Tag: exemption

  • FBR announces tax exemptions for flood relief operation

    FBR announces tax exemptions for flood relief operation

    ISLAMABAD: Federal Board of Revenue (FBR) on Tuesday announced major tax exemptions for flood relief operation.

    The FBR issued SRO 1634(I)/2022 dated August 30, 2022 to allow the tax exemption.

    In order to enable the exemption, the FBR amended Second Schedule of the Income Tax Ordinance, 2001. It is pertinent to mention that tax is levied on imported goods under Section 148 of the Ordinance.

    According to the amendment: “(123) The provision of Section 148 shall for a period of ninety days not apply to goods required and imported for relief operation for flood affectees, duly certified by the National Disaster Management Authority (NDMA) or the Provincial Disaster Management Authority (PDMA).”

    The FBR issued another SRO 1635(I)/2022 dated August 30, 2022 to allow exemption from sales tax on goods imported for flood relief operation.

    Sales tax exemption has been granted with effect from August 24, 2022 subject to the conditions and restrictions.

    According to the FBR, import of all goods received, in the event of a natural disaster or other catastrophe, as gift and relief consignments or any goods received as gift or donation from a foreign government or organization by the federal or provincial governments or any public sector organization.

    However, this exemption is subject to the same conditions as are envisaged for the purpose of apply zero-rate of customs duty under the Customs Act, 1969.

    Through SRO 1636(I)/2022 dated August 30, 2022, which stated that the federal government has exempted for a period of ninety days the import and supply of the goods as certified by the NDMA or PDMA for relief operation for flood affectees, from the whole of the sales tax.

    Similarly, SRO 1637(I)/2022 dated August 30, 2022 has been issued to exempt federal excise duty leviable on the goods as ceritifed by NDMA or PDMA for relief operation for flood affectees.

  • Tax exemption granted to donations for PM flood relief fund

    Tax exemption granted to donations for PM flood relief fund

    ISLAMABAD: The federal government on Tuesday granted tax exemptions to donations made for Prime Minister’s Flood Relief Fund 2022.

    The Federal Board of Revenue (FBR) issued SRO 1590(I)/2022 dated August 23, 2022 to exempts deduction of tax under various provisions of Income Tax Ordinance, 2001.

    According to the SRO an amendment has been made into Part 1 of the Second Schedule of the Income Tax Ordinance, 2001 that any income derived from The Prime Minister’s Flood Relief Fund, 2022 has been exempted from income tax with effect on and from August 5, 2022.

    Furthermore, an amendment has been made to Part IV of the Second Schedule under which minimum tax under Section 113 of the Income Tax Ordinance, 2001 shall not apply to the flood relief fund.

    In the same part of the schedule a new clause 120 has been inserted under which Section 151 related to profit from debt shall not apply to the relief fund with effect on and from August 5, 2022.

    It further said that the provisions of Section 236 of Income Tax Ordinance, 2001 shall not apply on the amount donated through SMS to the Prime Minister’s Flood Relief Fund, 2022 with effect on and from August 5, 2022.

    The FBR issued another SRO 1589(I)/2022 dated August 23, 2022, under which the federal government exempted the federal excise duty leviable on any donation received in Prime Minister’s Flood Relief Fund, 2022. “The notification shall take effect on and from August 5, 2022,” the FBR added.

    The Finance Division on August 5, 2022 issued a notification to establish Prime Minister’s Flood Relief Fund 2022.

    According to the notification: “It has been decided to establish / open with immediate effect a Fund to be known as ‘Prime Minister’s Flood Relief Fund 2022’ for collective national effort to meet the challenge of providing relief and rehabilitation to the affected population due to excessive rains and floods across the country.

    It said that all proceeds and payments for the fund will be received at all branches of State Bank of Pakistan (SBP), all treasuries and branches of National Bank of Pakistan (NBP) and all other scheduled banks.

    The fund may receive donations from both domestic, international donors and contributions from abroad which will be received at all the branches of above referred banks where such branches are existing. In other foreign countries contributions will be received at Pakistan missions and remitted to the State Bank of Pakistan which would prescribe necessary procedure for their accounting.

  • Customs duty exemption, concession granted

    Customs duty exemption, concession granted

    KARACHI: The Finance Act, 2022 has amended provisions of Customs Act, 1969 to grant exemption and concessions from customs duty.

    Following are the exemptions and concessions of customs duty:

    Exemption of Customs Duty and Additional Customs Duty

    READ MORE: Commodities’ illegal movement to be treated as smuggling

    Customs Duty (CD) leviable on the import of following categories of items / sectors is exempted for incentivizing the respective sectors:

    – Machinery and capital goods for mechanization of farming including machinery pertaining to irrigation, drainage, harvesting, plant protection etc.

    – Specified raw materials used for manufacturing of LED lights, LED bulbs (including parts thereof) and brush ware.

    – 26 Active Pharmaceutical Ingredients for incentivizing Pharmaceutical manufacturers.

    – Raw materials for manufacture of first aid bandages.

    READ MORE: Special tax regime for pharma sector introduced

    – Membranes for filtering / purifying water.

    – The drug ‘Grafalon’ and gadget ‘Irisvision’.

    – Raw materials of Ivy leaves extract powders.

    – Motor spirit.

    – Cinematographic equipment imported during the period commencing on the 1st July, 2018 and ending on the 30th June, 2023.

    – Bullet proof vehicles and jammers imported by Federal Government, Provincial Government or such states and territories as are or may be included in Pakistan.

    READ MORE: Defacing sales tax invoice declared as offence

    – Smartphones including those in CKD/SKD condition (subject to certain conditions prescribed for import of CKD/SKD units).

    In addition to CD, Additional Customs Duty (ACD) is also exempted on import of the following goods:

    – Raw materials imported by paper sizing industry and chlorinated paraffin wax industry and manufacturers of aluminum conductor composite cores.

    – Stamping foils for manufacturing of optic fiber cables.

    – Aluminum paste and powder imported by the Coating industry.

    – Guts, bladders and stomachs of animals.

    Reduction in Customs Duty and Additional Customs Duty

    CD leviable on import of following goods is reduced:

    – Specified categories of other woven fabrics and artificial flowers / foliage of other materials imported by manufacturers of footwear.

    READ MORE: FBR to collect 3% further tax on supply to inactive taxpayer

    – High-density fiber (HDF) boards of wood or other ligneous materials

    – Specified fibers of polypropylene.

    – Through the Finance Bill, CD was proposed to be reduced on 10 categories of direct and reactive dyes. Such reduction in CD has now been restricted to 6 categories through the Act.

    In addition to CD, ACD, leviable on import of following goods is also reduced:

    – Direct and reactive dyes.

    – Glycerol crude and Glycerol for the coating industry.

    – Goods pertaining to Aluminum, polymers of ethylene, Biaxially Oriented Polypropylene (BOPP) used by the packing industry.

    – Adhesive, Epoxide resins, Filter media/ paper, Non-woven fabric media and Steel plates / sheets of prime quality imported by manufacturers of filters, other than automotive.

    – Organic composite solvents and thinners imported by manufacturers of Dibutyl Orthophthalates.

    – Plywood, veneered panels & similar laminated wood, poly (methyl methacrylate) and cyanoacrylate.

    – Flavoring powders for food preparation for snacks manufacturers.

  • Pakistan grants tax exemption to charitable organizations

    Pakistan grants tax exemption to charitable organizations

    KARACHI: Pakistan has granted exemption from tax on income of various charitable organizations through Finance Act, 2022.

    The tax exemption has been granted under Second Schedule of Income Tax Ordinance, 2001.

    READ MORE: New tax rates on car registration from July 01, 2022

    According to interpretation of Finance Act, 2022 by PwC A. F. Ferguson & Co. the income of following organizations has been exempted from income tax by way of inclusion in Table I of Clause (66):

    (i) The Pakistan Global Sukuk Programme Company Limited;

    (ii) Karandaaz Pakistan from tax year 2015 onwards;

    (iii) Public Private Partnership Authority for tax year 2022 and subsequent four tax years; and

    (iv) Hamdard Laboratories (Waqf) Pakistan.

    READ MORE: Finance Act 2022 notifies tax rates on disposal of securities

    It is apt to mention here that income derived by The Pakistan Global Sukuk Programme Company Limited was earlier exempted from income tax through Notification SRO 1457(I)/2021 dated November 11, 2021; however, through the Act, such tax exemption has been ratified by the Parliament.

    Further, the following Organizations, earlier entitled to tax exemption subject to fulfillment of conditions specified in section 100C of the Ordinance, are now extended unconditional tax exemption as was earlier available to them prior to Finance Act, 2020:

    (i) Pakistan Mortgage Refinance Company Limited;

    READ MORE: Finance Act 2022 revises tax rates for salaried persons

    (ii) Pakistan Sweet Homes Angels and Fairies Place; and

    (iii) Dawat-e-Islami Trust.

    Further, the following Organizations have been extended tax exemption subject to fulfillment of conditions specified in section 100C:

    (i) Burhani Qarzan Hasnan Trust;

    (ii) Saifee Hospital Karachi; and

    (iii) Safiyah Girls Taalim Trust.

    READ MORE: Proposal of final tax regime for commercial importers rejected

  • Pakistan expands tax exemptions under foreign treaties

    Pakistan expands tax exemptions under foreign treaties

    KARACHI: Pakistan has expanded scope of income tax exemption provided under international tax treaties.

    The change has been brought into Section 44 of Income Tax Ordinance, 2001 through Finance Act, 2022.

    READ MORE: Capital gains tax revamped on disposal of immovable properties

    Experts at PwC A. F. Ferguson & Co. explained the amendment saying that presently, income received by any person (not being a citizen of Pakistan) engaged as a contractor, consultant, or expert on a project in Pakistan is exempt from tax to the extent provided for in a bilateral or multilateral technical assistance agreement between the Federal Government and a foreign government or public international organization, subject to certain conditions. Such exemption is limited to agreements where ‘technical assistance’ is being provided.

    READ MORE: Tax on deemed income arising from capital assets in Pakistan

    The Finance Act 2022, has enhanced the scope of above exemption by removing the term ‘technical assistance’ from the above provision, meaning thereby now all sorts of agreement between Federal Government and a foreign government or public international organization would be covered under the above exemption.

    READ MORE: Pakistan imposes tax at 10% on money transfers to non-residents

    Furthermore, the exemption would also be available to a citizen of Pakistan provided such person is either a non-resident person or a resident person solely by reason of the performance of services under the agreement.

    The Act has also empowered the Federal Government to grant exemption on income of any person on a case-to-case basis through a notification in the Official Gazette in respect of an official development assistance financed loans and grant-in-aid, subject to such conditions and limitations as may be specified.

    READ MORE: Significant changes to sales tax laws through Finance Act 2022

  • FBR allocates quota for industries in erstwhile FATA/PATA

    FBR allocates quota for industries in erstwhile FATA/PATA

    ISLAMABAD: The Federal Board of Revenue (FBR) on Saturday allocated quota of raw material import on free of duty and taxes for industries located in erstwhile FATA/PATA.

    The FBR issued Sales Tax General Order (STGO) No. 14 dated April 16, 2022 regarding quota for import of raw materials for industries located in erstwhile FATA/PATA.

    The FBR said that import of plant and machinery and inputs by industrial undertakings located in erstwhile FATA/ PATA are exempt under S. No. 151 of Table-1 of the Sixth Schedule to the Sales Tax Act, 1990 till 30th day of June, 2023.

    READ MORE: Erstwhile FATA/PATA units to get exemption on quota

    To prevent misuse of said exemption, a number of significant amendments have been introduced in the Sales Tax Act, 1990 including section 40D and S. No. 74 of Table-1 of the Eighth Schedule to the Sales Tax Act, 1990.

    Different administrative measures are also being taken by FBR including escort of containers from Azakhail Dry Port to the location of the concerned unit.

    READ MORE: FBR explains taxation of erstwhile FATA/PATA industries

    In order to ensure further transparency and prevent leakage of revenue, the FBR has decided that industrial units located in erstwhile FATA/PATA shall be allocated import quota of raw materials as determined by Directorate General IOCO-Inland Revenue in consultation with the Regional Tax Office (RTO), Peshawar on the basis of installed capacity of these units.

    The annual import quota as per the attached Annex-A shall be apportioned equally in 12 equal parts on monthly basis and that shall be duly entered in the WeBOC against each manufacturer/ industrial unit.

    After each updation, the balance available quota for the remaining year shall also be clearly mentioned.

    The FBR said that the STGO shall come into effect immediately until further order.

    READ MORE: FBR issues procedure for availing exemption certificate by erstwhile FATA/PATA residents

  • FBR exempts customs duty on import of oxygen gas

    FBR exempts customs duty on import of oxygen gas

    The Federal Board of Revenue (FBR) has issued an exemption on customs duty for the import of oxygen gas and oxygen cylinders.

    (more…)
  • Erstwhile FATA/PATA units to get exemption on quota

    Erstwhile FATA/PATA units to get exemption on quota

    ISLAMABAD: The Federal Board of Revenue (FBR) has decided to allow tax exemption to industries located in erstwhile FATA/PATA on the basis quota determined against installed capacity.

    An important meeting held in FBR Headquarter on April 01, 2022, (Friday). Chairman FBR Dr. Muhammad Ashfaq Ahmed reviewed progress regarding determination of quota for import of raw material on the basis of installed capacity for the industrial units located in erstwhile FATA/PATA.

    READ MORE: March collection up over 20% amid political unrest: FBR

    The participants of meeting were informed that out of total 140 units of steel , oil and ghee, plastics and textile etc. in erstwhile FATA/ PATA identified for joint survey for determination of manufacturing capacity, reports about 58 units have been sent to the FBR, while reports of 20 more units were in the pipeline.

    The Director General IOCO stated that the survey and reports on the remaining units will be completed in couple of weeks. Chairman FBR directed that exercise/survey to determine the installed capacity needed to be completed by April 15, 2022 positively.

    READ MORE: Pakistan needs to introduce laws to tax crypto income

    It was also decided that exemptions under Sixth Schedule of Sales Tax Act, 1990 and Income Tax Ordinance, 2001 will not be available to industrial units beyond their quota determined on the basis of their installed capacity after April 15, 2022.

    It was reported that some of industrial units were delaying the exercise on frivolous grounds. However, such units will not be allotted any quota to import raw materials after completion of the exercise.

    Chairman FBR reiterated that the business community should play its positive role to complete this survey so that misuse of exemption of taxes in these areas could be discouraged and thus a level playing field may be ensured to industries located in all parts of the country.

    READ MORE: Tax slabs reduction may be considered: FBR chairman

    It is pertinent to mention that at the time of merger of erstwhile Federally Administered Tribal Areas/Provincially Administered Tribal Areas in Khyber Pakhtunkhwa in 2018, tax exemptions had been granted to these areas for 5 years up to June 30, 2023.

    Currently several industrial units located in these areas are manufacturing different goods including Iron & Steel, Plastic, Ghee, Textile, Plastic etc.

    These units import raw material through sea port at Karachi without payment of Sales Tax and Income Tax. However, these units are required to sell the finished goods only in the newly merged Districts of erstwhile FATA/PATA and not in the tariff areas/other Districts of the Province or in other Provinces.

    READ MORE: Withholding tax should be on income: FBR Chairman

    To frustrate and prevent the misuse of facility of exemption of taxes on the import of raw materials by these units, different measures are being taken by FBR including escort of containers from Azakhail Dryport to the location of the concerned unit.

    The meeting was attended by Member IR Operations, Member IR Policy, Member Customs Policy, Director General Input Output Coefficient Organization (IOCO), Chief Commissioner Peshawar, Chief Collector Khyber Pakhtunkhwa, concerned Collector Customs, Commissioner IR, Director IOCO and other senior officers of FBR.

  • Highlights of Finance (Supplementary) Bill, 2021

    Highlights of Finance (Supplementary) Bill, 2021

    PWC A. F. Ferguson & Co. has issued a memorandum to highlight amendments proposed through the Finance (Supplementary) Bill, 2021 which has been laid before the Parliament on December 30, 2021.

    It said that through the Bill, certain amendments have been made in the Income Tax Ordinance, 2001; Sales Tax Act, 1990; Federal Excise Act, 2005; Customs Act, 1969 and the Islamabad Capital Territory (Tax on Services) Ordinance, 2001.

    The Bill with or without further modification approved by the Parliament will come into force on the next day of assent given by the President of Pakistan.

    READ MORE: Mini-budget: FBR to generate Rs4.5bn through tax rate increase on cellular services

    The government claims to have presented the Finance (Supplementary) Bill, 2021 as part of prior actions to ensure Pakistan’s sixth review of the $6 billion Extended Fund Facility (EFF) cleared by the IMF’s Executive Board, which is scheduled to meet on January 12, 2022 to decide about the disbursement of a nearly $1 billion tranche.

    The government estimates to collect revenues of Rs 375 billion through the amendments proposed in the Bill, out of which Rs 343 billion are expected to be collected from the withdrawal of sales tax concessions.

    The Finance Minister has emphasized that most of the sales tax exemptions proposed to be withdrawn are intended to fix the distortions in existing sales tax laws with respect to exemption and zero-rating. He has further claimed that substantial part of the sales tax so collected would not be passed on to the end consumers / common man especially the sales tax of Rs 160 billion expected to be collected from the pharma sector which will be refundable to pharmaceutical companies when claims for zero rating will be filed.

    READ MORE: Mini-budget: income tax rates proposed for foreign TV dramas

    This claim, however, raises question on the basis of additional tax collections of Rs 375 billion envisaged through the Bill if substantial amount of sums so collected are expected to be refunded / adjusted.

    While removal of distortions in the sales tax regime was essential to streamline the process of collection of sales tax under the VAT mode across the board, however government’s over reliance on indirect taxes which has been seen over a period of time, and also witnessed in higher tax collections recently, needs to be rationalised. This over emphasis on indirect taxation is perhaps due to structural imbalance of taxation system of Pakistan which does not allow optimal tax collection and promotes undocumented economy.

    A substantial and incremental shift is required to decrease disparity in income and reduce the burden of indirect taxes on common man.

    Major sales tax concessions / exemptions withdrawn are as under:

    ▪ Zero rating of sales tax has been proposed to be withdrawn on various items including

    (i) exempt goods if exported by a manufacturer;

    (ii) supplies of locally manufactured plant and machinery to manufacturers in the Export Processing Zone;

    (iii) supplies to duty free shops.

    READ MORE: Mini-budget: Advance tax on motor vehicles doubles

    ▪ The reduced rate of 12.5 per cent on locally manufactured or assembled motorcars has been restricted to the motorcars having engine capacity up to 850 cc only.

    ▪ Reduced rate of tax on import of specified plant and machinery is proposed to be withdrawn.

    ▪ Fixed tax on import of certain cellular mobile phones has been proposed to be replaced by the standard rate of 17 per cent tax.

    ▪ Exemptions from sales tax on import and supplies of various goods (including capital goods) is proposed to be withdrawn including plant and machinery for export processing zones, goods imported by or supplied to hospitals, machinery and parts for renewable energy, sample or replacement goods.

    Apart from the above, some other major amendments proposed through the Bill are as under:

    READ MORE: Tax exemptions worth Rs343 billion withdrawn through mini-budget

    ▪ A clause introduced by the Tax Laws (Third Amendment) Ordinance, 2021 (through which companies were made liable to make their payments through digital modes) has been suspended until it will be notified by FBR. Since its introduction, the implementation of the clause was otherwise being kept in abeyance by FBR through circulars.

    ▪ Banks are required to provide particulars of bank accounts opened or re-designated during preceding month.

    ▪ Advance income tax on bills of internet and mobile, and on own money of locally manufactured cars has been increased. FED on import or local supply of certain vehicles has also been increased.

    ▪ Concept of SPV introduced in the REIT regulations has also been accounted for in the income tax provisions.

    ▪ Threshold of small manufacturers (not liable to sales tax) reduced from Rs 10 million to Rs 8 million.

    ▪ Condition of providing CNIC on sale to unregistered persons waived in case payments are made through debit or credit card or digital mode.

    ▪ Scope of Tier 1 retailers has been expanded to include those subject to income tax withholding under sections 236G or 236H, beyond a threshold.

  • Pakistan allows sales tax exemption on Afghan fruits

    Pakistan allows sales tax exemption on Afghan fruits

    The Federal Board of Revenue (FBR) in Pakistan issued a sales tax notification, SRO 1501(I)/2021, on Monday, formalizing the government’s decision to exempt the sales tax on the import of most Afghan fruits.

    (more…)