Pakistan imposes tax on high net-worth individuals

Pakistan imposes tax on high net-worth individuals

ISLAMABAD: Pakistan has imposed an additional rate of tax on high net-worth individuals for poverty alleviation.

The country on June 10, 2022 presented its federal budget for the fiscal year 2022/2023. The budget was presented amid severe financial crisis.

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Finance Minister Miftah Ismail urged the high income earner to contribute toward poverty reduction by paying additional amount of tax.

A separate section has been introduced to the Income Tax Ordinance, 2001 to levy additional tax on persons earning more than Rs300 million in a year.

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Finance Bill, 2022 has proposed insertion of a new Section 4C to Income Tax Ordinance, 2001 for the purpose:

“4C. Tax on high earning persons for poverty alleviation.― (1) A tax shall be imposed for poverty alleviation for tax year 2022 and onwards at the rates specified in Division IIB of Part I of the First Schedule, on income of every person.

(2) For the purposes of this section, “income” shall be the sum of the following:—

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(i) profit on debt, dividend, capital gains, brokerage and commission;

(ii) taxable income (other than brought forward depreciation and brought forward business losses) under section 9 of the Ordinance, if not included in clause (i);

(iii) imputable income as defined in clause (28A) of section 2 excluding amounts specified in clause (i); and

(iv) income computed, other than brought forward depreciation, brought forward amortization and brought forward business losses under Fourth, Fifth and Seventh Schedules.

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(3) The tax payable under sub-section (1) shall be paid, collected and deposited on the date and in the manner as specified in sub-section (1) of section 137 and all provisions of Chapter X of the Ordinance shall apply.

(4) Where the tax is not paid by a person liable to pay it, the Commissioner shall by an order in writing, determine the tax payable, and shall serve upon the person, a notice of demand specifying the tax payable and within the time specified under section 137 of the Ordinance.

 (5) Where the tax is not paid by a person liable to pay it, the Commissioner shall recover the tax payable under sub-section (1) and the provisions of Part IV, X, XI and XII of Chapter X and Part I of Chapter XI of the Ordinance shall, so far as may be, apply to the collection of tax as these apply to the collection of tax under the Ordinance.

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(6) The Board may, by notification in the official Gazette, make rules for carrying out the purposes of this section.

Tax on high earning persons for poverty alleviation

The rate of tax under section 4C shall be:-

Income under section 4CRate of tax
Where income does not exceed Rs. 300 million0% of the income
Where income exceeds Rs. 300 million2% of the income