Persons not on new ATL to pay 100% additional withholding tax

Persons not on new ATL to pay 100% additional withholding tax

KARACHI: Persons who have failed to submit their annual income tax returns and declaration of assets for tax year 2019 will pay 100 percent additional withholding tax on certain transactions, sources in Federal Board of Revenue (FBR) said on Monday.

They said that those taxpayers availing the benefit of reduced rate of withholding tax on the basis of returns filed for tax year 2018 would not more eligible.

The FBR issued new Active Taxpayers List (ATL) for tax year 2019 including names of those return filers who filed their returns up to February 29, 2020.

The new ATL included name of 2.53 million taxpayers who filed their returns for tax year 2019. These taxpayers were salaried persons, business individuals, Association of Persons (AOPs) and companies.

The FBR had extended the last date for filing income tax returns and declaration of assets up to February 28, 2020.

The sources said that through Finance Act, 2019 a new 10th Schedule to Income Tax Ordinance, 2001 was introduced under which the FBR imposed 100 percent additional withholding tax on those persons whose name were not on the ATL.

Previously, the law provides for the concept of a non-filer and stipulates higher withholding rates for the same which were adjustable at the time of filing of income tax return.

This tax regime has created a misconception that a non-filer can go scot free by choosing not to file income tax return.

The measure was meant to increase the number of filers, however over time the focus shifted to raising additional revenue only.

The measure had not achieved the desired results as the regime did not provide for any legal framework to ensure filing of return by such non filers.

In order to remove the aforesaid misconception, the concept and the term of “non-filer” was abolished from the statute, wherever occurring.

In its stead a separate Schedule is being introduced to specifically provide a legal framework for punitive measures for persons not appearing on ATL and to ensure filing of return by such persons.

The main attributes of this scheme are as under:-

— Persons whose names are not appearing on the ATL will be subjected to hundred percent increased rate of tax.

— The withholding agents will clearly specify the names, CNIC or any other identification of such persons in the withholding statement so that legal provisions to enforce return can come into effect.

— Where a withholding agent is of the opinion that hundred percent increased tax is not required to be collected on the basis that the person was not required to file return, the withholding agent shall furnish an intimation to the Commissioner setting out the basis on which the person is not required to file return.

The Commissioner shall accept or reject the contention on the basis of existing law. In case the Commissioner fails to respond within thirty days, permission shall be deemed to be granted to not deduct tax at hundred percent increased rate o Where the person’s tax has been deducted or collected at hundred percent increased rate and the person fails to file return of income for the year for which tax was deducted, the Commissioner shall make a provisional assessment within sixty days of the due date for filing of return by imputing income so that tax on imputed income is equal to the hundred percent increased tax deducted or collected from such person and the imputed income shall be treated as concealed income.

— The provisional assessment shall be of no effect if the person files return within forty five days of completion of provisional assessment and the provisions of the Ordinance shall apply accordingly. Where return is not filed within forty five days of provisional assessment, it shall be treated as final assessment and the Commissioner shall initiate penalty proceedings for concealment of income.

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