Karachi, December 11, 2023 – Federal Board of Revenue (FBR) has issued procedure for release of tax exemption certificates to non-residents during tax year 2024.
In a significant development, the FBR has introduced a streamlined procedure for the release of tax exemption certificates to non-residents during the tax year 2024. This initiative aims to facilitate non-resident individuals and permanent establishments of non-resident entities seeking relief in the form of lower tax rates.
The FBR’s latest move comes in the wake of an update to the Income Tax Rules, 2002, specifically for the tax year 2024. The newly introduced procedure is outlined under Rule 40FA, which pertains to the issuance of exemption or lower-rate certificates under sections 152 and 159 of the Income Tax Ordinance, 2001, to non-resident persons or the permanent establishments of non-resident entities.
Procedure Highlights:
1. Application Submission
Non-resident individuals or permanent establishments (PE) of non-resident entities must submit an online application for a certificate under sub-section (1) of section 159. This application is required to be made using the specified form in Part VII(B) of the First Schedule to the Income Tax Rules, 2002, along with all necessary information and documents.
2. Payer’s Application or Notice
For certificates under sub-section (4B) and sub-section (5) of section 152, payers are required to submit an online application or notice using the form specified in Part VII(C) of the First Schedule, furnishing all the requisite information and documents.
3. Criteria for Certificate Issuance
The FBR emphasizes that an exemption or reduced-rate certificate will only be issued if the Commissioner Inland Revenue is satisfied that the applicant has filed returns of income when due and is not in default regarding any taxes, unless a stay has been granted by relevant authorities.
4. Affidavits
Both non-resident applicants and resident persons or permanent establishments of non-resident entities must file affidavits confirming that no application for an exemption or reduced-rate certificate has been rejected. Any misrepresentation will result in the immediate cancellation of the issued certificate.
5. Disclosure of Contracts
Applicants are required to provide details of all contracts related to the sale of goods, provision of services, or execution of contracts in Pakistan.
6. Commissioner’s Powers
The Commissioner Inland Revenue may call for additional information, documents, or records during the proceedings and can conduct further inquiries, including cohesive business operation assessments.
7. Order and Validity
The Commissioner Inland Revenue is mandated to issue an order within thirty days of receiving the application, excluding any adjourned periods. The certificate, valid for a period determined by the Commissioner, remains in effect unless withdrawn earlier.
8. Record Keeping
The Commissioner Inland Revenue is required to maintain comprehensive records, encompassing applications, necessary enclosures, annexures, and orders passed during the process.
This new procedure is poised to enhance transparency and efficiency in the issuance of tax exemption certificates, offering a more structured and accountable framework for both non-resident applicants and tax authorities.
