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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.

  • Income of corporate executives, directors needs aggressive monitoring

    Income of corporate executives, directors needs aggressive monitoring

    KARACHI: The field offices of Federal Board of Revenue (FBR) have been advised to focus on aggressive monitoring on corporate executives / directors with income above certain levels.

    “Their [executives/directors] tax accounts are usually kept separate and not shared with even ordinary management,” according to an official document related to withholding taxes said.

    “Enforcement should be ramped up in their cases for detecting the avoidance.”

    Some sort of trigger management should also be exercised to select such cases with higher probability of producing additional revenue.

    It said that there are certain businesses which are involved in high cash transactions.

    “Cash withdrawals from banks could be one lead along with un-documented receivables or payables.”

    Their reporting in the statements may not be complete. Details of vendors/suppliers are not provided either.

    Such cases should be included in the risk for monitoring. Poor record keepers placing low priority on improving the documentation should be on priority of monitoring.

    Basically, monitoring of withholding taxes is analysis of filed Statements and enforcement from non-filers.

    Formal selection of case for monitoring of Withholding Taxes may not be required.

    Yet, there are numerous aspects that can be considered for initiating the monitoring work.

    The following factors are important in this regard:-

    1. Incomplete or sloppy Statements;

    2. Habitual non-filers/short filers;

    3. Missing part of the Statements (where tax was not deducted);

    4. Incorrect Statements/mathematical errors;

    5. Exempt cases like Non-residents etc;

    6. Matching of information from various documents/ sources;

    7. Discrepancies in Income Tax; Sales Tax Statements and Returns;

    8. Statistical analysis for policy formulation and Sectoral studies;

    9. Un-desirable activities like continuous under reporting etc;

    10. Monitoring on the basis of case studies and research works;

    11. Statistical information collected to update the data sources;

    12. Selection on random basis either electronically or manually;

    13. Discrepancy in Withholding Taxes Statements and Annual Statements of Accounts;

    14. Monitoring consequential to special enquiries, reports and judgments, etc;

    15. Selection of specific cases e.g. large taxpayers and or other revenue potential Withholding Taxes Agents likely to yield substantial revenue for the government;

    16. Risk based analysis of statements and other economic information;

    17. Issue based monitoring;

    18. Any other method or selection as decided by the concerned Commissioner in the individual cases or by the Board about specific classes.

  • Gratuity to be treated as salary for tax matters

    Gratuity to be treated as salary for tax matters

    KARACHI: Federal Board of Revenue (FBR) has said that gratuity received by an employee during his lifetime shall be treated as salary income and will be subject to tax under Income Tax Ordinance, 2001.

    Officials at the FBR said that where any gratuity is paid to an employee during his life-time, the gratuity shall be treated as salary paid to the employee for the purposes of this Ordinance.

    They further said that if a gratuity fund for any reason ceases to be an approved gratuity fund, the trustees of the fund shall nevertheless remain liable to tax on any gratuity paid to any employee.

    Where any contributions by an employer (including the interest thereon, if any,) are repaid to the employer, the amount so repaid shall be deemed for the purposes of tax to be the income of the employer of the income year in which they are so repaid.

  • FBR asked to suggest measure to eliminate exemptions

    FBR asked to suggest measure to eliminate exemptions

    ISLAMABAD: The ministry of finance has asked Federal Board of Revenue (FBR) to suggest measure to eliminate exemptions and concessions.

    The Finance Division (Budget Wing) of the finance ministry asked the FBR to provide information for development of budget strategy paper 2020-2021 – 2022-2023.

    The finance division asked the FBR to provide information on the key points:

    01. Tax policy over the medium-term including measure to eliminate exemption / concessions.

    02. Planned tax administration reforms to enhance tax-base and improve tax-to-GDP ratio.

    03. Number and types of new sectors, which were out of the tax net, to be added in the tax system.

  • FBR to examine transaction records of commercial importers: CCIR

    FBR to examine transaction records of commercial importers: CCIR

    KARACHI: Federal Board of Revenue (FBR) will examine transaction records of commercial importers as they are no more under Final Tax Regime (FBR), Badaruddin Ahmed Qureshi, Chief Commissioner Inland Revenue (CCIR), Regional Tax Office (RTO)-II Karachi said.

    He was addressing a seminar on ‘Minimum Tax Implications After the Finance Act, 2019’ organized by Karachi Tax Bar Association (KTBA) on Thursday.

    The chief commissioner said that minimum tax was introduced through Finance Act, 2019 with objectives of documentation of economy and realizing actual potential of tax revenue.

    He said that previously commercial importers were liable to discharge their liability under the FTR and further they were not required to provide any record.

    However, with the introduction of minimum tax the commercial importers will required to provide details of all their goods declaration filed for clearance of their consignments.

    Previously, the FTR was available to persons such as commercial importers, commercial suppliers of goods, contractors, persons deriving brokerage or commission income and persons earning income from CNG stations.

    The tax collected or deducted from these persons has now been made as minimum tax liability except for exporters, persons winning prizes and sellers of petroleum products.
    The chief commissioner said that the taxpayers brought into the minimum tax regime would file their income tax returns and wealth statement for tax year 2020 in September this year.

    Murtaza Qurban, Executive Manager, EY Ford Rhodes, highlighted the changes related to minimum tax brought through the Finance Act, 2019.

    Tax required to be collected on import of goods that are sold in the same condition as they were when imported was treated as final tax.

    The Finance Act, 2018 brought a substantive conceptual shift whereby such tax collection was made “minimum tax”.

    The Finance Supplementary (Second Amendment) Act, 2019 restored the original position whereby tax collected at import stage from commercial importers was again treated as final discharge of tax liability.

    The Finance Act, 2019, however, again introduced amendments through which tax collection at import stage is made “minimum tax” instead of “final tax”.

    As a result of this change, Commercial Importers are now required to compute their financial results for comparison of tax on profits with minimum tax.

    Pursuant to the above amendments, Commercial Importers are now required to file a return of income instead of a statement in terms of section 115 of the Ordinance.

  • FBR extends date to submit stock position up to March 15 for claiming refunds

    FBR extends date to submit stock position up to March 15 for claiming refunds

    ISLAMABAD: Federal Board of Revenue (FBR) has allowed taxpayers to submit their stock position for the period July – September 2019 up to March 15, 2020 in order to claim sales tax refunds under newly only verification and issuance system.

    In an official memorandum issued on Thursday, the FBR condoned the time limit for filing of Annexure – H for the tax period July – September 2019 up to March 15, 2020.

    Annexure-H is a statement for providing stock position by taxpayers along with monthly sales tax return.

    The FBR from July 01, 2019 introduced expeditious payment of sales tax refunds within 72 hours subject to the true filing of Annexure – H.

    Recently, Karachi Tax Bar Association (KTBA) highlighted this issue and urged the tax authorities to resolve for facilitating exporters and manufacturers.

    The KTBA pointed out that as per the amendments made in Sales Tax Rules, 2006 vide SRO no. 918(I)/2019 dated August 7, 2019, mechanism for expeditious processing of refund claim has been devised only for manufacturers-cum- exporters.

    As per the Rules, refund will be treated as having been filed only after filing of Annexure H of the Sales Tax return, for which deadline of 120 days has been prescribed in the Rules and the same can be extended for a period of 60 days on the basis of approval from the Commissioner.

    However, the rules are silent about the mechanism for processing of Sales Tax refunds in case Annexure H has not been filed by manufacturer-cum-exporter for any reason. Considering the legal and legitimate right of the taxpayer to claim adjustment / refund of the input tax, either of the following two option be considered by the FBR for facilitation of exporters:

    Allow filing of Annexure H without any time limit [present time limit of 4 months be abolished and taxpayer be allowed to claim refund as and when required] ii. Incase present limit of 4 months cannot be abolished, registered persons be allowed at least to alternatively file refund on annual basis after the end of the tax year.

    Apart from the above, Annexure H is only being allowed to be filed to taxpayers who have filed the said Annexure from sales tax returns of July 2019 and onwards. Instead of claiming refund, some taxpayers have reported sales tax carried forward balance in their sales tax returns from July 2019 onwards. In case they now intend to file Annexure H from the current month,

    FBR’s online portal does not allow such taxpayers to enter opening balance of inventory / raw materials as the said field in blocked for editing. This limitation should be removed and taxpayers should be allowed to file Annexure H for any specific month, for which they intend to claim refund.

    From apparent mechanism being followed by the system, it appears that those taxpayers who have not filed Annexure H for the month of July 2019 will never be allowed to file Annexure H for any subsequent month. This apparent anomaly should be resolved at earliest.

  • Values of immovable properties may be enhanced to prevent money laundering

    Values of immovable properties may be enhanced to prevent money laundering

    KARACHI: Federal Board of Revenue (FBR) may increase valuation of immovable properties in order to prevent money laundering in the real estate sector.

    “In Pakistan the Real Estate sector is one of the biggest sources of money laundering and is used as a parking lot for untaxed as well as ill-gotten money,” the FBR said in an official note.

    The sources in FBR said that considering the lower valuation set by the FBR as compared with open market valuation, the FBR values may be enhanced further in future.

    Considering the real estate sector as parking lot for untaxed month, a wide range of steps had been taken to restructure the taxation of this sector.

    The various steps being taken are as under:-

    The Board has issued valuation tables of immovable properties in 21 major cities wherein such properties are valued at a value higher than the DC rates.

    The purchasers were required to pay 3 percent tax on the difference between the DC value and FBR value of property to explain the source of investment to the extent of differential between FBR value and DC value.

    The rates notified by the Board are still considerably lower than actual market value. It is therefore intended that FBR rates of immovable properties would be taken closer to or about 85 percent of actual market value.

    In addition, 3 percent tax for not explaining the source of investment was withdrawn.

    As the increase in FBR values of immovable property would increase the incidence of tax on genuine buyers and sellers, the rate of withholding tax on purchase of immovable property has been reduced from 2 percent to 1 percent.

    The withholding tax on purchase of property was attracted only if the value of property is more than four million rupees.

    The threshold of four million rupees was abolished and withholding tax on purchase is to be collected irrespective of the value of property.

    Previously, there was no withholding tax on sale of property if the property was held for a period of more than three years.

    Since capital gain is to be taxed under normal tax regime even beyond the period of three years, withholding tax on sale of property would be collected where the holding period is up to five years.

    The law imposed restriction on registration or transfer of property having fair market value exceeding rupees five million in the name of a non-filer. The aforesaid restriction placed on purchase of immovable property has been withdrawn.

  • FBR may obtain sales tax record of past six-years

    FBR may obtain sales tax record of past six-years

    ISLAMABAD: Federal Board of Revenue (FBR) may ask certain taxpayers to provide past six years record of their sales for examination, sources said.

    The sources said that the tax offices may conduct audit of sales tax of many taxpayers in order to meet revenue collection target for current fiscal year.

    The sources said that under Sales Tax Act, 1990 taxpayers are required to retain past six years record.

    A person, who is required to maintain any record or documents under Sales Tax Act, 1990 shall retain the record and documents for a period of six years after the end of the tax period to which such record or documents relate or till such further period the final decision in any proceedings including proceedings for assessment, appeal, revision, reference, petition and any proceedings before an alternative Dispute Resolution Committee is finalized.

    The sources said that the tax officials have immense powers to access to record and documents of taxpayers.

    (1) A person who is required to maintain any record or documents under this Sales Tax Act, 1990 or any other law shall, as and when required by Commissioner, produce record or documents which are in his possession or control or in the possession or control of his agent; and where such record or documents have been kept on electronic data, he shall allow access to the officer of Inland Revenue authorized by the Commissioner and use of any machine on which such data is kept.

    (2) The officer of Inland Revenue authorized by the Commissioner, on the basis of the record, obtained under sub-section (1), may, once in a year, conduct audit:

    Provided that in case the Commissioner has information or sufficient evidence showing that such registered person is involved in tax fraud or evasion of tax, he may authorize an officer of Inland Revenue, not below the rank of Assistant Commissioner, to conduct an inquiry or investigation under section 38:

    Provided further that nothing in this sub-section, shall bar the officer of Inland Revenue from conducting audit of the records of the registered person if the same were earlier audited by the office of the Auditor-General of Pakistan.

    (3) After completion of Audit under this section or any other provision of this Act, the officer of Inland Revenue may, after obtaining the registered person’s explanation on all the issues raised in the audit shall pass an order under section (11).

    (5) Notwithstanding the penalties prescribed in section 33, if a registered person wishes to deposit the amount of tax short paid or amount of tax evaded along with default surcharge voluntarily, whenever it comes to his notice, before receipt of notice of audit, no penalty shall be recovered from him:

    Provided if a registered person wishes to deposit the amount of tax short paid or amount of tax evaded along with default surcharge during the audit, or at any time before issuance of show cause notice … he may deposit the evaded amount of tax, default surcharge under section 34, and twenty five per cent of the penalty payable under section 33:

    Provided further that if a registered person wishes to deposit the amount of tax short paid or amount of tax evaded along with default surcharge after issuance of show cause notice, he shall deposit the evaded amount of tax, default surcharge under section 34, and full amount of the penalty payable under section 33 and thereafter, the show cause notice, shall stand abated.

    Explanation.– For the purpose of sections 25, 38, 38A, 38B and 45A and for removal of doubt, it is declared that the powers of the Board, Commissioner or officer of Inland Revenue under these sections are independent of the powers of the Board under section 72B and nothing contained in section 72B restricts the powers of the Board, Commissioner or Officer of Inland revenue to have access to premises, stocks, accounts, records, etc. under these sections or to conduct audit under these sections.

  • DGRM authorized to manage risk involved in customs clearance

    DGRM authorized to manage risk involved in customs clearance

    KARACHI: Directorate General of Risk Management (DGRM) has been authorized to manage risk involved in customs clearance of containerized, LCL and bulk cargo.

    The FBR on Wednesday issued SRO 101(I)/2020 to amend Customs Rules, 2001. Through the SRO the FBR issued Risk Management System Rules.

    It said that the DGRM to manage risk involved in customs clearance of containerized, LCL and bulk cargo including but not limited to transit cargo, international passengers and accompanied and unaccompanied baggage thereof including clearances against carnet-de-passage/TIR.

    The DG has also been authorized to plan, design and implement strategies by applying accredited risk management tools and techniques specific to each transaction types relating to imports, exports and transit of goods and clearance of international passengers.

    The DG shall also monitor, evaluate and review Risk Management System based on changing national and international trends and feedback from stakeholders.

    According to the SRO, the DG shall examine clearance patterns of various sectors and commodities to identify, analyze and evaluate risks, develop mitigation strategies and present the same to Risk Management Committee (RMC) for approval and implementation.

    The DG shall responsible to develop system whereby different stakeholders’ compliance levels are determined. Compliant stakeholders are facilitated in the system, it added.

    The DG shall coordinate with Directorate General of Intelligence and Investigation Customs (DG I&I) to get feedback in the structured format after completion of investigations of cases or studies undertaken by the DG I&I.

    The DG shall also coordinate with the Directorate General of Customs Valuation to develop checks and parameters for selection of cases requiring valuation scrutiny.

    It said that RMC shall be headed by a BS-21 officer of Customs preferably Director General RMS and shall comprise many BS-19 and BS-20 officers of Customs as may be notified by the FBR.

    According to the SRO, the meetings of RMC shall be convened at least once every month.

    The RMC shall perform the following key functions, namely:

    a. to review performance of the RMS;

    b. to review risk parameters and behavior of important risk indicators;

    c. to set benchmarks for interventions or interceptions focusing on targeting the risky consignments or entities; and

    d. to review major detections by the collectorates or directorates (I&)- Customs with respect to RMS.

  • FBR defines fair market value of immovable properties, motor vehicles

    FBR defines fair market value of immovable properties, motor vehicles

    KARACHI: Federal Board of Revenue (FBR) has defined fair market value of immovable properties and motor vehicles in case of undeclared assets identified.

    FBR officials said that the valuation of immovable property for the purposes of section 111 of Income Tax Ordinance, 2001 related to undisclosed assets shall be taken to be-

    (a) the fair market value of immovable property shall be the value notified by the Board under sub-section (4) of section 68, in respect of area or areas specified in the said notifications;

    (b) if the fair market value of any immovable property of any area or areas has not been determined by the Board in the notification referred to in sub-section (4) of section 68, the fair market value of such immovable property shall be deemed to be the value fixed by the District Officer (Revenue) or provincial or any other authority authorized in this behalf for the purposes of stamp duty; and

    (c) in the case of agricultural land, the value shall be equal to the average sale price of the sales recorded in the revenue record of the estate in which the land is situated for the relevant period or time;

    (d) if in a case sale price recorded in the instrument of sale of any property is higher than the fair market value as determined under clauses (a), (b) and (c), the applicable price shall be higher of the two; and

    (e) in the case of sale price of any auctioned property or the fair market value as determined under clauses (a), (b) and (c), the higher price shall be applicable.

    (2) For the purposes of section 111 and subject to sub-rule (2), the value of motor cars and jeeps shall be determined in the following manner, namely:-

    (a) the value of the new imported car or jeep shall be the C.I.F. value of such car or the jeep, as the case may be, plus the amount of all charges, customs-duty, sales tax, levies, octroi fees and other duties and taxes leviable thereon and the costs incurred till its registration;

    (b) the value of a new car or jeep purchased from the manufacturer or assembler or dealer in Pakistan, shall be the price paid by the purchaser, including the amount of all charges, customs-duty, sales tax and other taxes, levies, octroi, fees and all other duties and taxes leviable thereon and the costs incurred till its registration;

    (c) the value of used car or jeep imported into Pakistan shall be the import price adopted by the customs authorities for the purposes of levy of customs-duty plus freight, insurance and all other charges, sales tax, levies octroi, fees and other duties and taxes leviable thereon and the costs incurred till its registration;

    (d) the value of a car or jeep specified in clause (a), (b) and (c) at the time of its acquisition shall be the value computed in the manner specified in the clause (a), (b) or (c), as the case may be, as reduced by a sum equal to ten percent of the said clause for each successive year, upto a maximum of five years; or

    (e) the value of a used car or jeep purchased by an assessee locally shall be taken to be the original cost of the car or the jeep determined in the manner specified in clause (a), (b) or (c), as the case may be, as reduced by an amount equal to ten percent for every year following the year in which it was imported or purchased from a manufacturer.

    (3) In no case shall the value be determined at an amount less than fifty percent of the value determined in accordance with clause (a), (b) or (c) or the purchase price whichever is more.

    (4) For the purposes of section 61, the value of any property donated to a non-profit organization shall be determined in the following manner, namely:-

    (a) the value of articles or goods imported into Pakistan shall be the value determined for the purposes of levy of customs duty and the amount of such duty and sales tax, levies, fees, octroi and other duties, taxes or charges leviable thereon and paid by the donor;

    (b) the value of articles and goods manufactured in Pakistan shall be the price as recorded in the purchase vouchers and the taxes, levies and charges leviable thereon and paid by the donor;

    (c) the value of articles and goods which have been previously used in Pakistan and in respect of which depreciation has been allowed, the written down value, on the relevant date as determined by the Commissioner;

    (d) the value of a motor vehicle shall be the value as determined in accordance with rule; and

    (e) the value of articles or goods other than those specified above, shall be the fair market value as determined by the Commissioner.

  • FBR starts enforcing NTN displaying at business premises

    FBR starts enforcing NTN displaying at business premises

    KARACHI: Federal Board of Revenue (FBR) has started enforcement dive to ensure displaying National Tax Number (NTN) at place of business.

    Sources in FBR said on Tuesday that the tax offices had started campaign to ensure displaying of NTN at place of the business.

    The tax authorities will imposed penalty of around Rs5000 on persons who fail to display the NTN at the place of business as required under Income Tax Ordinance, 2001.

    Section 181C of Income Tax Ordinance, 2001 explains the displaying of National Tax Number.

    Every person deriving income from business chargeable to tax, who has been issued a National Tax Number, shall display his National Tax Number at a conspicuous place at every place of his business.