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.

Abolishing withholding tax, reducing sales tax rate on telecom services recommended

KARACHI: Federal Board of Revenue (FBR) has been urged to abolish withholding tax rate at 12 percent on telecom services to promote the accessibility of internet/data services to the low-income group.

Similarly, Federal Excise Duty (FED) is charged at 17 percent on telecom services which is on higher side as compared to other sectors, and general rate.

Provincial authorities levy a much lower rate of sales tax on other services. Since sales tax is a consumption tax (on usage), the decrease in sales tax rate will result in increased usage of telecom services and consequently drive tax collection upwards.

There should be single sales tax rate across all jurisdiction to remove the anomalies and undue hardships being faced by telecom sector in terms of compliances in different jurisdictions, thus, to provide ease of doing business.

These recommendations have been sent by Overseas Investors Chamber of Commerce and Industry (OICCI) to the Federal Board of Revenue (FBR) for the budget 2021/2022.

The OICCI further recommended that since the insertion of 9th Schedule in Sales Tax Act, 1990 effective 1st July 2014, the matter is in litigation. This tax should be abolished, ab initio, by accepting the decision of Lahore High Court as the resolution of the matter will result in additional upside on the corporate tax side for the exchequer and eliminate the undue litigations.

On the issue of advance tax on Auction/ Renewal of telecom licenses at 10 percent under section 236A of Income Tax Ordinance, 2001, the OICCI recommended that this tax should be abolished being irrational and burdensome on CMOs keeping in view the financial/ tax position.

The chamber said that as large utility providers, Cellular Mobile Operators’ (CMO) are subject to deduction/collection of withholding of income tax on large number of transactions, which increases the cost and complexity of tax compliance and an additional administrative burden for the telecom sector and negatively impacts the overall business environment.

It is recommended:

i. Exemption should be given to the telecom sector from deduction or collection of all types of withholding taxes, like banking and oil sector. There will be no loss of revenue to the exchequer as the tax collection mechanism will be simplified in terms of real time payment of advance tax Under Section 147 on quarterly basis.

Furthermore, this measure will also make the tax claims and its verification mechanism more transparent with minimum operational hassles as maintaining the thousands of records especially for advance tax on utility bills and imports is itself a very cumbersome procedure.

ii. Amendments need to be made in the section 147 for the calculation of tax liability. Currently the calculation of tax liability is based on the last assessed position and turnover of the year. The assessed position should not be used as a basis of calculation of tax liability until and unless an independent forum (i.e. At least Tribunal) has also confirmed the assessed position.

The OICCI recommended to reduce the custom duty rates for batteries (8507.6000) to 5 percent and to abolish additional custom duty and Regulatory duty, as these batteries are used with solar and power systems and are core asset for telecom infrastructure services provider. Reduction in duties will further encourage alternate energy resources for Telecom sector e.g. Solar etc.

On the issue of custom duty and Regulatory duty on import of telecom equipment, it is recommended to restore SRO 575, reduce Custom duty to 5 percent and abolish the Additional Custom duty and Regulatory duty as the core assets needs to be imported for provisioning of telecom services.

The OICCI demanded exemption from advance tax on electricity for Telecom Tower Infrastructure Companies. The chamber said that currently taxpayers can obtain exemption certificate for non-deduction of tax on electricity bills under section 235(3) of ITO 2001 if their income is exempt under the law or by discharging their advance tax liability for the year. Such exemption is not available to telecom service providers as their tax liability is minimum under section 153(3) of the ITO, 2001.

Enabling provision may be inserted in section 235 of the ITO, 2001 to empower the Commissioner to issue exemption certificate to Service Providers under minimum tax regime for non-deduction of advance tax on electricity bills.

April 13, 2021
367,159 taxpayers pay surcharge to enroll on ATL-2020

ISLAMABAD: Around 367,159 taxpayers have paid surcharge for appearance in the Active Taxpayers List (ATL) for availing exempt or reduced rates of withholding tax on various transactions.

According to weekly updated ATL for tax year 2020 issued on Monday the number of active taxpayers increased to 2,545,622 on the basis of income tax return filed within due date and after payment of surcharge after due date by April 11, 2021.

The Federal Board of Revenue (FBR) issued the new ATL for tax year 2020 on March 01, 2021 which carried 2,178,463 names of taxpayers, who were entitled to avail reduced or exempt rates of withholding tax on various transactions.

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.

April 13, 2021
Taxpayers not to worry on system generated past six years audit notices: CCIR

KARACHI: Taxpayers should not worry on audit notices of past six years as most of those were system generated and Federal Board of Revenue (FBR) is trying to resolve the issue, a top FBR officials said on Monday.

While discussing tax issues at Karachi Chamber of Commerce and Industry (KCCI), Dr. Aftab Imam, Chief Commissioner Inland Revenue (CCIR) of Corporate Tax Office (CTO) Karachi explained the issues pertaining to audit notices.

He said that FBR was well-aware of this issue and it has been observed that most of them were system generated notices and the business community should not worry as FBR was trying its best to resolve this issue.

“There is no need to re-submit those documents again at the FBR which have already been submitted for audit and only the missing documents should be provided with a covering letter in which it should be clearly mentioned that the following relevant documents have already been provided while the missing documents are being sent,” he added.

He also assured to analyze the issue of higher turnover tax on yarn traders as compared to the profit margin and look into the possibility of restoring it back to 0.1 percent from 1.5 percent in the next budget.

The Chief Commissioner CTO mentioned that FBR was seriously working towards creating ease for the business community as the economy would only flourish when the businesses flourish that would automatically improve the tax revenue for the country. “Hence, we want to facilitate the business community and keeping in view FBR’s approach, most of the issues being faced today would be resolved in the next one-an-a-half year as we are very keen to create a tax-friendly environment”, he added.

He further sought business community’s assistance in identifying those millions of individuals who have been doing businesses of up to billions of rupees but they remain out of the tax net which was the basic reason for the exorbitant tax rates being suffered by the existing taxpayers. “The unregistered individuals have to be taken to task which would reduce the burden on existing taxpayers through reduction in tax rates”, he added.

Earlier, President KCCI M. Shariq Vohra, while welcoming Chief Commissioner CTO, appreciated that dedicated efforts and prompt response by Chief Commissioner CTO towards amicably resolving the FBR-related taxation issues being faced by business community. “We hope that the FBR would incorporate maximum number of recommendations given by KCCI in its budget proposals which have been recommended in the larger interest of the country”, he said, adding that it has always been KCCI approach to highlight the general issues which are not faced by a few individuals only but by the majority of stakeholders from a particular sector. “Our proposals for upcoming Budget for FY 2021-22 carry pivotal importance and will have a positive impact on business and investment climate, ease of doing business and overall growth of the economy.”

He was of the opinion that taxpayers face immense hardships in getting petty issues resolved because of the unnecessary hindrances being creates by FBR officials which not only fetches a bad image for the entire department but also discourages new individuals to come into the tax net which was a very issue that requires immediate attention.

Shariq Vohra pointed out that many members of the business community have been receiving bulk audit notices nowadays in which huge number of documents for six years old cases of 2014 were being demanded which was not making any sense at all and it appears like an attempt to harass the business community. “The FBR, instead of intensifying the hardships for existing taxpayers, must take practical steps to somehow bring more and more people into the tax net which was in the larger interest of the country as it would not only improve the tax revenue but would also bring down the tax rates that would certainly go in favor of the economy”, he added.

Former Senior Vice President KCCI Ibrahim Kasumbi, in his remarks, particularly mentioned that the furniture industry comprising workshops, employing artisans and manual labor, has been receiving notices from tax authorities and field officers in many parts of Pakistan and they were being compelled to get registered as Tier 1 retailers which was unjust and not practicable for this trade. Hence, FBR must stop harassing shopkeepers, showroom and workshop owners in the name of registration in Tier-1 and the employment of hundreds of thousands skilled workers artisans and laborers has to be protected while this important industry of traditional hand-crafted furniture has to be preserved.

He further stated that consumption of black tea in Pakistan was 240,000 tons, but the imports through legal channels was hardly 100,000 tons due to high rates of customs duty, sales tax, regulatory duty (RD) and withholding tax (WHT). The remaining requirement was being fulfilled by smuggling, Afghan Transit Trade, and imports under various exemptions/concessions granted to Provincially Administered Tribal Areas (PATA) and Azad Kashmir. Hence, rates of customs duty, sales tax, RD & WHT have to be rationalized to prevent smuggling and massive leakage of revenue, he added.

April 12, 2021

Withholding tax collection from new car registration declines by 39pc in TY2020

ISLAMABAD: The collection of withholding tax on registration of new cars has declined by around 39 percent in tax year 2020 due coronavirus pandemic that has lowered the sales of locally assembled motor vehicles.

According to details released by Federal Board of Revenue (FBR) the collection of withholding tax fell to Rs5.88 billion in tax year 2020 as compared with Rs9.58 billion in the preceding tax year.

The drastic fall in revenue collection has been attributed to lower car sales that were impacted by COVID-19 and slowdown in the economy.

The annual sales of locally assembled cars posed a decline of 53 percent during fiscal year 2019/2020. According to Pakistan Automobile Assemblers Association (PAMA), the total car sales in the country were recorded at 110,583 units during fiscal year 2019/2020 as compared with 235,229 units in the preceding fiscal year.

The provincial motor vehicle registration authorities collect withholding tax on behalf of the FBR. The withholding tax has been collected on the registration of new motor car under Section 231B of the Income Tax Ordinance, 2001.

Following rates of withholding tax under Section 231B:

S. No.	Engine capacity	Tax
(1)	(2)	(3)
1.	upto 850cc	Rs. 7,500
2.	851cc to 1000cc	Rs. 15,000
3.	1001cc to 1300cc	Rs. 25,000
4.	1301cc to 1600cc	Rs. 50,000
5.	1601cc to 1800cc	Rs. 75,000
6.	1801cc to 2000cc	Rs. 100,000
7.	2001cc to 2500cc	Rs. 150,000
8.	2501cc to 3000cc	Rs. 200,000
9.	Above 3000cc	Rs. 250,000]

The above rates are applicable for persons on the Active Taxpayers list (ATL). However, the tax rate shall be enhanced by 100 percent in case person is not on the ATL.

April 11, 2021

Duty rebate payment to textile sector increases by over 100pc

ISLAMABAD: The payment of customs duty rebate to textile sector increased by over 100 percent during tax year 2020, which shows the commitment of Federal Board of Revenue (FBR) to facilitate the most import sector for resolving liquidity issues.

The payment of customs duty rebated was Rs18.31 billion during tax year 2020 as compared with Rs9 billion in the preceding tax year, showing an increase of 103.33 percent.

According to details released by the FBR, the major chunk of the rebate payment to textile sector was issued to ready-made garments and fabric made-ups.

The payment of customs duty rebate to ready-made garment industry was Rs6.5 billion during tax year 2020 as compared with Rs1.88 billion, showing a growth of 246 percent.

Similarly, the payment of duty rebate to fabric and made-up increased to Rs6.41 billion in tax year 2020 as compared with Rs1.12 billion in the preceding tax year, showing a rise of 472 percent.

The FBR has taken all possible measures to provide relief through payment of refunds and rebate to sectors of the economy for resolving liquidity issues during coronavirus pandemic.

The FBR issued rebate to the tune of Rs1.56 billion to hosiery industry during tax year 2020 and Rs1.24 billion to cotton fabric industry.

The FBR issued an amount of Rs24.4 billion as a total duty rebate during tax year 2020 as compared with Rs14 billion in the preceding tax year, showing an increase of 74 percent.

April 11, 2021
Listed companies should be exempted from electronic tax surveillance

KARACHI: Federal Board of Revenue (FBR) has been urged to exempt listed companies from electronic surveillance of business and records.

Overseas Investors Chamber of Commerce and Industry (OICCI) in its proposals for budget 2021/2022 said that through SRO 888 of 2020 dated September 21, 2020, a new chapter was introduced in Sales Tax Rules, 2006 whereby all registered persons are made liable to give continuous and full real-time electronic access to the premises, stocks, record, accounts and data, whether maintained electronically or otherwise, as and when required by an authorized officer as provided under section 38 of the Act.

The OICCI recommended that the scope should be restricted to the taxpayers having series of defaults or misconduct.

“Other taxpayers especially listed companies should be exempted from this requirement as they are subject to rigorous external audits, internal audit requirements by SECP and tax audits and monitoring by FBR,” it recommended.

April 11, 2021
FBR urged to allow commercial import of used cars to end auto assemblers monopoly

KARACHI: Federal Board of Revenue (FBR) has been urged to allow commercial import of used and reconditioned cars of models up to five years old to end monopoly of local car assemblers.

Karachi Chamber of Commerce and Industry (KCCI) in its proposals for budget 2021/2022 recommended the commercial import of used and reconditioned motor cars up to five years old.

The chamber said that during the past 40 years, assemblers of automobiles have enjoyed protective duties, exemptions and virtual monopoly in Pakistan’s automobile car market.

Contrary to initial agreements, the assemblers failed to implement deletion program up to 90 percent. Instead, they are importing CKD while they have created vendors who mostly import auto parts and supply to these assemblers.

Consequently, the so called vendor industry is only producing low quality and non-mechanical parts which is clearly visible in locally assembled cars.

So far the assemblers have only drained Pakistan’s foreign exchange reserves to the tune of billions of dollars.

Quality of automobiles produced by the assemblers is so poor that not a single unit of these cars has ever been exported to any country.

Despite such poor quality, artificial shortage is created to fetch a premium on the early delivery and allow undocumented investors to exploit genuine buyers.

The chamber said that import of reconditioned cars more than 3 years old model has been restricted to favor the assemblers and exploit the middle class people of Pakistan who can no more afford to buy even a small 660cc to 1000cc imported or local car.

Ironically, import of brand new cars of high capacity and premium brands is allowed which only benefits the elite. Middle class consumers have been deprived of their right to purchase reasonably priced used/reconditioned cars which have a better quality and safety standard than the locally assembled new vehicles.

Clearly there is an element of corruption, connivance and vested interest involved in formulating auto-policies. Unfortunately, the vested interests are also resisting to change the policy to allow import of reconditioned cars by reducing the Tariff rates and also permit import of cars of up to five year old models.

The chamber further said that enough protection has been given for decades to assemblers.

The chamber has given a comprehensive tariff plan for import of used and reconditioned cars.

April 10, 2021
Revamping withholding tax regime with maximum five rates recommended

KARACHI: Federal Board of Revenue (FBR) has been urged to revamp withholding tax regime and bring down the existing 50 different tax rates to maximum five rates.

Overseas Investors Chamber of Commerce and Industry (OICCI), the representative body of foreign investors operating in Pakistan and multinational companies, in its proposals for budget 2021/2022 suggested the FBR to revamp the withholding tax regime, which is one of the key irritants for compliant taxpayers.

It said that the fact that the ‘Collection and Deduction of Income Tax at Source (Withholding Agents Perspective) (Taxpayer’s Facilitation Guide)’ on the FBR website is of 48 pages highlights the complexity of the withholding tax regime which has more than 30 tax provisions that need to be followed and 50 different tax rates, applicable on nearly all heads of receipts/payments.

The rate of withholding/advance tax also varies depending upon the nature of transaction, legal/tax status of the parties i.e., company or individual and active or in-active filer.

Moreover, FBR system does not auto populate taxes withheld in the portal to the credit of the beneficiary.

Furthermore, different categories of withholding tax (WHT) rates have been prescribed under the ITO 2001, for various types of payments and it has become extremely difficult for the person processing payments to be precise and accurate in applying WHT rates and ensure compliance:

The complexity for the withholding agent has been further compounded after the introduction of active taxpayers list and different rates for an active and non-active filer.

The OICCI recommended the following:

i. Withholding tax regime should be revamped by reducing it to a maximum of five rates for all withholding taxes and the differentiation should be on the basis of active and inactive taxpayers only.

ii. All taxes withheld should be auto populated in the portal to the credit of the beneficiary.

iii. Final Taxation Regime should be eliminated, and all withholding taxes should be available for adjustment and the operations wing of FBR should ensure that all persons whose taxes have been deducted file their tax returns.

iv. Withholding agents should be given incentive in the form of 2% tax credit of the amount collected for facilitating the Government.

v. In addition to the above administrative/streamlining issues, withholding/ advance tax rates on below transactions should be reconsidered.

a) Withholding tax rate be reduced to 0.25% for all distributors in line with the withholding taxes applicable on dealers and sub-dealers of fast-moving consumer goods.

b) Withholding tax rates applicable on services is 8 percent minimum tax regardless of the actual taxable income of the service provider. The nature of this tax effectively becomes indirect tax and increases the cost of doing business for service providers, hence, tax on services should be made adjustable.

vi. Withholding tax deduction u/s 153 (1)(a) which is currently considered as minimum tax for all the suppliers (except manufacturers and listed companies) should be made adjustable at least for corporates appearing in active taxpayers’ list.

April 10, 2021
Tax collection from salary income grows by 69pc in TY2020

ISLAMABAD: The Federal Board of Revenue (FBR) witnessed a substantial increase in tax collection from salary income during tax year 2020, marking a sharp growth of 69 percent compared to the previous year. This significant rise is largely attributed to revisions in the income tax slabs for salaried individuals introduced under fiscal reforms.
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April 9, 2021
FBR issues office timings during Ramazan

The Federal Board of Revenue (FBR) has issued special office timings to be observed during the upcoming holy month of Ramazan.
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April 9, 2021