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Tag: exemption

  • Exemption from withholding tax at import stage suggested

    Exemption from withholding tax at import stage suggested

    KARACHI: Pakistan Business Council (PBC) has suggested the tax authorities to exempt withholding tax at import stage for avoiding generation of tax refunds and expansion of industry.

    In its proposals for budget 2020/2021, the PBC recommended exemption from collection of withholding tax under section 148 at import stage and exemption for manufacturing concerns under Section 153.

    It said that procedures and rules for obtaining exemption certificates for import of plant and machinery and raw material by tax payers have serious restrictions, which causes hardship.

    Corporate manufacturing sector should be excluded from the purview of income tax withholding at import stage under section 148 as well as from tax deduction on local supply under section 153.

    Similar exemption is already given to the greenfield industries through the Finance Supplementary Second Amendment Act 2019 announced in March 2019.

    The same exemption, however, is not available, for the brownfield expansion.

    Moreover, all the companies engaged in manufacturing should be exempt from withholding of tax under section 153.

    Similar exemption is available for Sales Tax in the Sales Tax Special Procedure (Withholding) Rules, 2007 via SRO 586 dated July 1, 2017.

    Alternatively, issuance of exemption certificate from withholding under sections 148 and 153 should automatically trigger on the FBR portal based on payment of quarterly advance tax under section 147 to avoid harassment of genuine taxpayers.

    This will enable taxpayers to avoid creating huge tax refunds and focus on more expansion.

    This would increase the investments for brownfield capacity expansion as well and would provide a meaningful relief (similar to greenfield expansion) with regard to BMR and extension / expansion. Further, it will also attract foreign direct investment in the form of new expansion ventures as well as partnerships and hence will also result in export growth.

  • Sindh exempts sales tax on Ehsaas Emergency cash transfer

    Sindh exempts sales tax on Ehsaas Emergency cash transfer

    KARACHI: Sindh Revenue Board (SRB) on Wednesday exempted sales tax on services to banking transfers made to Ehsaas Emergency Program.

    In a notification, the SRB said that the Sindh government had exempted the sales tax on the amount of commission (tariff heading 9819.1300) paid by the banks to their branchless banking retailers in Sindh on account of disbursement of financial assistance under the Ehsaas Emergency Cash Transfer Program of the government of Pakistan, subject to the conditions that the amount on account of such commission or service fee is not deducted from the amount of the financial assistance so transferred to the beneficiary, receiving the financial assistance, is paid the full amount of the assistance transfer.

    The SRB said that the exemption has been granted till 23:59 hours on June 30, 2020.

  • FBR amends list for exemption on equipment for coronavirus prevention

    FBR amends list for exemption on equipment for coronavirus prevention

    In a continued effort to combat the COVID-19 pandemic, the Federal Board of Revenue (FBR) has issued an updated list of duty and tax-exempt items crucial for the prevention and control of the virus.

    (more…)
  • FBR exempts withholding tax on commission for Ehsaas Program

    FBR exempts withholding tax on commission for Ehsaas Program

    ISLAMABAD: Federal Board of Revenue (FBR) has exempted the withholding tax on commission agent for disbursement of Ehsaas Emergency Program.

    The FBR issued SRO 315(I)/2020 dated April 16, 2020 to make amendment to Second Schedule of Income Tax Ordinance, 2001.

    According to the amendment, a new clause 102A inserted to Part IV of the Second Schedule, which stated: “The provisions of Section 233 shall not apply to commission received by a retail branchless banking agent on any amount disbursed by the Ehsaas Emergency Cash Transfer Program for the period commencing on the date of issuance of this notification and ending on the 30th day of June, 2020.”

    The Section 233 of the Income Tax Ordinance, 2001 explains application of withholding tax on brokerage and commission.

    Where any payment on account of brokerage or commission is made by the Federal Government, a Provincial Government, a Local Government, a company or an association of persons constituted by, or under any law (hereinafter called the “principal”) to a person (hereinafter called the “agent”), the principal shall deduct advance tax at the rate specified in Division II of Part IV of the First Schedule from such payment.

    If the agent retains Commission or brokerage from any amount remitted by him to the principal, he shall be deemed to have been paid the commission or brokerage by the principal and the principal shall collect advance tax from the agent.

  • KTBA highlights difficulties in claiming exemption

    KTBA highlights difficulties in claiming exemption

    KARACHI: Karachi Tax Bar Association (KTBA) on Tuesday highlighted issues faced by taxpayers in obtaining exemption against import of raw material and plant and machinery.

    The KTBA in a letter to Member Inland Revenue (Operations), Federal Board of Revenue (FBR) highlighted the issues being faced by taxpayers while claiming exemption from income tax deduction on import of raw materials and plant and machinery.

    The desired exemption certificate against tax deduction on import of raw material is though being auto generated by IRIS portal on the basis of annual quota allowed by the Commissioner Inland Revenue, the same however, for the past 6-7 days is not being uploaded on WeBOC portal. Consequently, the Custom authorities are unable to allow any exemption as the same is not being reflected on their WeBOC portal.

    Secondly the IRIS portal has not been enabled to distinguish exemption application applied for raw material and the one applied for exemption on plant and machinery.

    The KTBA said that consignment/LC wise exemption certificate is allowed against tax deduction on import of plant and machinery. However, while trying to apply for the said exemption certificate, following error message pops up on IRIS portal:
    “You are not allowed any quota”

    Any quota related objection can only be relevant in case of import of raw material and not otherwise.

    The issues highlighted above are not more than IT Glitches and can be brought to correction with minimum due attention on the details of the system requirements.

    In view of the foregoing, the KTBA requested the Member to kindly issue directions for resolutions of these issues on urgent basis so as to facilitate taxpayers.

  • SRB notifies sales tax exemption on services provided by restaurants, marriage halls

    SRB notifies sales tax exemption on services provided by restaurants, marriage halls

    KARACHI: Sindh Revenue Board (SRB) has notified exemption of 13 percent sales tax on services rendered by restaurants and marriage halls.

    The SRB issued working tariff applicable from January 01, 2020.

    The service provided or rendered by restaurants and marriage halls are subject to 13 percent sales tax.

    The SRB said that services provided or rendered by restaurants shall be exempted from sales tax whose turnover does not exceeds Rs4 million in a financial year:

    Provided that the exemption shall not apply in case of restaurants:-

    (i) which are air-conditioned on any day in a financial year and which are located within the building or premises of air-conditioned shopping malls or shopping plazas;

    The SRB further said that the marriage halls and lawns are also exempt from sales tax at 13 percent, which are located on plots measuring 800 square yards or less.

    Provided that the exemption shall not apply in case of marriage halls and lawns:

    (i). which are air-conditioned on any day in a financial year;

    (ii).located within the building, premises or precincts of a hotel, motel, guest house, restaurant or club whose services are liable to tax;

    (iii). as are owned, managed or operated by caterers whose services are liable to tax;’

    (iv). which are franchisers or franchisees; and

    (v). marriage halls and lawns having branches or more than one hall or lawn in Sindh.

    (ii) located within the building, premises or precincts of any hotel, motel, guest house or club whose services are liable to sales tax;

    (iii) providing or rendering services in the building, premises, precincts, hall or lawn of any hotel, motel, guest house, marriage hall or lawn or club whose services are liable to sales tax;

    (iv) which are franchisers or franchisees;

    (v) having branches or more than one outlet in Sindh; and

    (vi) whose total utility bills (gas, electricity and telephone) exceed Rs. 40,000/- in any month during a financial year.

  • Tax Amendment Ordinance: exemption, incentives announced for foreign investment in debt securities

    Tax Amendment Ordinance: exemption, incentives announced for foreign investment in debt securities

    ISLAMABAD: The government has announced a comprehensive package of tax incentive and exemptions to attract foreign investment into debt securities.

    The Federal Board of Revenue (FBR) issued salient features on Wednesday to explain amendments to Income Tax Ordinance, 2001 brought through Tax Laws (Second Amendment) Ordinance, 2019.

    The FBR said that the existing foreign exchange framework of the country allows non-residents to invest in debt securities and Government securities through Special Convertible Rupee Accounts (SCRA’s) maintained with banks in Pakistan.

    There is no restriction on repatriation of funds from SCRA’s which incentivizes investment in the local debt market by non-resident investors.

    Several amendments for encouraging investment in the local debt market and simplifying the tax regime for non-resident companies have been introduced which are summarized hereunder:-

    (i) Capital gains emanating from the disposal of debt instruments and government securities (including treasury bills and Pakistan Investment Bonds) to non-resident companies (not having a permanent establishment in Pakistan)who have made investments in such debt instruments/securities exclusively through a Special Convertible Rupee Account (SCRA) maintained with a bank in Pakistan shall be subject to withholding tax @ 10 percent by banks/financial institutions which shall constitute final discharge of tax liability.

    (ii) Enhanced rate of withholding tax for persons not appearing on the active taxpayers list under the Tenth Schedule to the Ordinance shall not apply to capital gains and profit on debt earned by non-resident companies, not having a permanent establishment in Pakistan, which invest in local debt instruments/securities through SCRA maintained with a bank in Pakistan.

    (iii) Special Convertible Rupee Accounts (SCRA) being maintained by non-resident companies having no permanent establishment in Pakistan shall be exempt from collection of advance tax on banking transactions otherwise than through cash under section 236P of the Ordinance.

    (iv) A non-resident company having no permanent establishment in Pakistan investing debt instruments and government securities through SCRA shall not be required to pay advance tax under section 147 of the Income Tax Ordinance, 2001 in respect of capital gains arising to it.

    (v) Requirement for filing a statement of final taxation under section 115(4) of the Income Tax Ordinance, 2001 and registration under section 181 of the Ordinance shall not apply to a non-resident company having no permanent establishment in Pakistan solely by reason of Capital Gain or Profit on Debt earned from investments indebt securities and Government securities through Special Convertible Rupee Account maintained with a banking company or financial institution in Pakistan.

  • FBR notifies revision in exemption regime under sales tax laws

    FBR notifies revision in exemption regime under sales tax laws

    ISLAMABAD: Federal Board of Revenue (FBR) has issued changes brought through Finance Act, 2019 in exemption regime under Sixth Schedule of the Sales Tax Act, 1990.

    Following changes have been made in Table-1 of the Schedule:

    i. Exemptions at the existing serial numbers 2,3, and 72, relating to meat, fish, poultry meat etc. have been amended to clearly provide that these exemptions also apply to products specified thereunder even if these products are packed.

    ii. Under serial number 19, the products of milling industry, as sold in retail packing bearing brand names, have been excluded from purview of exemption, however, wheat and meslin flour shall remain exempt even if so packed or sold under a brand name. Redundant PCT Heading 1102.1000 has also been omitted.

    iii. Serial numbers 36 and 37 pertaining to Gold and Silver, in unworked condition, have been omitted. Gold and Silver have been placed in the 8th schedule and chargeable to sales tax at the reduced rate of 1%. Gold and Silver have also been excluded from the purview of minimum value-addition tax of@ 3% at import stage under Twelfth Schedule.

    iv. The expression “excluding electricity and natural gas” has been added in serial number 52A relating to exemption on goods supplied to specified hospitals. Now, such hospitals are no more eligible for exemption on supplies of electricity and gas.

    v. The exemption at serial number 85, as available to fat filled milk, has been restricted to such milk as is not sold in retail packing under a brand name or a trademark. Such packed and branded fat filled milk now shall be subject to 10% sales tax under Eighth Schedule.

    vi. In view of doing away with the special procedure for steel industry, the exemption available to vessels / ships for breaking at serial number 95 has been omitted. Vessels imported for breaking up are now taxable at 17%. Field formations of Customs should ensure chargeability of sales tax on import of vessels since 1st July, 2019.

    vii. New serial number 151 has been added. This is a transposition of exemption under SRO 1212(I)/2018 which now has been rescinded and which provided exemption on supplies made within the tribal areas. In the transposed form, it allows further exemption on imports of industrial input including plant and machinery imported by industrial units located within tribal areas. These exemptions on imported inputs / plant and machinery shall be available subject to security mechanism specified under this serial.

    viii. Newly added serial 152 provides exemption on supplies of electricity as made to all consumers in tribal areas. However, this exemption shall neither be available to industries established after 31st May, 2018, nor to any steel and ghee /oil industries.

    ix. Through new serial number 153, imports and supplies by manufacturers of steel billets, ingots, ship plates, bars and other long re-rolled profiles, have been exempted. In lieu of this exemption, federal excise duty has been imposed on these items in sales tax mode.

    In Table-2, relating to local supplies, two changes have been made:

    (i) Exemption under serial number 16 shall not be available to ginned cotton, as the same has been subjected reduced rate of 10% in Eighth Schedule, at newly inserted serial number 65 in Table 1.

    (ii) The exemption to cottonseed oil has been provided at serial number 25.

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  • KCCI hails withholding tax exemption to yarn traders

    KCCI hails withholding tax exemption to yarn traders

    KARACHI: Karachi Chamber of Commerce and Industry (KCCI) has hailed the decision of Federal Board of Revenue (FBR) to exempt withholding tax for yarn traders.

    In a statement issued on Monday President KCCI Junaid Esmail Makda appreciated the FBR for holding numerous meeting with KCCI and taking into consideration KCCI’s suggestion pertaining to exemption of withholding tax to yarn traders into consideration as they were overburdened with additional taxes.

    Makda pointed out that under Section 45A of Part IV of the Income Tax Ordinance about Exemption from Specific Provisions, the sales, supplies and services made by traders of yarn to taxpayers from textile & articles, carpets, leather and Articles including artificial leather footwear, surgical goods and sportswear sector will not be subjected to deduction of withholding tax.

    He said that such traders of yarn shall pay 0.1 percent minimum tax on their annual turnover on monthly basis on the 30th day of each month and monthly withholding tax statement shall be e-filed under the provision of section 165 of the Income Tax Ordinance, which was widely being demanded by relevant stakeholders.

    He hoped that misinterpretation and incorrect application of Section 113 of Income Tax Ordinance which was against the spirit of SRO 333 (I) 2011 will not be repeated again and FBR would continue to take more such steps which were badly needed as the loyal taxpayers from different sectors of the economy were facing immense hardships and were finding it hard to continue their businesses because of exorbitantly high cost of doing business which must be brought down to provide a level playing field and make Pakistani goods competitive.

  • FBR proposes reducing retaining period of imported plant, machinery by export units for disposal at zero percent duty, taxes

    FBR proposes reducing retaining period of imported plant, machinery by export units for disposal at zero percent duty, taxes

    ISLAMABAD: Federal Board of Revenue (FBR) has proposed to relax the condition of disposal of plant and machinery by export units at zero percent of duty and taxes to five years as compared with prevailing 10 years.

    The FBR on Wednesday issued SRO 747(I)/2019 to proposed amendments in the Export Oriented Units and Small and Medium Enterprises Rules, 2008.

    Through proposed amendment the FBR allowed the retaining imported goods including plant and machinery for a maximum period of five years as against prevailing ten years.

    The FBR through SRO 327(I)/2008 notified “The Export Oriented Units and Small and Medium Enterprises Rules, 2008” to facilitate the exporters and promote the exports.

    The FBR proposed that there will be no duty or tax if items imported by export oriented unit is sold or otherwise disposed of after five years from the date of importation. The existing retaining period is ten years.

    The FBR proposed that there will be full duty and tax if sold or otherwise disposed of before the expiration of three years from the date of importation. The existing period of attracting full duty and taxes is five years.

    It is proposed that there will be 75 percent duty and taxes if sold or otherwise disposed of after three and before four years from the date of importation. The existing period for this category is ‘after five and before seven and half years’ from the date of importation.

    The FBR also proposed to impose 50 percent of duty and taxes if sold or otherwise disposed of after four and before five years from the date of importation. The existing time period for this category is ‘after seven and half years and before ten years.’

    In the latest SRO the FBR also proposed to amend the word ‘Collector’ with the Regulatory Authority. The FBR also defined the regulatory authority is the additional collector of customs designated by the collector of customs as the regulatory authority in relation to an export oriented unit, in whose jurisdiction the place of business or manufacturing unit of the export oriented unit applicant, duly registered under the Sales Tax Act, 1990, is situated.