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.

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

ISLAMABAD: Federal Board of Revenue (FBR) has unveiled strategy to achieve revenue collection target of Rs7.47 trillion during the ongoing fiscal year 2022-2023.

Officials in the FBR on Thursday said that revenue target for 2022-2023 has been fixed at Rs7.47 trillion which demands growth of 21.5 per cent over the collection of Rs6.148 trillion made during the last fiscal year.

READ MORE: Customs officer awarded major penalty of rank demotion

In absolute terms, around Rs1.32 trillion additional revenues are to be collected by the FBR in the current fiscal year to meet the target.

The 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.

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

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 Federal Excise Duty (FED) on international air travel, increased tax on luxury motor vehicles etc,” according to the officials.

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

Keeping in view the past performance of FBR and the revenue measures taken during the current budget there are high hopes of achieving the tax target for fiscal year 2022-2023.

READ MORE: LTO Karachi collects PKR 456 billion in 1QFY23

October 6, 2022
FBR surpasses first quarter collection target by Rs27 billion

ISLAMABAD: The Federal Board of Revenue (FBR) has surpassed the revenue collection target assigned for July – September 2022-2023 by Rs27 billion.

The FBR in a statement issued on Friday stated that the target of the first quarter of the current financial year has also been surpassed by achieving Rs1635 billion against the target of Rs1609 billion and the growth is more than 17 per cent for the quarter. FBR has collected Rs27 billion in excess of the target.

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

These figures would further improve before the close of the day, the FBR said.

The FBR released the provisional revenue collection figures for the month of September and the first quarter of the current financial year.

The revenue body collected net revenue of Rs685 billion during the month of September against the target of Rs684 billion which is 27 per cent higher than the collection of September last year.

This performance in revenue collection is despite zero rating of Sales Tax on POL products, import compression and the prevailing situation of floods.

READ MORE: LTO Karachi collects PKR 456 billion in 1QFY23

This impressive growth is primarily based on the 41 per cent growth in direct taxes in the first quarter which is in line with the policy of the government to tax the rich and affluent.

The revenue performance is reflective of robust revenue mobilization strategy of FBR and effective enforcement by the field formations.

READ MORE: Dar appreciates FBR for taxing rich

On the other hand, the amount of refunds of Rs84 billion disbursed during the first quarter against Rs62 billion in the first quarter of the last year which is 35.5 per cent higher.

FBR expresses its profound gratitude to all the taxpayers who have made possible this remarkable record collection during the first quarter of the year.

READ MORE: FBR issues procedure, collection of capital value tax

October 1, 2022
FBR extends return filing date up to October 31, 2022

ISLAMABAD: Federal Board of Revenue (FBR) on Friday granted one month extension in filing of income tax return for tax year 2022.

The FBR issued Circular No. 16 of 2022 and extended date of filing of income tax returns for tax year 2022.

According to the circular the FBR extended the date for annual return filing up to October 31, 2022 from September 30, 2022.

Chambers and association have approached the FBR to extend the last date for filing income tax return, which is expiring on September 30, 2022.

READ MORE: FBR allows refund adjustment to facilitate return filing

Muhammad Idrees, President, Karachi Chamber of Commerce and Industry (KCCI) in a letter sent to the Finance Minister requested to issue to the FBR for extension in last date for filing income tax returns from September 30, 2022 to December 31, 2022 keeping in view the unusual situation emerging all over the country due to recent rainfalls and flash floods.

He stated that the chamber was constantly being approached by the members of the business and industrial community and also by the people belonging to different walks of life who wanted the last date to be extended till December 31, 2022.

“Due imposition of ban on imports which was followed by unusual situation all over the country emerging after torrential rainfalls and flashfloods, the taxpayers, particularly the members of the business & industrial community, are facing a lot of problems as a large portion of receivables from various parts of the country badly hit by floods are still pending,” he said.

READ MORE: FPCCI seeks statutory time for return filing after error removals

It was a well-known fact that the business, commercial, agricultural and all other activities in the flood-hit areas have come to a total halt which has created serious cashflow issues and it will take at least two more months to return to normalcy.

In this scenario, it has become inevitable to provide relief to loyal taxpayers in shape of extension in last date hence, keeping in view the ground realities, he requested the Finance Minister to order FBR to extend the last date for filing income returns to December 31, 2022 which will be widely welcomed by the loyal taxpayers from all over the country.

Besides, the return filing portal is also encountered with some glitches which the tax practitioners said those were not removed so far.

Karachi Tax Bar Association (KTBA) recently highlighted problems on the online return form. It said Column for adjustment of brought forward capital losses under the head of capital gains is not available in Income tax return form due to which tax on capital gain cannot be calculated correctly.

The Column of tax credit for specified industrial undertakings u/s 65G of the Income Tax Ordinance, 2001 is inadvertently available in the Tax Credits Annexure of income tax return for salaried individuals, which has no correlation with such tax credit.

READ MORE: FBR advised to extend tax return filing date for three months

Although the rate of tax on contract receipts under section 153 was reduced from 7.5 per cent to 7 per cent for Tax Year 2022, however, there is no column for such reduced rate in the return for the TY 2022 available on IRIS.

The draft of manual return forms for the Individuals and AOPs for the Tax Year 2022 was issued belatedly on August 26, 2022, whereas the final SRO. 1733(1)/2022 was issued on September 13, 2022 meaning thereby only 17 days of time has been allowed to file the manual returns, which is insufficient as provided under the law.

The IRIS portal is calculating incorrect tax liability on gain on sale of immovable properties in violation of section 37(1A) of the Income Tax Ordinance, 2001 which needs to be taken care off as soon as possible.

The IRIS portal is calculating incorrect tax on profit/yield on Bahbood Certificates/ Pensioner’s Benefit Account/ Shuhada Family Welfare Account in violation of clause (6) of Part-III, 2nd Schedule of the Income Tax Ordinance, 2001, which provides that tax shall not exceed 10 percent of such Profit/ Yield.

There lies no option list in drop downs country and currency under Code “7006” having description “Investment (Non-Business) (Account / Annuity / Bond / Certificate / Debenture / Deposit / Fund / Instrument / Policy / Share / Stock / Unit, etc.)” due to which a taxpayer remains unable to file the Foreign Income & Assets Statement under section 116A(1) of the Ordinance.

READ MORE: PTBA suggests measures to resolve refund adjustment ahead return filing deadline

Opening wealth is being shown in “Reconciliation of Net Assets” Value of opening net assets is being shown under code ‘703002’ despite the fact that the taxpayer’s residency status is selected as “non-resident” for Tax Year 2022 after which, he should not be required to file the wealth statement including reconciliation of net assets.

The withholding rates on payment of Dividend @ 7.5 per cent, 15 per cent and 25 per cent, (under section 150 of the Ordinance) are appearing in the Income Tax Return Form of “Income for a person deriving income only from salary and other sources and the Column Code 64330052 (Dividend u/s 150 @25 per cent) is missing.

Proviso was inserted under section 22(2) of the Tax Ordinance by Finance Act, 2020 whereby depreciation on additions to fixed assets made after 01-Jul-2020 would be reduced by 50 per cent However, when entries related to written down values are entered in in depreciation schedule as opening values, the IRIS is calculating depreciation at 50 per cent on total values.

October 1, 2022
LTO Karachi collects PKR 456 billion in 1QFY23

The Large Taxpayers Office (LTO) Karachi, the flagship revenue collection arm of the Federal Board of Revenue (FBR), has demonstrated exceptional performance by collecting a staggering PKR 456.4 billion during the first quarter of the fiscal year 2022/2023 (July – September).
(more…)

September 30, 2022