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  • FBR explains income tax on export of services

    FBR explains income tax on export of services

    ISLAMABAD: The Federal Board of Revenue (FBR) has explained income tax treatment on export of services as amended through Finance Act, 2022.

    The FBR issued Income Tax Circular No. 15 of 2022/2023 to explain the important amendments brought through the Finance Act, 2022 to the Income Tax Ordinance, 2001.

    The revenue body said that a special regime u/s 154A of the Income Tax Ordinance, 2001 for export of IT and IT enabled services was introduced though Finance Act, 2021 whereby 1 per cent final tax was collected on realization of export proceeds of these services.

    READ MORE: FBR restores 100% depreciation deduction

    Moreover, hundred percent tax credit was available against this final tax to the exporters of IT and IT enabled services u/s 65F upon fulfilling few conditions mentioned therein.

    In order to simplify the tax regime for exporters of IT and IT enabled services, the 100 per cent tax credit regime under section 65F of the Ordinance has been withdrawn and a reduced rate of final tax of 0.25 per cent has been provided for exporters of IT and IT enabled services who are registered with the Pakistan Software Export Board (PSEB).

    READ MORE: FBR notifies graduated tax rates on disposal of securities

    Corresponding changes in section 65F have been made accordingly. Furthermore, scope of definitions of IT services and IT enabled services contained in clause (30AD) and clause (30AE) of section 2 of the Ordinance has been clarified and widened through the Finance Act, 2022.

    READ MORE: FBR applies separates CGT rates on immovable properties

    The FBR said previously, the amount of foreign commission due to an indenting commission agent was charged to tax, at the rate of 5 per cent, under sub-section (2) of section 154 of the Ordinance. Now, this rate has been reduced to 1 per cent by incorporating clause (da) in sub-section (1) of section 154A of the Ordinance. Corresponding changes have been made in section 154 accordingly.

    READ MORE: FBR explains tax on deemed income from immovable property

    Moreover, provisions of Tenth Schedule will not apply on tax collectible under section 154A of the Ordinance. Necessary change has been incorporated in rule 10 of Tenth Schedule in this regard, the FBR added.

  • Interest rates on export, business loans enhanced to 10%

    Interest rates on export, business loans enhanced to 10%

    KARACHI: The State Bank of Pakistan (SBP) on Thursday enhanced the interest rates under export refinancing and long term refinancing to 10 per cent.

    The SBP in a circular said that as mentioned in the above-referred circular, the rates of Export Finance Scheme (EFS) and Long Term Financing Facility (LTFF) have now been linked with the central bank’s policy rate by keeping these rates currently 5 per cent below policy rate.

    READ MORE: Pakistan hikes key policy rate by 125 basis points to 15%

    Accordingly, with effect from July 08, 2022:

    — Mark up rate for financing under EFS (Part-I & Part-II) is increased from 7.5 per cent p.a. to 10 per cent p.a.; and

    — Mark up rate for financing under LTFF is increased from 7 per cent p.a. to 10 per cent p.a.

    Accordingly, with any change in the Policy Rate, markup rates for EFS and LTFF will be revised automatically so that the gap between Policy Rate and EFS and LTFF rates is maintained at 5 per cent. However, this gap is subject to revisions in view of future economic activity, the SBP added.

    READ MORE: Pakistan may see further 100bps hike in policy rate

    The SBP in its monetary policy announced today (July 07, 2022) mentioned that in the last monetary policy statement, the interest rates on EFS and LTFF loans are now being linked to the policy rate to strengthen monetary policy transmission, while continuing to incentivize exports by presently offering a discount of 500 basis points relative to the policy rate.

    READ MORE: SBP increases interest rate by 150bps to 13.75%

    This combined action continues the monetary tightening underway since last September, which is aimed at ensuring a soft landing of the economy amid an exceptionally challenging and uncertain global environment.

    It should help cool economic activity, prevent a de-anchoring of inflation expectations and provide support to the Rupee in the wake of multi-year high inflation and record imports.

    READ MORE: SBP may increase key policy rate by 100bps: poll

  • Pakistan’s trade deficit balloons $43.33 bn in 11 months

    Pakistan’s trade deficit balloons $43.33 bn in 11 months

    ISLAMABAD: Pakistan’s trade deficit ballooned to $43.33 billion during first 11 months (July – May) of fiscal year 2021/2022 owing to massive rise in import bill during the same period.

    According to trade data released by Pakistan Bureau of Statistics (PBS) on Thursday, the trade deficit widened by 58 per cent to $43.334 billion during first eleven months of the current fiscal year as compared with $27.45 billion in the corresponding months of the last fiscal year.

    READ MORE: Pakistan’s imports hit record high at $65.47 bn in 10 months

    Pakistan’s import bill massively increased to $72.18 billion during the period under review as compared with $50.03 billion in the same period of the last fiscal year, showing an increase of 44.28 per cent.

    On the other hand, exports have increased by 28 per cent to $28.85 billion during July – May 2021/2022 as compared with $22.57 billion in the corresponding period of the last fiscal year.

    READ MORE: Pakistan’s March trade deficit widens by only 5.5%

    The exports registered 55.66 per cent growth to $2.60 billion in the month of May 2022 as compared with $1.67 billion in the same month of the last year.

    READ MORE: Pakistan’s trade deficit widens to $32 billion in 8MFY22

    Meanwhile, import bill for the month of May 2022 increased by 25.43 per cent to $6.44 billion as compared with $5.297 billion in the same month of the last year.

    This resulted in widening of trade deficit by 11.50 per cent to $4.043 billion in the month of May 2022 as compared with the deficit of $3.62 billion in the same month of the last year.

    READ MORE: Pakistan’s trade deficit widens by 92% in seven months

  • PM Imran terms exports, tax collection must for growth

    PM Imran terms exports, tax collection must for growth

    ISLAMABAD: Prime Minister Imran Khan Tuesday termed tax collection and exports key elements to boost the country’s economy.

    “The government was making strenuous efforts to remove all hurdles and bottlenecks faced by exporters, investors and businessmen and to give a spur to the exports industry,” the prime minister said while addressing at an inaugural ceremony of 14th International Chambers Summit 2022 arranged by the Rawalpindi Chamber of Commerce and Industry (RCCI).

    The prime minister said that in the past, no attention was paid to these sectors of the economy which were vital for wealth creation.

    READ MORE: PM Imran Khan announces food subsidy package

    Imran Khan said the exports sector was stagnant in the past, but the incumbent government was providing all facilitation to the exporters and stressed that exporters should be encouraged with awards and other incentives.

    He observed that if the country’s exports were not increased, it could again put pressure on the current account and currency.

    The summit was being attended by presidents of more than 54 regular chambers, 10 small chambers, 13 women chambers and representatives from the development partners, international business community, political parties, ministries and the government institutions.

    The summit will provide an opportunity to the businessmen to seek resolution of their issues besides, presentation of solid proposals to the stakeholders for the formulation of the business-friendly policy of the country.

    The prime minister said the government was constantly endeavoring to introduce incentives for ease of doing business and remove all bottlenecks which would help increase businessmen’s profits and develop a tax culture.

    READ MORE: Imran Khan for monitoring accountants, lawyers to stop financial crimes

    He also termed the introduction of mini-budget as an effort to document the economy. Out of the total estimated Rs11 trillion retail market, only Rs3 trillion market was registered.

    The government was also working on full tax automation, he added.

    The prime minister said: “No government in Pakistan ever faced such big challenges like the fiscal and current account deficits. If our friends, Saudi Arabia and China would not have helped us, we would have defaulted due to our liabilities. We had no reserves to stem the depreciation of rupee.”

    He said the country’s economy was going through a stabilization phase, but unfortunately, then came the Covid 19 which posed the century’s biggest challenge.

    It was worth appreciable how Pakistan was out of the woods. The government not only saved the economy but also the lives of the people, he said, adding, the pandemic brought havoc across the world. In India, its economy was badly impacted with a huge death toll.

    READ MORE: PM Imran launches incentive program for remittances

    The prime minister said that he was criticized by the political opponents for not clamping a complete lockdown. But their decision of smart lockdown was being followed by the British Prime Minister Boris Johnson.

    Then came the challenge of Afghanistan and the flight of dollars which put pressure on rupee, he further added.

    The prime minister said the world also witnessed a record surge in commodity prices as the supply and demand lines were disrupted by the pandemic. The people all over the world had been facing problems, he added.

    About commodity prices, the prime minister expressed the confidence that it would ease soon.

    The prime minister further stressed upon developing a tax culture like the Scandinavian countries that have the highest tax ratio.

    He observed that tax culture could not evolve in the country as the people were reluctant to pay taxes in the past, due to lack of trust over rulers who spent the public tax money on their luxurious living.

    He said the present government was making efforts to spend available resources on the poor segments of society.

    He referred to the health cards initiative under which each family was getting free health facility worth 1 million rupees. Such a health insurance was never thought of in the world.  To lift the living standards of poor segments of society, the government also launched Ehasaas programme and stipends.

    The prime minister recounted that country’s exports for the first time in history reached to $31 billion, remittances recorded $32 billion, tax revenues reached to around Rs6000 billion.

    READ MORE: Pakistan offers huge potential for e-commerce: PM Imran

    The prime minister said the expansion of industry was vital for a country’s economy. In Pakistan, large-scale manufacturing (LSM) witnessed a growth by 15 percent. The corporate profits reached Rs930 billion while private sector offtake touched Rs1138 billion. IT sector exports recorded 70 percent increase reaching to about $3 billion, the prime minister said while enumerating the growth of the economy due to the government’s business-friendly policies.

    He said the construction sector was also on the boom while the rural agriculture economy earned Rs1100 billion where 60 to 65 pc population of the country was residing. The change in their economic condition could be gauged from the increased sale of motorcycles.

    The prime minister said Pakistan was still a cheaper country when compared with petroleum product prices in India and others in the region.

    About state of Madina, the prime minister said it had brought the biggest revolution in the world, transforming the humble people as the leaders of the world.

    He also shared Allama Iqbal’s opinion that a Muslim society would always rise to prominence when it followed the model of Riyasat-e-Madina.

    The prime minister further said that rule of law in a society was critical as in its absence, corruption would assume the role of cancer.

    “Corruption is a symptom of lack of rule of law in a society. Our fight is for the rule of law in Pakistan. It is a difficult one because of different cartels and mafias who did not want the rule of law,” he said terming it a ‘Jihad’ against these mafias to secure future of the country.

    “In a banana republic, there are two sets of laws for the powerful and the weak,” he maintained.

    The prime minister stressed that alongside him (Imran Khan), the society would have to carry out this struggle because it was connected with the economic prosperity. “Nations had been destroyed due to corruption and lack of rule of law,” he added.

    The prime minister said Pakistan had huge potential to excel on the economic front and, in tourism sector alone, they could earn to meet the current account deficit.

    He also assured the participants that all facilities and utilities would be provided for setting up industrial zones along the Rawalpindi Ring Road project.

    Imran Khan informed that the project was in the final stages which was delayed due to corruption that changed its alignment.

    He also regretted that any initiatives like this one always drew speculations only for the real estate business, shooting up prices of lands.

    He assured that government would ensure provision of lands on lease at affordable prices to set up economic zones.

  • SBP shortens period to 120 days for bringing export earnings

    SBP shortens period to 120 days for bringing export earnings

    KARACHI: The State Bank of Pakistan (SBP) on Wednesday reduced the period from 180 days to 120 days for exporters to bring export proceeds from the date of shipment.

    The SBP on Wednesday amended foreign exchange regulations requiring exporters to bring export proceeds.

    READ MORE: SBP introduces licensing, regulations for digital banking

    The move also brings in Pakistan’s regulations closer to international best practices, the central bank said.

    It is pertinent to mention here that in recent past, SBP has introduced a number of policy measures in its foreign exchange regulations to facilitate exporters.

    READ MORE: SBP introduces Shariah compliant OMO injections

    These include (i) allowing up to 10 per cent of exporters’ annual exports for equity investment abroad to establish overseas subsidiary/branch office (ii) allowing exporters who are eligible to retain part of their export proceeds to make payments abroad from their export retention account for a number of additional purposes including marketing & promotions, purchase of design/ patterns, warehousing, consultancy service  etc. (iii) facilitating e-Commerce by allowing exporters to sell their products directly through their own websites as well as through international digital marketplaces including Amazon, e-Bay, Ali Baba and (iv) allowing exports by way of dispatch of shipping documents directly to the foreign buyer, to make exporters competitive in the international market.

    READ MORE: SBP directs banks to accept bearer prize bonds

    The new measure is expected to positively impact foreign exchange inflows in the market. SBP is of the view that flexible exchange rate has appropriately played its role as a shock-absorber and it is important that its role be complemented by strong exports proceed realization.

  • Pakistan’s trade deficit swells by 100% in 1HFY22

    Pakistan’s trade deficit swells by 100% in 1HFY22

    ISLAMABAD: Pakistan’s trade deficit has doubled to $24.8 billion during first half (July – December) of 2021/2022 1HFY22. The trade deficit was $12.36 billion in the same half of the last fiscal year.

    The import bill of the country surged by 63 per cent to $40 billion during the first half of the current fiscal year as compared with $24.47 billion in the same half of the last fiscal year, according to data shared by Arif Habib Limited.

    READ MORE: Pakistan’s trade deficit widens by 112% to $20.59 billion

    The exports registered a growth of 25 per cent to $15.13 billion during first six months of the current fiscal year as compared with $12.11 billion in the corresponding months of the last fiscal year.

    The trade deficit for the month of December 2021 contracted by 18 per cent to $4.14 billion as compared with $5.03 billion in November 2021.

    READ MORE: Pakistan’s import bill surges by 65% in four months

    Import bill of the country declined by 13 per cent to $6.9 billion in December 2021 as compared with $7.93 billion in November 2021. Meanwhile exports of the country also fell by five per cent to $2.76 billion in December 2021 as compared with $2.9 billion in November 2021.

    READ MORE: Pakistan’s trade deficit doubles in first quarter

  • Pakistan exports to seven regional countries up by 20.5%

    Pakistan exports to seven regional countries up by 20.5%

    ISLAMABAD: Pakistan has registered an increase in the exports to seven regional countries by 20.50 per cent in the first month of the financial year (2021-2022) as compared with the corresponding month of the last year.

    The State Bank of Pakistan (SBP) reported that the countries in the seven regional countries including Afghanistan, China, India, Nepal, Bangladesh, Sri Lanka, and the Maldives.

    These countries account for a small amount of $282.020 million which is only 12.49 percent of Pakistan’s overall exports of $2257.042 million in July 2021-22.

    China tops the list of the countries in which Pakistan exports goods to its neighboring countries except for Afghanistan and Bangladesh.

    There is an increase observed in the exports from Pakistan to China with a growth of 55.26 percent to $165.878 million in July 2022 from $106.775 million in July 2021.

    On the other hand, there is also an increase in the exports of Pakistan to Bangladesh by 5.66 percent from $5t51.033 million to $48.297 million.

    Yet the exports of Pakistan to Afghanistan have dropped by 38.57 percent to $38.557 million this year from $62.774 million. The exports of the country with India also plunged by 87.81 percent to $0.054 million from $0.443 million because of the suspension of trade relations by the government with Pakistan.

    The exports to Nepal also declined by 39.86 percent to $0.273 million from 0.454 million. However, the exports to the Maldives also fell by 1.21 percent to 0.325 million from 0.329 million.

    The exports of Pakistan with Sri Lanka increased by 68.55 percent to $235.991 million from $15.420 million in the previous year.

    However the imports of Pakistan from seven regional countries have increased by 19.36 percent to $1350.535million during July 2022 as compared to $1131.427 million in July 2021.

  • Monthly exports in March 2021 highest in decade: Razak Dawood

    Monthly exports in March 2021 highest in decade: Razak Dawood

    In a significant economic development, Pakistan’s exports soared to $2.345 billion in March 2021, marking a remarkable 13.4 percent increase compared to February 2021.

    (more…)
  • Exports cross $2 billion for four consecutive months in eight years

    Exports cross $2 billion for four consecutive months in eight years

    ISLAMABAD: Pakistan’s exports have crossed over $2 billion for the fourth consecutive months in January 2021 for the first time in last eight years, a statement said on Friday.

    A consultative meeting was held by the Advisor to Prime Minister on Commerce and Investment, Abdul Razaq Dawood, via video link to review the provisional trade data till the month of January 2021.

    He was informed that exports in January 2021 have increased by 8 percent to USD 2,135 million as compared to USD 1,978 million in January 2020.

    He was informed that this is the first time in last eight years that exports have crossed the $ 2 billion mark for four consecutive months.

    He was briefed that in January 2021, an increasing trend has been witnessed in the export of value-added and non-traditional products.

    The exports of Jerseys & Cardigans increased by 72 percent, Pharmaceutical by 55 percent, T-shirts by 43 percent, Plastics by 24 percent, Women’s Garments by 21 percent, Home Textiles by 19 percent, Textile Made-up by 11 percent, Men’s Garments by 8 percent and Rice by 7 percent as compared to January 2020.

    He was also informed that decreasing trend was noted in export of mostly non-value-added products.

    The exports of Maize decreased by 82 percent, Raw Leather by 23 percent, Cotton yarn by 11 percent, Cotton Fabric by 14 percent and Meat by 5 percent as compared to January 2020.

     The meeting was informed that geographically, in January 2021 exports increased to Canada (43 percent), Australia (42 percent), the United States (36 percent), South Africa (27 percent), China (21 percent), the United Kingdom (21 percent), Belgium (18 percent), and Saudi Arabia (14 percent).

    However, there was decrease in exports to Jordan (-68 percent), Senegal (-59 percent), Italy (-24 percent), Turkey (-21 percent), Bangladesh and the United Arab Emirates (-19 percent each).

    The 7-months’ performance of exports was also discussed in the meeting.

    The advisor was informed that the provisional export data for the period July-January 2020-21 showed that the exports increased by 5.5 percent, to USD 14,245 million as compared to USD 13,507 million during the same period last year.

    During July-January 2020-21, the exports of value-added and non-traditional products increased especially for Tents & Canvas (49 percent), Jerseys & Cardigans (37 percent), Pharmaceuticals (28 percent), Cutlery (27 percent), Socks & Stockings (26 percent), Women’s Garments (22 percent), Home Textiles (17 percent) and Textile Made-ups (9 percent) as compared to the same period last year.

    He was informed that as compared to the same period in the previous year, during July-January 2020-21 the export decrease was observed in mostly non-value added products, such as Cotton (-96 percent), Maize (-49 percent), Raw Leather (-30 percent), Cotton yarn (-24 percent) and Cotton Fabric (-9 percent).

    Dawood was informed that on the basis of export growth Pakistan’s Top markets for 7-months’ period are Indonesia (43 percent), Australia (22 percent), the United States (21 percent), the United Kingdom (21 percent), Poland (14 percent), Germany (12 percent), the Netherlands (11 percent) and China (9 percent).

    He was further informed that compared to last year, the markets showing declining exports during July-January 2020-21 were Thailand (-43 percent), Malaysia (-24 percent), Sri Lanka (-23 percent), the United Arab Emirates (-21 percent), Bangladesh (-18 percent), Italy (-7 percent) and Spain (-5 percent).

    Dawood advised the officials of the commerce ministry that much more needs to be done. He paid rich tributes to Pakistan’s exporters for this performance during difficult times despite the COVID-19 pandemic and contraction in Pakistan’s major markets. He urged them to aggressively focus on capturing a larger share of international exports.

  • Pakistan’s exports grow by 2.11 percent in five months

    Pakistan’s exports grow by 2.11 percent in five months

    ISLAMABAD: Pakistan’s exports have shown resilience amidst global economic challenges, recording a 2.11% increase to $9.737 billion in the first five months (July – November) of the current fiscal year 2020/2021, according to data released by the Pakistan Bureau of Statistics (PBS) on Friday.

    (more…)