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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.

  • Return filing made mandatory for computer software exporters

    Return filing made mandatory for computer software exporters

    ISLAMABAD: The filing of income tax return is mandatory for persons engaged in exporting computer software to avail 100 percent tax credit.

    Sources in Federal Board of Revenue (FBR) on Saturday said that the exemptions for IT and IT enabled services had been withdrawn through Tax Laws (Second Amendment) Ordinance, 2021. However, a tax credit equal to 100 percent has been granted through the ordinance to facilitate the software exports.

    The sources said that certain conditions have been introduced including making return filing mandatory and provision of income tax audit has been added through the latest amended ordinance.

    Following new section has been added to Income Tax Ordinance, 2001 through Tax Laws (Second Amendment) Ordinance, 2021:

    “65F Tax credit for certain persons.- (1) Income of following taxpayers shall be allowed a tax credit equal to one hundred per cent of the tax payable under any provisions of this Ordinance including minimum and final taxes for the period, to the extent, upon fulfillment of conditions and subject to limitations detailed as under: –

    (a) persons engaged in coal mining projects in Sindh supplying coal exclusively to power generation projects;

    (b) a startup as defined in clause (62A) of section 2 for the tax year in which the startup is certified by the Pakistan Software Export Board and the next following two tax years;

    (c) persons deriving income from exports of computer software or IT services or IT enabled services upto the period ending on the 30th day of June, 2025:

    Provided that eighty per cent of the export proceeds is brought into Pakistan in foreign exchange remitted from outside Pakistan through normal banking channels.

     Explanation.- For the purpose of this clause, –

    (i) “IT services” include software development, software maintenance, system integration, web design, web development, web hosting and network design; and

    (ii) “IT enabled services” include inbound or outbound call centres, medical transcription, remote monitoring, graphics design, accounting services, HR services, telemedicine centers, data entry operations, locally produced television programs and insurance claims processing.

    (2) The tax credit under sub-section (1) shall be available subject to fulfillment of the following conditions, namely:-

    (a) return has been filed;

    (b) tax required to be deducted or collected has been deducted or collected and paid;

    (c) withholding tax statements for the immediately preceding tax year have been filed; and

    (d) sales tax returns for the tax periods corresponding to relevant tax year have been filed:

    Provided that nothing contained in this section shall preclude the applicability of section 214C or section 177.

  • No more tax credit for new industrial setup

    No more tax credit for new industrial setup

    ISLAMABAD: Tax credit available for establishing new industrial unit has been withdrawn through Tax Laws (Second Amendment) Ordinance, 2021. However, those units already availed the concession would remain eligible till the cutoff time.

    The Federal Board of Revenue (FBR) on Friday posted Tax Laws (Second Amendment) Ordinance, 2021 on its website.

    According to tax analysts as per Section 65D, where a taxpayer being a company formed for establishing and operating a new industrial undertaking including corporate dairy farming sets up a new industrial undertaking including a corporate dairy farm, it shall be given a tax credit, on basis of ratio of equity investment in industrial undertaking to total investment, of the tax payable, including on account of minimum tax and final taxes payable for a period of five years beginning from the date of setting up or commencement of commercial production, whichever is later.

    This tax credit was available to the company that is incorporated and industrial undertaking is setup between the first day of July, 2011 and 30th day of June, 2021.

    Now through Ordinance this is omitted with condition that existing beneficiaries shall continue to avail benefits of repealed provisions for the periods and subject to conditions and limitations specified in this Section.

  • FBR official awarded ‘removal from service’ on undeclared money, assets

    FBR official awarded ‘removal from service’ on undeclared money, assets

    ISLAMABAD: Federal Board of Revenue (FBR) on Friday imposed major penalty of ‘removal from service’ upon Maqbool Ahmed, a BS-16 officer of Inland Revenue Service (IRS) for concealing assets and money in mandatory declarations besides hiding foreign trips.

    The FBR initiated disciplinary proceedings against Maqbool Ahmad, Inland Revenue Officer (BS-16), Regional Tax Office, Faisalabad under Government Servants (Efficiency & Discipline) Rules, 1973 on account of “Inefficiency” and “Misconduct”.

    The Chief Commissioner-IR, Regional Tax Office, Faisalabad being Authorized Officer issued Show Charge Sheet/ Statement of Allegations vide letter No. 1626 dated 08.10.2020.

    The authorities identified against the official that he had not declared properties made through unknown sources. Further, the official had travelled many times to the US without ex-Pakistan leave. In addition the official failed to provide details of money spent on his foreign trips.

    Member (Admn/HR), Authority in the case, has imposed major penalty of “Removal from Service” upon Maqbool Ahmad, Inland Revenue Officer (BS-16) (under suspension) under Rule 4(1)(b)(iii) of Government Servants (Efficiency & Discipline), Rules, 1973.

  • Tax penalty reduced to half for making false statement

    Tax penalty reduced to half for making false statement

    ISLAMABAD: The tax authorities have reduced penalty amount to half on making false or misleading statement under various sections of Income Tax Ordinance, 2001.

    Through Tax Laws (Second Amendment) Ordinance, 2021 promulgated a day earlier, the penal amount under Section 182 for misleading or false statement has been reduced to 50 percent from 100 percent of the amount of tax shortfall.

    Under Serial No. 10 of Section 182: any person who makes a false or misleading statement to an Inland Revenue Authority either in writing or orally or electronically including a statement in an application, certificate, declaration, notification, return, objection or other document including books of accounts made, prepared, given, filed or furnished under this Ordinance, then such person shall pay a penalty of twenty five thousand rupees or 50 percent of the amount of tax shortfall whichever is higher:

    Provided that in case of an assessment order deemed under section 120, no penalty shall be imposed to the extent of the tax shortfall occurring as a result of the taxpayer taking a reasonably arguable position on the application of this Ordinance to the taxpayers’ position.

    Through the latest ordinance, the penalty for misleading information under Section 114A has also been imposed. Section 114A is related to taxpayers’ profile.

  • Date extended up to June 30 for updating tax profile

    Date extended up to June 30 for updating tax profile

    ISLAMABAD: Federal Board of Revenue (FBR) on Friday extended the last date for updating taxpayer profile up to June 30, 2021.

    The FBR issued Circular No. 14 of 2021 on March 26, 2021 to extend the date for updating taxpayer profile from March 31, 2021 to June 30, 2021.

    The date has been extended on the request of the tax bars that coronavirus cases were on the rise and most of the offices were working with 50 percent strength.

    Updating profile by all the taxpayers registered under Section 181 of the Income Tax Ordinance, 2001 and other conditions specified by the Federal Board of Revenue (FBR) is a mandatory requirement under Section 114A of the Ordinance.

    Through Finance Act, 2020, the Section 114A was introduced to make the updating profile mandatory for following persons:

    (a) every person applying for registration under section 181;

    (b) every person deriving income chargeable to tax under the head, “Income from business”;

    (c) every person whose income is subject to final taxation;

    (d) any non-profit organization as defined in clause (36) of section 2;

    (e) any trust or welfare institution; or

    (f) any other person prescribed by the Board.

    The FBR explained the newly introduced section as: “Complexity of return forms is an embodiment of the complexity of tax law. Nevertheless, there is a dire need to simplify return forms without compromising on data required to verify accuracy of the declared version.”

    The FBR said that instead of endeavoring to obtain all the relevant information in the income tax return, a new section has been added wherein taxpayers profile may be prescribed in order to capture data relevant to the taxpayer.

    It said that persons who are already registered before September 30, 2020 and are deriving business or incomes subject to final taxation, trusts, welfare institutions, non-profit organizations and such other persons prescribed by the FBR are proposed to file a profile on or before December 31, 2020, which is not extended up to March 31, 2021.

    Persons who obtain their registration after September 30, 2020 are proposed to furnish such profile within 90 days of registration. In case of any change in particulars of information, such persons shall update their profile within 90 days of the change in particulars. The profile contains information relevant to income regarding bank accounts, utility connections, business premises including all manufacturing, storage or retail outlets operated or leased by the taxpayer, types of businesses and such other information as may be prescribed by the FBR.

    The FBR said that if a person fails to furnish or update a taxpayer’s profile within the due date or time period as extended by the FBR under Section214A, such person shall not be included in the active taxpayers list for the latest tax year ending prior to the aforesaid due date or extended date.

    However, upon filing or updating the profile, such persons shall be allowed to be placed on the active taxpayers list upon payment of surcharge which is Rs20,000 in the case of a company, Rs10,000 in the case of an association of persons and Rs1,000 in the case of an individual.

    Further, a penalty for non-filing or not updating of profile is also proposed at the rate of Rs2,500 for each day of default subject to minimum penalty of Rs10,000.

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  • First year allowance on plant, machinery withdrawn

    First year allowance on plant, machinery withdrawn

    ISLAMABAD: First year allowance has been withdrawn that was allowed on installation of plant and machinery by any industrial unit. The concession has been withdrawn through Tax Laws (Second Amendment) Ordinance, 2021.

    The first year allowance has been abolished that was available under Section 23A of Income Tax Ordinance, 2001 at the rate of 90 percent. An initial allowance was available at 25 percent for installation of plant and machinery, according to officials of the Federal Board of Revenue (FBR).

    The omitted section 23A was:

    First Year Allowance.—(1) Plant, machinery and equipment installed by any industrial undertaking set up in specified rural and under developed areas or engaged in the manufacturing of cellular mobile phones and qualifying for exemption under clause (126N) of Part I of the Second Schedule and owned and managed by a company shall be allowed first year allowance in lieu of initial allowance under section 23 at the rate specified in Part II of the Third Schedule against the cost of the “eligible depreciable assets” put to use after July 1, 2008.

    (2) The provisions of section 23 except sub-sections (1) and (2) thereof, shall mutatis mutandis apply.

    (3) The Federal Government may notify “specified areas” for the purposes of sub-section (1).

  • FBR reminds taxpayers of updating profile by March 31

    FBR reminds taxpayers of updating profile by March 31

    ISLAMABAD: Federal Board of Revenue (FBR) on Thursday reminded taxpayers to update their profile by March 31, 2021 to avoid penal action.

    “Statutory deadline for furnishing/updating of taxpayers’ profile under section 114A of the Income Tax Ordinance, 2001 is March 31, 2021,” the FBR said and urged taxpayers to update profile before the deadline in order to avoid penal consequences under the law.

    Updating profile by all the taxpayers registered under Section 181 of the Income Tax Ordinance, 2001 and other conditions specified by the Federal Board of Revenue (FBR) is a mandatory requirement under Section 114A of the Ordinance.

    Through Finance Act, 2020, the Section 114A was introduced to make the updating profile mandatory for following persons:

    (a) every person applying for registration under section 181;

    (b) every person deriving income chargeable to tax under the head, “Income from business”;

    (c) every person whose income is subject to final taxation;

    (d) any non-profit organization as defined in clause (36) of section 2;

    (e) any trust or welfare institution; or

    (f) any other person prescribed by the Board.

    The FBR explained the newly introduced section as: “Complexity of return forms is an embodiment of the complexity of tax law. Nevertheless, there is a dire need to simplify return forms without compromising on data required to verify accuracy of the declared version.”

    The FBR said that instead of endeavoring to obtain all the relevant information in the income tax return, a new section has been added wherein taxpayers profile may be prescribed in order to capture data relevant to the taxpayer.

    It said that persons who are already registered before September 30, 2020 and are deriving business or incomes subject to final taxation, trusts, welfare institutions, non-profit organizations and such other persons prescribed by the FBR are proposed to file a profile on or before December 31, 2020, which is not extended up to March 31, 2021.

    Persons who obtain their registration after September 30, 2020 are proposed to furnish such profile within 90 days of registration. In case of any change in particulars of information, such persons shall update their profile within 90 days of the change in particulars. The profile contains information relevant to income regarding bank accounts, utility connections, business premises including all manufacturing, storage or retail outlets operated or leased by the taxpayer, types of businesses and such other information as may be prescribed by the FBR.

    The FBR said that if a person fails to furnish or update a taxpayer’s profile within the due date or time period as extended by the FBR under Section214A, such person shall not be included in the active taxpayers list for the latest tax year ending prior to the aforesaid due date or extended date.

    However, upon filing or updating the profile, such persons shall be allowed to be placed on the active taxpayers list upon payment of surcharge which is Rs20,000 in the case of a company, Rs10,000 in the case of an association of persons and Rs1,000 in the case of an individual.

    Further, a penalty for non-filing or not updating of profile is also proposed at the rate of Rs2,500 for each day of default subject to minimum penalty of Rs10,000.

  • Tax Laws (Second Amendment) Ordinance, 2021 likely today

    Tax Laws (Second Amendment) Ordinance, 2021 likely today

    ISLAMABAD: The government to withdraw a large number of tax exemptions through an ordinance on Thursday after the approval of President of Pakistan.

    The federal cabinet has approved the amendments to the Income Tax Ordinance, 2001 to withdraw tax exemptions. Tax Laws (Second Amendment) Ordinance, 2021 to be promulgated after the approval of the president.

    The executive board of International Monetary Fund (IMF) approved $500 million for Pakistan under Extended Fund Facility (EFF) on Wednesday.

    Withdrawal of income tax exemption was one of the conditions for the IMF disbursement.

    According to the draft ordinance approved by the federal cabinet, significant amendments have been made to Second Schedule of the Income Tax Ordinance, 2001.

    The second schedule is related to tax exemptions and concessions granted to different sectors of the economy and individual entities.

    The concessionary regime for Non-Profit Organization (NPOs) has been redrafted and limited the scope of exemption and concession.

    Sources in the Federal Board of Revenue (FBR) said that most of the exemptions had been converted with the tax credit.

    Many provisions related to tax exemptions have been deleted that were already expired, the sources added.

  • FBR urged to withdraw CNIC condition under sales tax law

    FBR urged to withdraw CNIC condition under sales tax law

    KARACHI: Federal Board of Revenue (FBR) has been urged to withdraw the mandatory requirement of Computerized National Identity Card (CNIC) on buying and selling under Sales Tax Act, 1990 till the time a sufficient number gets register for sales tax.

    Karachi Chamber of Commerce and Industry (KCCI) has highlighted the issue as by amendment to Section 8 (Sub-Sec.1, Clause M) of Sales Tax Act, and addition of 10th Schedule, it is mandatory to provide CNIC number of Unregistered person in the invoice. Similar statute has been added U/S.19A of Federal Excise Act, Sec.216A to ITO and Sec.156A of Customs Act.

    Moreover 3 percent further tax is also charged on sales to unregistered buyers even if the CNIC number is provided, which is totally unjust and tantamount to penalizing the registered persons who have to bear the burden of 3 percent further tax.

    The chamber said that rather than generating more revenue, this provision has resulted in proliferation of undocumented cash transactions.

    With hardly 45000 registered entities in Sales Tax Regime, it is very hard to find a registered buyer. This has affected the entire supply chain including manufacturers, importers and traders in Documented Sector and has led to greater advantage for smugglers and undocumented sectors as they do not have to face any such condition. Many registered person are now forced to issue flying invoices to registered persons to overcome CNIC condition and avoid 3 percent Further Tax.

    The chamber recommended that requirement of CNIC should not be mandatory till the time that number of registered persons in Sales Tax regime has substantially increased.

    Providing CNIC number should be optional and may be treated at par with STRN if provided in the Sales Tax Return.

    Further Tax on supplies to unregistered buyer should not be charged if CNIC number is provided in Sales Tax Return.

    In case CNIC number of unregistered buyer of Raw Materials is not provided, VAT may be charged at 1.7 percent on sellers of Raw Material.

    Giving rationale, the chamber said that it will discourage cash economy and encourage documentation by placing the trust in registered persons.

    Discourage Fake and Flying invoices which are issued to avoid 3 percent further tax.

    Enhance business transactions through banking channels and promote growth.

  • What is provisional assessment of taxable income?

    What is provisional assessment of taxable income?

    A provisional assessment is calculation of tax due on a person who has failed to file income tax return for a tax year. A commissioner of Inland Revenue of Federal Board of Revenue (FBR) has been empowered to make provisional assessment of such person under Income Tax Ordinance, 2001.

    According to Tenth Schedule of Income Tax Ordinance, 200, the Provisional assessment is:

    (1) Where for a tax year person’s tax has been collected or deducted in accordance with rule 1 and the person fails to file return of income for that tax year within the due date provided in section 118 or as extended by the Board, the Commissioner shall notwithstanding anything contained in sub-sections (3) and (4) of section 114, within sixty days of the due date provided in section 118 or as extended by the Board make a provisional assessment of the taxable income of the person and issue a provisional assessment order specifying the taxable income assessed and tax due thereon.

    (2) In making the provisional assessment under sub-rule (1), the Commissioner shall impute taxable income on the amount of tax deducted or collected under rule 1 by treating the imputed income as concealed income for the purposes of clause (d) of sub-section (1) of section 111:

    Provided that the provision of section 111 shall be applicable on unexplained income, asset or expenditure in excess of imputed income treated as concealed income under this rule.”

    “Explanation.- For the removal of doubt it is clarified that the imputable income so calculated or concealed income so determined shall not absolve the person so assessed, from requirement of filing of wealth statement under sub-section (1) of section 116, the nature and source of amounts subject to deduction or collection of tax under section 111, section of audit under section 177 or 214C or subsequent amendment of assessment as provided in rule 8 and all the provisions of the Ordinance shall apply.”