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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.

  • Sportsmen allowed tax holiday on temporary import

    Sportsmen allowed tax holiday on temporary import

    ISLAMABAD: Sportsmen – participating in an international event – have been allowed tax holiday o import of professional and technical apparatus with condition of re-export of those things within stipulated time period.

    Sources in Federal Board of Revenue (FBR) on Tuesday said that the exemption from income tax, sales tax and customs duty has been allowed through Tax Laws (Amendment) Ordinance, 2021, which was recently promulgated through presidential order.

    Customs duty has been reduced to zero percent on temporary import of professional and technical apparatus or equipment or instruments imported by foreign nationals, experts and athlete etc. participating in an international event (including but not limited to sports events) or under any international arrangement for use solely during such event or arrangement provided:

    (a) it is endorsed on the passports of importer.

    (b) The goods allowed for temporary admission shall be identified at the time of import and subsequent re-export

    The condition of furnishing undertaking or bond by such foreign nationals has been made inapplicable.

    Goods temporarily imported into Pakistan by international athletes or sportsmen, which would be subsequently taken back by them within 120 days have been allowed exemption from sales tax as well as income tax at import stage.

  • Tax exemption granted to transmission line projects set up till June 2022

    Tax exemption granted to transmission line projects set up till June 2022

    ISLAMABAD: A time period for setting up transmission line projects has been extended for four years up to June 30, 2022 in order to allow 10-year tax exemption on profit and gains derived by a taxpayer from such projects.

    The amendment has been made to clause 126M of Second Schedule to Income Tax Ordinance, 2001 through Tax Laws (Amendment) Ordinance, 2021.

    Earlier, income tax exemption was granted to those projects which were set up on or after June 30, 2018. However, with the amendment the time for setting up projects has been extended up to June 30, 2022.

    The text of the clause is:

    “(126M) Profits and gains derived by a taxpayer from a transmission line project set up in Pakistan on or after the1st day of July, 2015 for a period of ten years. The exemption under this clause shall apply to such project which is—

    (a) owned and managed by a company formed for operating the said project and registered under the Companies Ordinance, 1984 (XLVII of1984), and having its registered office in Pakistan;

    (b) not formed by the splitting up, or the reconstruction or reconstitution, of a business already in existence or by transfer to a new business of any machinery or plant used in a business which was being carried on in Pakistan at any time before the commencement of the new business; and

    (c) owned by a company fifty per cent of whose shares are not held by the Federal Government or Provincial Government or a Local Government or which is not controlled by the Federal Government or a Provincial Government or a Local Government.

  • Tax collected on immovable properties made final liability on payment through RDAs

    Tax collected on immovable properties made final liability on payment through RDAs

    ISLAMABAD: The collection of withholding tax on immovable properties has been made final liabilities in case payment made through Roshan Digital Accounts (RDAs).

    The changes have been brought through Tax Laws (Amendment) Ordinance, 2021. The Federal Board of Revenue (FBR) posted the ordinance on its website on Monday.

    An amendment has been made to Section 236C of the Income Tax Ordinance, 2001, which is related to deduction of withholding tax on sale of immovable properties.

    According to the amendment that if the seller or transferor is a non-resident individual holding Pakistan Origin Card (POC) or National ID Card for Overseas Pakistanis (NICOP) or Computerized National ID Card (CNIC) who had acquired the said immovable property through a Foreign Currency Value Account (FCVA) or NRP Rupee Value Account (NRVA) maintained with authorized banks in Pakistan under the foreign exchange regulations issued by the State Bank of Pakistan (SBP), the tax collected under the section from such persons shall be final discharge of tax liability in lieu of capital gain taxable under Section 37 earned by the seller or transferor from the property so disposed of.

    Similar change has been made in Section 236K of the Income Tax Ordinance, 2001. This section is related to deduction of withholding tax on purchase of immovable property.

    According to the amendment that if the buyer or transferee is a non-resident individual holding Pakistan Origin Card (POC) or National ID Card for Overseas Pakistanis (NICOP) or Computerized National ID Card (CNIC) who has acquired the said immovable property through a Foreign Currency Value Account (FCVA) or NRP Rupee Value Account (NRVA) maintained with the authorized banks in Pakistan under the foreign exchange regulations issued by the SBP, the tax collected under this section from such persons shall be final discharge of tax liability for such buyer or transferee.

    According to the SBP, there are two types of accounts offered under Roshan Digital Accounts.

    These are:

    Foreign Currency Value Account (FCVA)

    NRP Rupee Value Account (NRV)

  • Super tax made permanent for banks

    Super tax made permanent for banks

    ISLAMABAD: The levy of super tax has been made permanent for banking companies beyond Tax Year 2021, sources in Federal Board of Revenue (FBR) said on Monday.

    Tax Laws (Amendment) Ordinance, 2021 has been promulgated on February 12, 2021 after approval by the President of Pakistan.

    As per the ordinance the levy of super tax on banks shall continue beyond Tax Year 2021. Through the ordinance the levy shall apply in tax year 2021 and onwards.

    With this amendment the banks shall pay the super tax at four percent in subsequent tax years. For the banking companies the tax year 2022 has commenced from January 01, 2021.

    The one-time super tax was imposed by inserting Section 4B of Income Tax Ordinance, 2001 through Finance Act, 2015.

    The Income Tax Ordinance, 2001 explained the super tax as:

    “4B. Super tax for rehabilitation of temporarily displaced persons.― (1) A super tax shall be imposed for rehabilitation of temporarily displaced persons, for tax years 2015 and onwards, at the rates specified in Division IIA of Part I of the First Schedule, on income of every person specified in the said Division.

    (2) For the purposes of this section, “income” shall be the sum of the following:—

    (i) profit on debt, dividend, capital gains, brokerage and commission;

    (ii) taxable income (other than brought forward depreciation and brought forward business losses) under section (9) of this Ordinance, if not included in clause (i);

    (iii) imputable income as defined in clause (28A) of section 2 excluding amounts specified in clause (i); and

    (iv) income computed, other than brought forward depreciation, brought forward amortization and brought forward business lossess under Fourth, Fifth, Seventh and Eighth Schedules.

    (3) The super tax payable under sub-section (1) shall be paid, collected and deposited on the date and in the manner as specified in sub-section (1) of section 137 and all provisions of Chapter X of the Ordinance shall apply.

    (4) Where the super tax is not paid by a person liable to pay it, the Commissioner shall by an order in writing, determine the super tax payable, and shall serve upon the person, a notice of demand specifying the super tax payable and within the time specified under section 137 of the Ordinance.

    (5) Where the super tax is not paid by a person liable to pay it, the Commissioner shall recover the super tax payable under subsection (1) and the provisions of Part IV,X, XI and XII of Chapter X and Part I of Chapter XI of the Ordinance shall, so far as may be, apply to the collection of super tax as these apply to the collection of tax under the Ordinance.

    (6) The Board may, by notification in the official Gazette, make rules for carrying out the purposes of this section.”

    In tax year 2018 the rate of super tax was four percent for banking companies on percentage of income and three percent on person other than a banking company, having income equal to or exceeding Rs500 million.

    In tax year 2020 the tax rate at 4 percent was maintained for banking companies. However, in other cases it was abolished.

    With the new amendment, the banking companies shall continue to pay the super tax with not time frame.

  • Withholding tax up to Rs200,000 imposed on sale of new car within 90 days

    Withholding tax up to Rs200,000 imposed on sale of new car within 90 days

    ISLAMABAD: The Federal Board of Revenue (FBR) has imposed up to Rs200,000 as withholding tax on sale of motor cars within 90 days of first registration, sources said on Monday.

    The withholding tax has been imposed till June 30, 2021. The revenue generation measure has been taken in order to discourage the trend of ‘on money’.

    Following withholding income tax rates have been imposed on motor vehicles:

    01. Tax rate at Rs50,000 has been imposed on sale of up to 1000CC motor vehicles.

    02. Tax rate at Rs100,000 has been imposed on sale of motor vehicles between 1000CC and 2000CC.

    03. Tax rate up to Rs200,000 has been imposed on motor vehicles with engine capacity of 2000CC and above.

    In order to apply the rates an amendment to Section 231B of Income Tax Ordinance, 2001 has been made.

    Following is the text of the amendment:

    “Every motor vehicle registration authority of Excise and Taxation Department shall collect advance tax from the buyers of locally manufactured motor vehicles who subsequently sell it within ninety days of delivery of such vehicle whether prior to or after registration.”

    The FBR said that no collection of the withholding tax under the new amendment would be made after June 30, 2021.

  • Illicit cigarettes worth Rs549 million confiscated in seven months

    Illicit cigarettes worth Rs549 million confiscated in seven months

    ISLAMABAD: Pakistan Customs has confiscated non-duty paid cigarettes worth Rs549 million during first seven months of the current fiscal year, a statement said on Sunday.

    A spokesman of Federal Board of Revenue (FBR) said that over 7.1 million sticks of illegal cigarettes had been confiscated during the period under review.

    The spokesman said that the FBR had issued instructions to field formation of Inland Revenue and Pakistan Customs to accelerate their efforts against smuggled and non-duty paid cigarettes.

    The FBR chairman issued instructions to both the field formations in this regard.

    In the anti-smuggling efforts to prevent movement of illegal cigarettes the Intelligence and Investigation of Inland Revenue had conducted 65 operations. In these operations, the IR authorities confiscated 44.827 million sticks of cigarettes worth Rs95.51 million. Out of these amount the authorities had recovered Rs2.2 million and remaining amount was in litigation before the court.

    The FBR chairman had directed the tax authorities to expand the anti-smuggling operation across the country.

    The customs authorities have been issued special instructions for enhancing vigilance at sea ports, air ports and dry ports to prevent smuggling of illicit cigarettes.

    The spokesman said that the customs authorities had recovered huge quantity of non-duty paid cigarettes on the basis of information.

    The spokesman further said that in order to avoid misuse auction process, the FBR had imposed complete ban on auction of confiscated cigarettes.

  • Foreign source of income defined by ITO 2001

    Foreign source of income defined by ITO 2001

    Income Tax Ordinance, 2001 has defined the meaning of ‘foreign source of income’ derived by Pakistani individual by working or giving services abroad.

    Income Tax Ordinance, 2001 updated up to June 30, 2020 issued by the Federal Board of Revenue (FBR) stated that an amount shall be foreign-source income to the extent to which it is not Pakistan-source income.  

    The Ordinance further explained as:

    Any foreign-source salary received by a resident individual shall be exempt from tax if the individual has paid foreign income tax in respect of the salary.

    A resident individual shall be treated as having paid foreign income tax in respect of foreign-source salary if tax has been withheld from the salary by the individual’s employer and paid to the revenue authority of the foreign country in which the employment was exercised.

    It explains:

    Where a resident taxpayer derives foreign source income chargeable to tax under this Ordinance in respect of which the taxpayer has paid foreign income tax, the taxpayer shall be allowed a tax credit of an amount equal to the lesser of –

    (a) the foreign income tax paid; or

    (b) the Pakistan tax payable in respect of the income.

    (2) For the purposes of clause (b) of sub-section (1), the Pakistan tax payable in respect of foreign source income derived by a taxpayer in a tax year shall be computed by applying the average rate of Pakistan income tax applicable to the taxpayer for the year against the taxpayer’s net foreign-source income for the year.

    (3) Where, in a tax year, a taxpayer has foreign income under more than one head of income, this section shall apply separately to each head of income.

    (4) For the purposes of sub-section (3), income derived by a taxpayer from carrying on a speculation business shall be treated as a separate head of income.

    (5) The tax credit allowed under this section shall be applied in accordance with sub-section (3) of section 4.

    (6) Any tax credit or part of a tax credit allowed under this section for a tax year that is not credited under sub-section (3) of section 4 shall not be refunded, carried back to the preceding tax year, or carried forward to the following tax year.

    (7) A credit shall be allowed under this section only if the foreign income tax is paid within two years after the end of the tax year in which the foreign income to which the tax relates was derived by the resident taxpayer.

    (8) In this section,—

    “average rate of Pakistan income tax” in relation to a taxpayer for a tax year, means the percentage that the Pakistani income tax (before allowance of the tax credit under this section) is of the taxable income of the taxpayer for the year;

    “foreign income tax” includes a foreign withholding tax; and

    “net foreign-source income” in relation to a taxpayer for a tax year, means the total foreign-source income of the taxpayer charged to tax in the year, as reduced by any deductions allowed to the taxpayer under this Ordinance for the year that –

    (a) relate exclusively to the derivation of the foreign-source income; and

    (b) are reasonably related to the derivation of foreign-source income in accordance with sub-section (1) of section 67 and any rules made for the purposes of that section.

  • ITO 2001 explains ‘fee for technical services’

    ITO 2001 explains ‘fee for technical services’

    Income Tax Ordinance, 2001 has explained the meaning of ‘fee for technical services’ rendered by non-resident persons to users in Pakistan.

    The Income Tax Ordinance, 2001 updated up to June 30, 2020 issued by the Federal Board of Revenue (FBR) explained the fee for offshore digital services as:

    “Fee for technical services” means any consideration, whether periodical or lump sum, for the rendering of any managerial, technical or consultancy services including the services of technical or other personnel, but does not include —

    (a) consideration for services rendered in relation to a construction, assembly or like project undertaken by the recipient; or

    (b) consideration which would be income of the recipient chargeable under the head “salary”.

    It also explained the following:

    ”Fee for offshore digital services” means any consideration for providing  or rendering services by a non-resident person for online advertising including digital advertising space, designing, creating, hosting or maintenance of websites, digital or cyber space for websites, advertising, e-mails, online computing, blogs, online content and online data, providing any facility or service for uploading, storing or distribution of digital content including digital text, digital audio or digital video, online collection or processing of data related to users in Pakistan, any facility for online sale of goods or services or any other online facility.

  • Fast moving consumer goods explained

    Fast moving consumer goods explained

    Income Tax Ordinance, 2001 has explained the meaning of ‘fast moving consumer goods’ for calculation and imposition of income tax.

    The Income Tax Ordinance, 2001 updated up to June 30, 2020 issued by the Federal Board of Revenue (FBR) explained it as:

    “Fast moving consumer goods” means consumer goods which are supplied in retail marketing as per daily demand of a consumer excluding durable goods.

    The income tax applied under Section 153 shall be:

    In the case of supplies made by the distributer of fast moving consumer goods,─

    (i) in case of a company, 2 percent of the gross amount payable; and

    (ii) in any other case, 2.5 percent of the gross amount payable.

  • ITO 2001 defines employee, employer

    ITO 2001 defines employee, employer

    Income Tax Ordinance (ITO), 2001 has explained the meaning of employee and employer for calculation and imposition of income tax.

    The Income Tax Ordinance, 2001 updated up to June 30, 2020 issued by the Federal Board of Revenue (FBR) explained the terms as:

    “Employee” means any individual engaged in employment;

    “Employer” means any person who engages and remunerates an employee;

    “Employment” includes –

    (a) a directorship or any other office involved in the management of a company;

    (b) a position entitling the holder to a fixed or ascertainable remuneration; or

    (c) the holding or acting in any public office.