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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.

  • Tax offices highlight anomaly in granting concession, exemption on imported goods

    Tax offices highlight anomaly in granting concession, exemption on imported goods

    ISLAMABAD: Tax offices have highlighted anomaly in extending concessionary rate of tax or exemption under Section 148 of the Income Tax Ordinance, 2001 to imported goods at customs stage.

    Large Tax Offices (LTOs) Islamabad and Karachi pointed out the anomaly and advised the Federal Board of Revenue (FBR) to rectify as taxpayers were suffering.

    Large Taxpayers Office (LTO) Karachi in a communication sent to FBR HQ stated that only FBR had powers under Section 148 of the Income Tax Ordinance, 2001 to reclassify goods under Part III of Twelfth Schedule. “In this condition the power of commissioner Inland Revenue to issue reduced rate certificate under SRO 715(I)/2020 dated August 12, 2020 is legally valid?”

    The LTO Karachi said that the FBR issued SRO 715(I)/2020 through which Rule 40E was inserted to Income Tax Rules, 2002 and the requirement had been set for the taxpayer desirous of seeking reduced rate certificate on goods classified in Part III of the Twelfth Schedule to the Ordinance.

    The LTO Karachi said that even issuance of the rule the commissioner cannot issue reduced rate certificate because there is no statutory or enabling provision in the statute itself (substantive law) for issuance of reduced rate certificate to the goods classified in Part III of the Twelfth Schedule, even if import is being made by the industrial undertaking.

    Explaining the background, the LTO Karachi said that before amendment brought in by the Finance Act, 2020, Section 148(7) of Income Tax Ordinance, 2001 provided the tax to be collected on import of raw material or plant and machinery for own manufacturing use by Industrial Undertaking shall not be Minimum Tax or Final Tax as the case may be.

    To this effect, earlier reduced rate certificate on import of Plant and Machinery for Industrial Undertaking was governed under the SRO 947(1)/2008 which now stands rescinded and the facility of exemption on plant and Machinery vide SRO 1020(1)/2020 dated 8th October stands withdrawn. Similarly, exemption under section 148 on import of in-house use by industrial undertaking was governed by Clause 72B of Part-IV of the Second Schedule to the Income Tax Ordinance, 2001 which has been omitted by Finance Act, 2020.

    The LTO Karachi said that section 148 has been amended by Finance Act, 2020, whereby tax to be collected u/s 148(1) on imports has been made Minimum Tax by amending Section 148(7) of the Ordinance except in the case of “Industrial Undertaking” importing goods subject to collection of Import Tax at 1 percent or 2 percent with respect to goods specified in Part-I or Part-II of the Twelfth Schedule to the Ordinance.

    “ The Plant and Machinery being capital goods have already been classified and mentioned in Part-I of the Twelfth Schedule to the Ordinance which is subject to reduce rate of withholding. Similarly, Raw Materials specified in Part-II of the Twelfth Schedule are subject to 2 percent of advance tax collection at import stage under section 148. However, goods specified in Part-III of the Twelfth Schedule to the Ordinance are subject to advance tax collection on import at 5.5 percent.

    “This tax to be collected under Part-III of the Twelfth Schedule at 5.5 percent is minimum tax even if import is made by Industrial Undertaking for its own use. As sub-section 7 of section 148 states that tax required to be collected under section 148 is to be minimum tax except in case of import of goods by Industrial Undertaking for its own use on which tax to be collected is at the rate if 1 percent or 2 percent as the case may be.”

    The tax office further informed that Section 159 of the Ordinance only grants exemption in three conditions: (i) where amount subject to withholding is exempt from tax; (ii) where amount subject to withholding tax is reduced rate; (iii) or where taxpayer is entitled for 100 percent tax credit under section 100C of the Ordinance.

    The LTO Karachi presented its view that commissioner is not competent or authorized under Section 148 to issue any reduced rate certificate with respect to goods specified in Part III of the 12th Schedule to the Ordinance unless the import is made by taxpayer whose income is exempt.

  • FBR advised to simplify withholding tax regime on imports

    FBR advised to simplify withholding tax regime on imports

    KARACHI: Federal Board of Revenue (FBR) has been urged to simplify the withholding tax regime on imported goods under Section 148 of the Income Tax Ordinance, 2001.

    Overseas Investors Chamber of Commerce and Industry (OICCI) in its proposals for budget 2021/2022 urged to FBR to simplify the withholding taxes on goods at the import stage.

    It suggested that the criteria for obtaining exemption under Section 148 of the Income Tax Ordinance, 2001 should be based on discharge of advance tax liability as per section 147 of the Income Tax Ordinance, 2001 and clause 72B of the part 1 of the second schedule should be restored.

    Raw materials imported at the rate of 5.5 percent withholding tax should not be subject to minimum taxation. This anomaly should be clarified by FBR at the earliest.

    Procedure for application of reduced rate of 2 percent on import of raw material for own use which are not covered under Part II of Twelfth Schedule is highly cumbersome and should be simplified.

    Section 148 (1) of the Ordinance to amended via the following insertion:

    “Provided that the Commissioner shall issue exemption certificate/ certificate of non-deduction / collection of advance tax at source at import stage within fifteen days of filing of application to exempt entities upon verification:

    Provided further that the Commissioner shall be deemed to have issued the exemption certificate upon the expiry of fifteen days to the aforesaid company and the certificate shall be automatically processed and issued by Iris”.

  • DG Customs Valuation assigned task to stop trade based money laundering

    DG Customs Valuation assigned task to stop trade based money laundering

    ISLAMABAD:  Directorate General of Customs Valuation has been assigned to stop trade based money laundering through effective monitoring of goods clearance specially those goods having lower duty rates or exempt from duty and taxes.

    The Federal Board of Revenue (FBR) on Friday issued SRO 503(I)/2021 to redefine functions of the Directorate General of Customs Valuation.

    Through the SRO it is instructed the directorate that besides focusing on under invoicing of imports, also identify cases of over-invoicing of imports of low-duty or exempt items, and mis-invoicing of exports (to prevent flight of capital or trade-based money laundering) and to convey such information to concerned formations.

     The FBR also instructed the valuation department to make special arrangements to aware trade and industry about the latest customs valuation of import and export of goods.

    The directorate has been advised to develop and maintain a center for issuing advance rulings on valuation in accordance with international best practices.

    The FBR asked the directorate to regularly obtain reference price data from accredited publications, official price list, websites, through market enquiries as well as findings of Post Clearance Audit and other authentic sources and to make such data available to all customs stations for smooth clearance of goods.

    Further, the directorate has been advised to carry out proactive monitoring of valuation of goods imported into and exported from the country vis a vis international price trends, conduct and undertake sector wise studies of items prone to mis-invoicing and to advise the field formations regarding any abnormalities in valuation during clearance.

    To maintain effective liaison with Pakistan Mission abroad for the purpose of valuation enquiries, with relevant valuation committees of World Trade Organization and World Customs Organization, and with foreign customs administration.

    The FBR further advised the directorate to develop suitable training modules, in consultation with Directorate General of Training and Research, focused and providing necessary skills from basic level to advanced level to officers and officials working in all relevant functions including Model Customs Collectorates, Post Clearance Audit and Valuation Directorates.

  • FBR expands operations against Benami assets to four major cities

    FBR expands operations against Benami assets to four major cities

    The Federal Board of Revenue (FBR) has decided to expand its operations by establishing Anti-Benami Zones in four major cities across the country.

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  • Sajidullah Siddiqui transferred as Member IT

    Sajidullah Siddiqui transferred as Member IT

    The Federal Board of Revenue (FBR) has announced the appointment of Sajidullah Siddiquie, a distinguished officer of the Inland Revenue Service (IRS) with the rank of BS-21, as the Member (IT) FBR.

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  • FBR urged to abolish withholding tax, minimum tax for commercial importers

    FBR urged to abolish withholding tax, minimum tax for commercial importers

    KARACHI: Federal Board of Revenue (FBR) has been urged to abolish withholding tax and minimum tax for commercial importers in the upcoming budget 2021/2022.

    Karachi Chamber of Commerce and Industry (KCCI) in its proposals for the upcoming budget said that commercial Importers of raw material pay withholding tax at 2 percent up to 5.5 percent which can only be possible if the gross profit is 30 percent, while the margin is not more than 2 to 3 percent on raw materials sold without value addition or change in form.

    By amendment to Section 148 of Income Tax Ordinance, 2001 through Finance Bill 2018-19, WHT paid on import of raw materials by commercial importers has been converted to minimum tax and the importers have been taken out of fixed tax regime (FTR).

    The chamber said that the concept of WHT is unique to Pakistan’s Tax regime which in fact is tantamount to putting the burden of tax-collection from undocumented entities on the compliant tax payers and avoiding the responsibility to broaden tax-base.

    After acquiring unprecedented powers to access information under Section 56 A and 56 B in Income Tax Ordinance, 2001, FBR and its subordinate departments must take the responsibility to identify non-compliant and undocumented entities/persons instead of laying the onus on existing taxpayers.

    The chamber proposed that concept of minimum tax and withholding tax may be abolished.

    Tax Payers may be allowed to pay certain Fixed Tax or opt for Audit regime and pay taxes in accordance with actual tax liability on Income.

    Furthermore, all Taxes deducted have to be adjustable against actual tax liability.

    Giving rationale, the chamber said that the commercial importers who are a major source of revenue will be able to resume their business and contribute to revenue as well as promotion of SMEs.

  • Real estate remains top priority for documentation of economy

    Real estate remains top priority for documentation of economy

    ISLAMABAD: Tax authorities have prioritized real estate sector for documentation of economy during next three years for increasing share of direct taxes in revenues.

    The Medium Term Budget Strategy Paper for 2021/2022 to 2023/2024 issued by the ministry of finance stated that all out efforts are being made to increase the share of direct taxes in revenues.

    “Documentation of economy to increase the taxation in services, real estate and wholesale and retail is top priority,” it added.

    According to the paper the use of information technology is the corner stone of strategy of Federal Board of Revenue (FBR) for mobilization of revenues.

    It aims at automation of all business processes starting from registration to assessment and issuance of refunds.

     Installation of the ‘Track and Trace’ system, point of sale integration of retailers with FBR’s computerized system, e-audit and e-appeals are at various stages of implementation and would be fully operational in the medium term.

  • 400,000 taxpayers pay surcharge for ATL

    400,000 taxpayers pay surcharge for ATL

    KARACHI: Around 400,000 taxpayers have paid surcharge for appearance on Active Taxpayers List (ATL) for tax year 2020, according to updated active taxpayers list issued on Monday by the Federal Board of Revenue (FBR).

    The FBR issues a fresh ATL on March 01 every year on the basis of returns filed for the preceding tax year. The FBR issued ATL for tax year 2020 on March 01, 2021. This ATL carried 2.17 million names of taxpayers who filed their income tax returns by due date or those who filed their returns on the date which was extended by Commissioner Inland Revenue (CIR).

    The updated ATL – on the basis of surcharge paid by those person who filed their income tax returns after due date – is showing around 2.57 million names of active taxpayers.

    The filing of income tax returns is mandatory for all the taxpayers who have taxable income or specified under Section 114 of Income Tax Ordinance, 2001.

    As per statute the compliance of mandatory return filing was not enough to avail the reduced rate facility. According to Section 182A of Income Tax Ordinance, 2001 the persons who fail to file annual return of income by due date or extended by commissioner Inland Revenue then their names would not be included in the active taxpayers list for the year for which return was not filed.

    However, the persons would be included in the taxpayers list on filing return after the due date, if they pay surcharge at: Rs20,000 in case of  a company; Rs10,000 in case of an association of persons; and Rs1,000 in case of an individual.

  • Tax collection on profit from bank deposits increase to Rs54.55bn in July – March

    Tax collection on profit from bank deposits increase to Rs54.55bn in July – March

    KARACHI: Withholding income tax collection from profit on bank deposits registered 11 percent growth to Rs54.55 billion during first nine months (July – March) 2020/2021, sources said on Monday.

    The collection of withholding tax from profit on bank deposits was Rs49 billion in the nine months of the last fiscal year, officials at Regional Tax Office (RTO) –I Karachi said.

    The RTO-I Karachi, is a revenue collection arm of the Federal Board of Revenue (FBR), has mandate to collect the withholding tax on profit from debt on bank deposits under Section 151 of the Income Tax Ordinance, 2001.

    The rate of tax to be deduction under section is 15 percent of the yield or profit. In case person is not on the Active Taxpayers List (ATL) the tax rate shall be increased by 100 percent.

    The officials attributed the rise in tax collection to massive increase in bank deposits.

    The bank deposits have reached to record high at Rs17.9 trillion by end of March 2021. The deposits of banking system increased by 18.38 percent as the total deposits were at Rs15.12 trillion by end March 2020.

  • Major reforms in personal income tax likely in budget

    Major reforms in personal income tax likely in budget

    ISLAMABAD: The tax authorities are working on major reforms in personal income tax to be introduced through budget 2021/2022.

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