Tag: FBR

FBR, Pakistan’s national tax collecting agency, plays a crucial role in the country’s economy. Pakistan Revenue is committed to providing readers with the latest updates and developments regarding FBR activities.

FTO directs stop unlawful recovery from taxpayers’ bank accounts

Federal Tax Ombudsman (FTO) has directed the tax authorities to stop unlawful recovery from bank accounts of taxpayers.

The FTO issued the order dated September 30, 2022 in a complaint against non-issuance of refund amounting to Rs23.25 million for tax year 2016 along with compensation.

READ MORE: FTO investigates tax collection through electricity bills

According to the complainant, which is an Association of Person (AOP), filed return for tax year 2016. Later on, a tax office of the Federal Board of Revenue (FBR), amended the assessment order by making an addition of Rs1,754 million and rs164.21 million.

Being aggrieved, the complainant filed appeal before the Commissioner (Appeals), Gujranwala who modified the order and annulled the addition of Rs164 million, with the directions that the unit office for further necessary verification and confirmed the addition of Rs1,754 million.

READ MORE: President Alvi rejects FBR plea in maladministration cases

The tax office, recovered an amount of Rs23.25 million through attachment of bank accounts on the very next day without passing appeal effect order. Statedly, recovery was also made from bank accounts of some un-concerned persons.

The complainant filed appeal before appellate tribunal Lahore, who order granted stay order with certain observations.

The FTO in its findings revealed that the recovery of Rs23.25 million had been made from the complainant AOP and certain other unconcerned whereas no demand was in the field at the time of making such recovery. “This act of department tantamount to maladministration.”

READ MORE: FTO directs customs to clear pending auctions

It is also found that recovery from the bank accounts of unconcerned person is also an act which tantamount to maladministration.

The FTO in its recommendations to the FBR to ensure that an internal fact finding is conducted to see as who had recovered the amounts from bank account without giving appeal effect and without having legally recoverable tax demand on record.

READ MORE: KTBA passes resolution against FTO Asif Jah

FBR has been asked to issue clear directions to all field formations: forestalling unlawful recovery in the absence of any legally recoverable tax demand; and recovery from the accounts of unconcerned persons/entities.

October 13, 2022

FBR collects Rs196 billion as income tax from salaried class

ISLAMABAD: Federal Board of Revenue (FBR) has collected a huge amount of Rs196.25 billion as income tax from salaried class during tax year 2022.

A report issued by the FBR revealed that the collection of tax on salaried income recorded significant growth of 29 per cent, which compared with the collection of Rs151.84 billion in the preceding tax year.

Salaried tax is major revenue spinner in the collection of withholding tax. The collection of income tax on salaried income has been ranked third in the table of top revenue spinner under the withholding taxes.

The collection of withholding taxes from contracts and imports are on the first two slots. The FBR collected Rs341.42 billion with growth of 25.5 per cent from contracts and Rs281.61 billion with a growth of 29 per cent from imports during tax year 2022.

The recent revision in tax slabs in for the salaried class has been aimed to boost the revenue collection during the current fiscal year 2022/2023.

The FBR said that target for 2022-2023 is challenging given the fact that government is focusing on controlling the current account deficit and rising inflation which would result in import contraction and slowdown in the overall GDP growth.

Nonetheless, FBR is confident that its team has the ability and the resolve to accomplish this gigantic task as an upward revised target has already been achieved for the financial year ended on June 30, 2022.

To achieve the target several efforts are being made at policy as well as operational levels.

“There is focus on enhanced use of technology and a policy shift towards taxing the high-income groups through direct taxation such as the imposition of Super Tax, Poverty Alleviation Tax, revision of individual tax slabs including salaried class, increase in FED on international air travel, increased tax on luxury motor vehicles etc.,” the FBR added.

FOLLOWING IS THE TAX CARD FOR SALARIED PERSONS FOR TAX YEAR 2022-2023

Taxable Income	Rate of Tax
Up to Rs600,000	0%
Rs600,001 –1,200,000	2.5% of amount exceeding Rs600,000
Rs1,200,001 –2,400,000	Rs15,000 + 12.5% of amount exceeding Rs1,200,000
Rs2,400,001 –3,600,000	Rs165,000 + 20% of amount exceeding Rs2,400,000
Rs3,600,001 –6,000,000	Rs405,000 + 25% of amount exceeding Rs3,600,000
Rs6,000,001 –12,000,000	Rs1,005,000 + 32.5% of amount exceeding Rs6,000,000
Amount exceeding Rs12,000,000	Rs2,955,000 + 35% of amount exceeding Rs12,000,000

The rate of tax in the table above are applicable where the income of an individual chargeable under the head ‘salary’ exceeds seventy-five per cent of his/her taxable income.

October 12, 2022

WHT share in direct taxes jumps to 67% despite omitting provisions

ISLAMABAD: Share of withholding tax (WHT) collection in total collection of direct taxes has increased to 67 during Tax Year 2022 despite elimination of many provisions related to the withholding taxes.
(more…)

October 12, 2022
Pakistan amends baggage rules; now $1,000 require declaration

ISLAMABAD: Pakistan has amended baggage rules to make currency declaration of an amount $1,000 while taking out of the country to Afghanistan.

However, new slabs of currency declaration on the basis of age have also been announced.

The Federal Board of Revenue (FBR) issued SRO 1864(I)/2022 dated October 10, 2022 to make changes in the Baggage Rules, 2006.

READ MORE: PTBA raises objections to amendments proposed by FBR

As per the new changes to the baggage rules, the outbound passenger, for all countries except Afghanistan, without prejudice to his entitlement of taking out of Pakistan $1,000 up to the age of 5 years, $5,000 above 5 years, up to 18 years and $10,000 above the age of 18 years, while taking out of Pakistan foreign currency exceeding $5,000 or equivalent, or any other prohibited or restricted item, shall file a declaration before or on departure, electronically in the WeBOC or pass track or manually at the airport.

READ MORE: Pakistan’s tax to GDP ratio improves to 9.2 per cent in FY22: FBR

The FBR said that the persons travelling to Afghanistan, while having entitlement of $1,000, shall file a declaration of currency in their possession.

The incoming passenger when in possession of foreign currency exceeding $10,000 or equivalent, or any other prohibited or restricted item, shall also file a declaration.

READ MORE: Pakistan customs seals over 1,600 illegal petrol pumps during FY22

The FBR said that the declaration is also must for passengers carrying: Prohibited or restricted goods such as arms & ammunitions, narcotics, psychotropic substances or satellite phones etc; and gold and precious metals, jewelry, precious or semi-precious stones.

The declaration of foreign currency in US $/ Bearer Negotiable Instrument or equivalent is mandatory for outbound passengers to all countries except Afghanistan, taking out amount exceeding $5,000 or equivalent;

READ MORE: FBR directs IR offices to avoid recovery in pending appeals

For passengers traveling to Afghanistan, taking out cash foreign currencies US $ or equivalent; and Incoming passengers bringing into Pakistan amount exceeding $ 10,000 or equivalent.

October 12, 2022
PTBA raises objections to amendments proposed by FBR

ISLAMABAD: Pakistan Tax Bar Association (PTBA) has raised objections to amendments proposed in format as 16 million returns have already been filed for tax year 2022.

In a letter sent to the chairman of the Federal Board of Revenue (FBR) on Monday October 10, 2022, the PTBA submitted objections and suggestions on the proposed amendments to be made in the Second Schedule, in part-II-V, in the heading “Tax chargeable / payments” in the Income Tax Rules, 2002 as published vide S.R.O. 1829(1)/2022 dated October 03, 2022.

READ MORE: Pakistan’s tax to GDP ratio improves to 9.2 per cent in FY22: FBR

The PTBA said that amendment in the format of return had been proposed vide notification under S.R.O. 1829(1)/2022 dated October 03, 2022. Whereas, as per FBR declaration, returns above 16 million for the tax year 2022 have already been received. What would be the status of the said returns? Taxpayer in future may face undue litigations.

It is submitted that tax is charged on the net value of the capital assets whereas, no row has been provided to declare the amount of liabilities as well as net value of capital assets.

READ MORE: Pakistan customs seals over 1,600 illegal petrol pumps during FY22

PTBA said that the federation has no power to levy tax on agricultural income whether real or deemed as it is the domain of the provinces. “Every province of the country is charging Income Tax on the holding exceeding 12.5 Acres. The charge u/s 7E amounts to double tax,” it added

It is further submitted that self-owned agricultural land where agricultural activity is carried out by a person has been excluded under clause (C) of sub section (2) of section 7E. No column has been provided to claim exemption in this respect.

READ MORE: FBR directs IR offices to avoid recovery in pending appeals

It is not clear that whether a landlord who has leased out his agricultural property, is obliged to file the return, particularly, when he does not have any other source of income, except the agricultural income.

For the sake of brevity, the relevant section 41 of the income Tax Ordinance, 2001 is reproduced hereunder;

“S. 41. Agricultural Income.-

(1) Agricultural income derived by a person shall be exempt from tax under this Ordinance.

(2) In this section, “agricultural income” means, –

(a) any rent or revenue derived by a person from land which is situated in Pakistan and is used for agricultural purposes;

(b) any income derived by a person from land situated in Pakistan from –

(i) agriculture;

(ii) the performance by a cultivator or receiver of rent-in-kind of any process ordinarily employed by such person to render the produce raised or received by the person fit to be taken to market; or

(iii) the sale by a cultivator or receiver of rent-in-kind of the produce raised or received by such person, in respect of which no process has been performed other than a process of the nature described in sub-clause (ii); or

(c) any income derived by a person from –

(i) any building owned and occupied by the receiver of the rent or revenue of any land described in clause (a) or (b);

READ MORE: FBR directs 85 big retailers to integrate businesses

(ii) any building occupied by the cultivator, or the receiver of rent-in-kind, of any land in respect of which, or the produce of which, any operation specified in subclauses (ii) or (iii) of clause (b) is carried on, but only where the building is on, or in the immediate vicinity of the land and is a building which the receiver of the rent or revenue, or the cultivator, or the receiver of the rent-in-kind by reason of the person’s connection with the land, requires as a dwelling-house, a store-house, or other out-building.

The PTBA said that one Capital Asset owned by the resident person has been excluded from deeming income under clause (a) of sub section (2) of section 7E. But to claim such exemption no column has been provided in the proposed draft.

Furthermore, self-owned business premises (which may be more than one) from where the business is carried out by the person is excluded under clause (b) of sub section (2) of section 7E. No column to claim the said exemptions has been provided in the draft.

Likewise, to claim exemption under sub clauses (i), (ii), (iii) and (iv) of clause (d) of sub section (2) of section 7E, no column has been provided in the draft.

No space to claim exemptions under clauses (e), (f), (g), (h), (i) of sub section (2) of section 7E has been provided in the draft.

In order to claim the basic exemption of Rs. 25,000,000/- from the aggregate value of the Capital assets to be assessed u/s 7E, the space column may be provided.

It is suggested that the auto shifting data from wealth statement regarding immovable asset including its costs be made possible, to avoid extra labour of the tax consultants who are already facing a lot of burden and as well have a short time in filing tax returns.

October 10, 2022
Pakistan’s tax to GDP ratio improves to 9.2 per cent in FY22: FBR

ISLAMABAD: Pakistan’s tax to GDP ratio has improved to 9.2 per cent in the fiscal year 2021-2022, the Federal Board of Revenue (FBR) said.

In Pakistan, although the tax to GDP ratio has been low compared to other regional countries yet if viewed over the past so many years this ratio has significantly increased.

“The tax to GDP ratio was 4.4 per cent in 1950 which increased to 9.2 per cent in 2022,” the FBR said in a report and hoped that the continuing reform efforts are expected to further increase the Tax to GDP ratio in coming years.

READ MORE: Pakistan customs seals over 1,600 illegal petrol pumps during FY22

During early 50s, the main revenue collection source was the Customs Duty which was contributing 66 per cent of the total revenue while direct tax and sales tax was contributing only 12 per cent and 14 per cent of revenue respectively.

Over the years the tax mix changed drastically. By 1995, Customs Duty share had reduced from 66 per cent to 34 per cent percent of the total revenue while direct tax and sales tax’s contribution increased to 27 per cent and 19 per cent respectively.

READ MORE: FBR directs IR offices to avoid recovery in pending appeals

Tax mix further changed during last two decades. By 2022, share of Sales Tax increased to 41 per cent and Direct Tax’s 37 per cent while the share of Customs Duty declined to 17 per cent.

The FBR said that the contribution of direct and indirect taxes has changed with share of direct taxes increasing and share of indirect taxes decreasing.

In the year 1952, the share of direct taxes was 14 per cent and the share of indirect taxes was 86 per cent. However, it was changed to the share of direct taxes to 37.2 per cent in the year 2022 as the share of indirect taxes to 62.8 per cent.

READ MORE: FBR directs 85 big retailers to integrate businesses

The share of withholding tax in collection of direct taxes increased phenomenally over the years. The share of withholding tax was 44 per cent of the direct taxes in the year 1985 and this share increased to 67 per cent.

The FBR said that rebasing of national accounts affected the tax to GDP ratio adversely.

National Accounts is a systematic framework for the presentation of statistics that provide a wide range of information about the economy. National accounts or System of National Accounts (SNA) provide a summary of national economy.

READ MORE: FBR issues one million tax notices to enforce compliance

There are several aggregate measures in the national accounts, most notably gross domestic product or GDP and investment. GDP at constant prices indicates economic growth to measure the performance of the economy over time or in comparison with other countries/in comparison with previous periods.

In 2022, the National Accounts were rebased to improve the statistical representation of economy.

In the fiscal year 2020-2021, the tax to GDP ratio decreased to 8.6 per cent as per new base year FY=2015-2016 when compared with 9.9 per cent on the basis of base year FY-2005-2006.

October 10, 2022
Pakistan customs seals over 1,600 illegal petrol pumps during FY22

KARACHI: Pakistan Customs has sealed over 1,600 petrol pumps across the country in its drive against smuggled petroleum products.

The Federal Board of Revenue (FBR) in its performance report for the fiscal year 2021/2022 stated that Customs authorities initiated country wide operations against illegal POL outlets during the fiscal year.

READ MORE: FBR directs IR offices to avoid recovery in pending appeals

FBR said that during the operation Customs sealed more than 1600 illegal outlets with criminal proceedings against owners. This initiative helped increase in legitimate imports of POL products.

It said Pakistan Customs is the guardian of Pakistan borders against movement of contra band goods and is facilitator of bona fide trade.

READ MORE: FBR directs 85 big retailers to integrate businesses

Customs provides a major source of revenue to the Government of Pakistan in the form of taxes levied on the goods traded across the borders. It also helps to protect the domestic industry, discourage consumptions of luxury goods and stimulate development in the under-developed areas.

Following initiatives taken by the Customs Administration during the TY 2022:

First Ever Counter Smuggling Policy Laid out which is an excellent example of interagency co-operation.

Highest Ever Counter Smuggling Seizures made (FY 2021-22: Rs. 66 billion).

READ MORE: FBR issues one million tax notices to enforce compliance

Countrywide Operation against Illegal POL outlets (sealing of more than 1600 illegal outlets with criminal proceedings against owners), through which, legitimate imports of POL products saw sharp surge as compared to previous financial year.

Opening Pakistan to Central Asian Republics through simplification of Transit Procedures and Automated Clearance. Pak-Uzbekistan Transit Agreement has been finalized and deliberations have been started.

Ease of Doing Business Indicators improved by 28 percent from 136 to 108 in 2021, which is an “unprecedented improvement” resulting into efficient Cross Border Trade.

READ MORE: FBR unveils plan to achieve Rs7.47 trillion revenue collection target

Pakistan Single Window Act, 2021 enacted and its rules notified and expected to be roll-out in the coming months.

WeBOC has now been implemented at all sea-ports, dry-ports and land border stations.

Online Payments have been introduced for the traders wherein levy-able duty and taxes on import of goods are paid online through digital banking.

Risk Management System is part of WeBOC clearance which is continuously upgraded from time to time.

Automated Duty Drawback Payment System: In order to facilitate the exporters, the manual rebate approval system has been replaced with RMS based, fully automated / system-based processing of duty drawback payment without involving any human intervention. Under the automated system, the exports Good Declaration is termed as Rebate request.

Administrative Measures like auctions, recoveries, valuations etc have resulted in generation of Rs. 25 billion in FY 2021-22.

October 10, 2022
FBR directs IR offices to avoid recovery in pending appeals

KARACHI: Federal Board of Revenue (FBR) has directed the offices of Inland Revenue (IR) to avoid undue recovery proceedings until a case has passed the test of appeal at first appellate.

In an official note circulated to all chief commissioners of Large Taxpayers Offices, Corporate Tax Offices, Medium Taxpayers’ Office and Regional Tax Offices regarding undue recover proceedings under Section 138 at first appellate.

READ MORE: FBR directs 85 big retailers to integrate businesses

The revenue body previously on October 12, 2021 issued directives to field formations and instructed to avoid coercive measures until case has passed the test of appeal at the level of Commissioner (Appeals).

“Coercive measures, until case has passed the test of appeal at the level of Commissioner IR (Appeals), may avoided. Moreover, in order to utilize collective wisdom, a committee comprising of senior commissioner IR headed by Chief Commissioner IR may be constituted at formation level to deliberate on the cases before according approval for coercive measures.”

READ MORE: FBR issues one million tax notices to enforce compliance

The FBR said it had come to its knowledge that the instructions contained in the FBR’s letter were not being followed.

“In this regard, it is clarified that the instructions/directions issued by FBR aforementioned letter have not been withdrawn and to be followed in letter and spirit,” the FBR added.

The FBR issued these directives on the issue raised by Karachi Tax Bar Association (KTBA) regarding undue recovery proceedings.

READ MORE: FBR unveils plan to achieve Rs7.47 trillion revenue collection target

The tax bar in its letter dated September 29, 2022 to the FBR chairman stated that it had received queries from bar members and taxpayers that different officers of FBR issuing notices of alleged recovery under section 138(1) of the Income Tax Ordinance, 2001 irrespective of the fact that the, appeal is pending before the first appellate authority and yet to be finalized.

KTBA President Syed Rehan Hasan Jafri informed the FBR that there was already a circular sent to all chief commissioners IR that ‘coercive measures until case has passed the test of appeal at the level of commissioner IR (Appeals) may be avoided’ in respect of measures to avoid unnecessary litigation.

READ MORE: Customs officer awarded major penalty of rank demotion

The KTBA urged the FBR chairman to issue directives to all the officers of the IR to follow the instructions which were binding on the officers of the FBR to avoid unnecessary harassment to the taxpayers.

October 8, 2022
FBR directs 85 big retailers to integrate businesses

ISLAMABAD: Federal Board of Revenue (FBR) has directed 85 big retailers to integrate their businesses with the Point of Sale (POS) system.

In this regard, the FBR issued Sales Tax General Order (STGO) No. 04 of 2023 regarding mandatory integration of Tier-1 retailers with the FBR’s POS System.

The revenue body said that the Finance Act, 2019 added sub-section 6 to section 8B of the Sales Tax Act, 190 whereby a Tier-1 Retailer who did not integrate its retail outlet in the manner prescribed under sub-section 9A of Section 3 of the Sales Tax Act, 1990 during a tax period, its adjustable tax for the period would be reduced by 15 per cent. The figure of 15 per cent has been raised to 60 per cent through Finance Act, 2021.

READ MORE: FBR issues one million tax notices to enforce compliance

The FBR further stated that in order to operationalize the important provision of law, a system-based approach has been adopted whereby all T-IRs who are liable to integrate but have not yet integrated, with effect from July 2021 (Sales Tax returns filed in August, 2021) are to be dealt with as per the procedure laid down in STGO No. 1 of 2022 issued on August 3, 2021.

READ MORE: FBR unveils plan to achieve Rs7.47 trillion revenue collection target

Through latest STGO, the FBR issued a list of 85 Tier-1 retailers, directing them to integrate with the FBR system by October 10, 2022 and the procedure of exclusion from this list of 85 identified Tier-1 Retailers shall apply as laid down in STGO 17 of 2022 issued on May 13, 2022.

READ MORE: Customs officer awarded major penalty of rank demotion

Upon filing of sales tax return for the month of October 2022 for all hereby notified Tier-1 retailers not having yet integrated, their input tax claim would be disallowed as above, without any further notice or proceedings, creating tax demand by the same amount.

October 8, 2022
FBR issues one million tax notices to enforce compliance

ISLAMABAD: Federal Board of Revenue (FBR) has issued one million notices to registered taxpayers for enforcing compliance to the tax laws.

FBR officials on Friday said that the FBR issued one million notices till June 30, 2022 in both income tax and sales tax to registered persons and entities having turnover Rs100 million and above to enforce compliance against different sections the tax laws.

READ MORE: FBR unveils plan to achieve Rs7.47 trillion revenue collection target

According to the FBR it had taken several measures to boost revenue. It said number of income tax return filers for TY 2020 has crossed 3.0 million.

FBR has embarked on a plan to integrate all sales outlets of tier-1 retailers with FBR’s central computerized system. Furthermore FBR has decided to implement Track and Trace System for specified goods/ products i.e. Tobacco, Cement, Sugar, Fertilizer and Beverages imported into or manufactured in Pakistan.

READ MORE: Customs officer awarded major penalty of rank demotion

The revenue body launched sectorial analysis of huge business concerns across the country by assessment and processing units in all field formations of Inland Revenue Service (IRS). Sectors like cement, sugar, cotton and tobacco remained under focus.

Legal actions (attachment of properties, arrests and seizures) has been made against huge tax-defaulters to create deterrence against tax-evaders.

READ MORE: FBR surpasses first quarter collection target by Rs27 billion

The FBR also took measures in audit and accounting wing. This has been entrusted with the task of designing audit policy as an audit compliance program on yearly basis. This current year following initiatives have been taken by the Audit & Accounting Wing:

The Audit Policy, 2020 for Tax Year 2019 is under process in view of the experience obtained from the past audit policies. In addition to that, the wing also monitors audit activities carried out in the field formation throughout the year.

READ MORE: FBR extends return filing date up to October 31, 2022

The FBR said this year, under DLI 6 of Pakistan Raises Revenue Program, FBR has conducted and completed 67 cases of comprehensive field audits of large taxpayers selected through the Audit Policy, 2019 for Tax year 2018 by the risk-based selection tool and monitored by the Compliance Unit through AMIS with associated reports submitted to FBR management which has been duly verified by the World Bank.

Software solution is introduced to provide continuous monitoring of the audit cases with sufficient documentation and assistance to the auditors.

October 7, 2022