Islamabad, June 29, 2023: Starting from July 1, 2023, Pakistan has introduced an additional tax on unexpected income, profit, and gains. The Federal Board of Revenue (FBR) has been granted the authority to collect this tax.
The country’s legislative assembly has approved an amendment to the Income Tax Ordinance of 2001, enabling the imposition of an additional tax on specific income, profits, and gains.
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According to analysts at KPMG Taseer Hadi & Co., the Finance Bill of 2023 proposes levying this tax on individuals who have generated income, profit, or gains due to economic factors resulting in unexpected financial outcomes. This includes income that may not have been disclosed in financial statements. The tax will be applied in addition to any tax charged, paid, or payable under the existing provisions of the Income Tax Ordinance from the previous five tax years, starting from the tax year 2023.
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To implement this tax, the Federal Government has the authority to determine the economic factor(s) that influence commodity prices or any sector of the economy. These factors may include fluctuations in international prices and variations in income, profits, or gains due to changes in foreign currency exchange rates. The government can set a tax rate of up to fifty percent on the aforementioned income, profits, or gains. Additionally, the government will specify the manner, conditions, scope, time, and payment details related to the tax payable under this section.
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The Finance Act of 2023 grants the Federal Government the power to exempt specific individuals, classes of persons, or certain types or categories of income from the application of this tax section, subject to specified conditions. However, the application of this section is limited to companies and their windfall income, profit, or gains from the preceding three tax years.
Furthermore, the Act authorizes the Federal Government to designate sectors for the application of this tax section.
In addition to the above, the Finance Act of 2023 mandates that the Federal Government must present the notification before the National Assembly no later than either ninety days after the issuance of the notification or by the 30th day of June of the financial year, whichever comes earlier.
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These amendments aim to enhance revenue collection and address unexpected economic gains by imposing an additional tax on such income, profit, and gains. It is important for individuals and businesses to familiarize themselves with the specific provisions and consult with tax professionals to ensure compliance with the new regulations.
