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Get the latest FBR news, tax updates, income tax, sales tax, customs, notifications, and policies from the Federal Board of Revenue.

  • Key points of amnesty scheme for real estate sector

    Key points of amnesty scheme for real estate sector

    KARACHI: The federal government has made amnesty granted to real estate sector to the part of Finance Bill, 2020 in order to get approval from the Parliament.

    Deloitte Yousuf Adil Chartered Accountants in their budget explanations said that to stimulate investment in real estate and construction sector, a no-questions-asked amnesty has been introduced.

    Under this amnesty the Federal Board of Revenue (FBR) has been restrained from asking question related to source of investment made into the real estate / construction business.

    Both previous and current federal governments have launched tax amnesty schemes in 2018 and 2019, albeit the scope of this scheme is limited to investment made in construction sector only.

    The proponent of this particular amnesty scheme argues that this would act as a catalyst to increase economic activity in the country thereby improving employment opportunities as number of sub-sectors and small and medium size industries are associated with construction industry.

    The newly introduced scheme provides immunity from the provisions of section 111 of the Ordinance , and no questions will be asked regarding source of funds from investors making capital investment in new construction projects in the form of money or land, either as an individual, as an association of persons or a company, subject to conditions as explained below.

    For individuals:

    Monetary: Investor shall open a new bank account and deposit such amount in it on or before the 31st day of December, 2020

    Land: Investor shall have the ownership title of the land at the time of commencement of the Tax Laws (Amendment) Ordinance, 2020

    Corporate shareholder / Partner:

    Monetary: Such amount shall be invested through a crossed banking instrument deposited in the bank account of such association of persons or company, as the case may be, on or before the 31st day of December, 2020

    Land: Such land shall be transferred to such association of persons or company, as the case may be, on or before the 31st day of December, 2020. Provided that the person shall have the ownership title of the land at the time of commencement of the Tax Laws (Amendment) Ordinance, 2020

    Registration: The Company or AOP shall be a single object company duly registered under the Companies Act, 2017 or Partnership Act, 1932 as the case may be.

    Additional conditions to be met:

    • Prescribed IRIS form shall be submitted by the person making investment.

    • The investments made shall be wholly utilized in a project.

    • Grey structure in case of builders and landscaping in case of developers have been completed on or before September 30, 2022, and duly certified by NESPAK or respective map approving authority.

    • Further, for land developer, the following additional conditions should be met;

    • 50 percent of plots have been booked for sale and 40 percent of sale proceeds thereof have been received by September 30, 2022 as duly certified by specified chartered accountancy firm.
    • 50 percent of the project roads have been laid up to sub-grade level as duly certified by NESPAK.

    • The value or price of the land or building shall be higher of

    a) 130 percent of FBR assessed fair market value; or

    b) At the option of person making investment, lower of the value determined by at least two independent SBP approved valuers.

    Exclusion

    The following incomes or persons are excluded from the relief provided under the amnesty scheme:

    Holder of public office, benamidar or his spouse or dependents; or

    Public Listed Company, real estate investment trust or any company whose income is exempt under the Ordinance.

    Proceeds of crime including money laundering, terror financing excluding tax evasion.

    Restriction of Ownership Changes

    • Under the new amnesty, no change in ownership shall be allowed for incomplete projects except where 50 percent cumulative cost on the project has been incurred as certified by prescribed Chartered Accountants firm, with the exception of legal transmission to heirs.

    • Inclusion of partners or shareholders after December 31, 2020 is permissible; however, such investors shall not be eligible to avail tax amnesty.

    Amnesty to the purchaser

    Provisions of section 111 shall also not apply to:
    the first purchaser of a building or a unit in the building in respect of the purchase price both in case of new project or existing incomplete project where payment is routed through crossed banking instrument between the date of registration of project with the FBR and September 30, 2022.

    The purchaser of plot for building construction where the purchase, the payment thereof and commencement of construction has been made on or before December 31, 2020 subject to construction completion by September 30, 2022 and subject to registration of such purchaser with FBR on IRIS portal.

    Thus no questions would be asked from the purchaser of building or plot regarding source of funds who complies with the above mentioned conditions.

  • FBR to take action against amnesty declarants on failure to make payment

    FBR to take action against amnesty declarants on failure to make payment

    The Federal Board of Revenue (FBR) in Pakistan issued a stern warning on Tuesday, stating that it would invoke provisions related to concealed assets if declarants under the amnesty scheme failed to pay their outstanding dues by June 30, 2020.

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  • FBR constitutes committees to remove anomalies in Finance Bill 2020

    FBR constitutes committees to remove anomalies in Finance Bill 2020

    ISLAMABAD: Federal Board of Revenue (FBR) on Tuesday constituted two committees for identifying and removing anomalies in the Finance Bill, 2020.

    The FBR issued two separate notifications for constituting the committees, which comprise FBR officials and representatives of business community.

    Chairman of the first anomaly committee is Saqib Shirazi of Atlas Group.

    The co-chairmen of the committee are Muhammad Javed Ghani, Member (Customs-Policy) and Dr. Hamid Ateeq Sarwar, Member (IR-Policy).

    The other members of the committee are:

    01. Ehsan Malik, Pakistan Business Council

    02. Agha Shahab Khan, President, Karachi Chamber of Commerce and Industry (KCCI)

    03. President, Khyber Pakhtunkhwa Chamebr

    04. Abdul Samad, former president, Quetta Chamber of Commerce and Industry

    05. Anjum Nisar, President, Federation of Pakistan Chamber of Commerce and Industry (FPCCI).

    06. Zahid Shinwari, former president, Sarhad Chamber

    07. Irfan Iqbal Sheikh, President, Lahore Chamber of Commerce and Industry (LCCI)

    08. Amir Fayyaz, Former Chairman, All Pakistan Textile Mills Association (APTMA).

    The FBR constituted the other technical anomaly committee. Ashfaq Tola, FCA, FCMA has been appointed as chairman of the committee.

    The co-chairmen of the committee will be the same FBR officials of the first committee.

    Other members of the committee are included:

    01. Ali Jameel, FCA

    02. Asif Haroon, FCA

    03. Abdul Qadir Memon, President, Pakistan Tax Bar Association

    04. Syed Yawar Ali, CEO, Pakistan Business Council

    05. Mrs. Robina Ather, Chairperson, National Tariff Commission (NTC)

    06. Muhammad Shahzad, ex-partner, A. F. Ferguson & Co.

    07. Rashid Ibrahim, A. F. Ferguson & Co.

    08. Khurram Mukhtar, Patron in Chief, PTEA.

    The term of reference (TOR) for the committees is: to review the anomalies identified and submitted; and to advise FBR on removal of anomalies.

    The FBR advised both the committees to submit the anomalies by June 19, 2020.

  • FBR allows Rs9.4 billion regulatory duty exemption on vehicle import

    FBR allows Rs9.4 billion regulatory duty exemption on vehicle import

    ISLAMABAD: Federal Board of Revenue (FBR) has allowed exemption from regulatory duty to the tune of Rs9.4 billion on import of vehicles during outgoing fiscal year.

    According to official documents, the revenue body granted exemption from regulatory duty under SRO 640(I)/2018 and SRO 1265(I)/2018 on import of vehicles by new entrants.

    The FBR allowed regulatory duty exemption of Rs6.46 billion under SRO 1265(I)/2018. The FBR issued details of the exemption of regulatory duty under this SRO granted under Para 2 of SRO for import under SRO678-2004, Fifth Schedule, Chapter 99, SRO 492-2009, 565-2006, import of vehicles by new entrants.

    Another amount of Rs2.93 billion granted as exemption from regulatory duty under SRO 640(I)/2018. Giving description, the FBR said that exemption of RD was given under Para 2 of the SRO for imports under SRO 678-2004, Fifth Schedule, Chapter-99, SRO 492-2009, 565-2006, import of Vehicles by new entrants, etc.  

  • FBR empowered third party real-time access to information, database

    FBR empowered third party real-time access to information, database

    The Federal Board of Revenue (FBR) in Pakistan has been granted enhanced authority to access third party information and databases in real-time as part of a comprehensive strategy to identify new taxpayers and curb tax evasion.

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  • FBR assigned 27 percent higher revenue collection target in 2020/2021

    FBR assigned 27 percent higher revenue collection target in 2020/2021

    ISLAMABAD: Federal Board of Revenue (FBR) has been assigned 27 percent higher revenue collection target for fiscal year 2020 despite challenging economic conditions due to COVID-19.

    According to official documents of Budget 2020/2020, the FBR has been assigned revenue collection target of Rs4,963 billion during upcoming fiscal year as compared with expected current revenue collection of Rs3,908 billion during the outgoing fiscal year, which is Rs1,055 billion higher.

    The collection target under direct tax has been estimated at Rs2,043 billion during fiscal year 2020/2021 as compared with expected collection of Rs1,623 billion in the current fiscal year, which is Rs420 billion higher.

    Under direct tax collection, target for income tax has been estimated at Rs2,037 billion, workers welfare fund at Rs3.2 billion and capital value tax at Rs3 billion.

    The collection of indirect taxes has been estimated at Rs2,920 billion during next fiscal year as compared with existing estimated collection of Rs2,285 billion during the current fiscal year, which is Rs635 billion higher.

    Under indirect taxes, the collection target of customs duty has been set at Rs640 billion, sales tax at Rs1,919 billion and federal excise duty at Rs361 billion.

    Targets for collection of other taxes are included: ICT Rs20.47 billion; Mobile handset levey Rs5.8 billion; airport tax Rs25 million, Gas Infrastructure Development Cess (GIDC) Rs15 billion; National Gas Development Surcharge Rs10 billion etc.

    The collection of petroleum levy has been estimated at Rs450 billion for next fiscal year as compared with existing collection of Rs260 billion, which is 73 percent higher.

    The target for total tax revenue has been set at Rs5,464 billion during fiscal year 2020/2021 as compared with Rs4,208 billion expected to be collected during current fiscal year.

  • Three FBR officers promoted to BS-22

    Three FBR officers promoted to BS-22

    KARACHI: The establishment division on Friday notified promotion of three senior officials of Federal Board of Revenue (FBR) to BS-22 with immediate effect.

    According to notification issued by the FBR, two officers of Inland Revenue Service (IRS) and one officer of Pakistan Customs Service (PCS) have been promoted to BS-22 from BS-21.

    The government has promoted IRS officers included: Khawaja Adnan Zahir and Ms. Fareena Mazhar.

    Fareena Mazhar has been promoted with effect from July 20, 2020.

    In PCS, Muhammad Zahid has been promoted to BS-22. He is presently serving as Director General (BS-21), Directorate General of Transit Trade, Karachi, which is now upgraded as Director General (BS-22), Directorate General of Transit Trade, Karachi.

  • Budget salient features related to Income Tax

    Budget salient features related to Income Tax

    ISLAMABAD: Federal Board of Revenue (FBR) issued budget salient feature related to income tax presented through Finance Bill, 2020.

    INCOME TAX

    RELIEF MEASURES

    • Deletion of Withholding Taxes

    To augment efforts towards simplification of the withholding tax regime, the following withholding tax provisions are being deleted:

    Section 236R: Collection of advance tax on education related expenses remitted abroad

    Section 235B: Tax on steel melters and composite units

    Section 156B: Withdrawal of balance under pension fund

    Section 148A: Tax on local purchase of cooking oil or vegetable ghee by certain persons

    Section 236D: Advance tax on functions and gatherings

    Section 236F: Advance tax on cable operators and other electronic media

    Section 236J: Advance tax on dealers, commission agents and arhatis etc.

    Section 236U: Advance tax on insurance premium

    Section 236X: Advance tax on tobacco

    This measure would reduce the cost of the compliance of taxpayers, enhance the control of FBR over the withholding tax regime and would be pivotal in promoting ease of doing business.

    • Enhancement of Threshold for Becoming Prescribed Person for Withholding of Tax on Supplies, Services and Contracts from fifty to hundred million rupees and a similar threshold of hundred million rupees is being prescribed for a sales tax registered person to become a withholding agent.

    • Reduction in Holding Period and Tax Rates for Capital Gain on Immoveable Property to incentivize and propel economic activity in the real estate sector, the bifurcation of plots and constructed property for determining holding period of capital gains is being done away with i.e. the holding period for taxation of capital gains on disposal of immovable property is being restricted to 4 years. In addition, rates are also being reduced on capital gains emanating from disposal of immoveable property.

    • Increase in Threshold of Section 21(l) per transaction delineated under section 21(l) is being increased from Rs. 10,000/- to Rs. 25,000/-. Similarly, the threshold of payments under a single from Rs.50,000/- to Rs.250,000/-.

    • Increase in Threshold of Section 21(m) from Rs. 15,000/- per month to Rs.25,000/- per month.

    • Enabling Adjustability of Property Expenses for All Individuals/AOPs

    • Exempting Withholding Tax on Cash Withdrawal to the extent of Foreign Remittances

    • Promoting Investment in Government Debt Instruments through a foreign bank account, a non-resident rupee account repatriable or a foreign currency account.

    • Issuance of Centralized Income Tax Refunds

    • Hajj Operators to be Exempted from Withholding Tax on Payments to Non-Residents

    • Explanation for excluding Vehicles Up to 200cc from the Ambit of Advance Tax

    • Advance Tax on Auction of Immovable Property to be Collected in Installments

    • Prompt Issuance of Exemption Certificates to Public Listed Companies within 15 days

    • Collection of Advance Tax by Educational Institutions not to Apply to Persons on the ATL

    • Rationalizing Tax on Imports by shifting from person-specific rates to goods specific rates cascaded according to the type of goods, with tax @1% for capital goods, 2% for raw materials and 5.5% for finished goods irrespective of status of the importer. However, the prevailing concessional rates on certain items such as remeltable scrap of iron and steel, potassic and urea fertilizers, LNG, Gold, Cotton, goods that were importable by manufacturers under the rescinded SRO 1125(I)/2011 dated 31.12.2011, mobile phones etc. are being maintained.

    • Agreed Assessment through arbitration by Assessment Oversight Committee

    • Strengthening Alternate Dispute Resolution Mechanism

    • Taxation Of Resident Shipping Companies as per latest marine policy

    PROCEDURAL MEASURES

    • Taxpayer’s Profile Automated Adjusted Assessment to rectify computational errors and wrongly claimed credits

    • Real-Time Access to Databases of Certain Organizations

    • Audit on the Basis of Benchmark Ratios

    • Enabling E-Audit

    • Strengthening Compliance Regime of Non-Profit / Welfare Organizations

    • Electricity Expense to be Treated as an Inadmissible Business Deduction subject to non-disclosure of name of actual user from 01.01.2021

    • Disallowance of Business Expenditure Proportionate to Sales Made to Sales Tax Unregistered Persons

    • Rationalizing Depreciation Deduction based on the Half Year Rule

    • Limiting Interest Deductibility to Foreign Affiliates

    TECHNICAL MEASURES

    • Rationalization of Cost of Transport Vehicle for Claiming Deduction on Account of Lease Rentals

    • Filing of Withholding Statements under section 165 on Quarterly Basis

    • Incentivizing and Promoting the Construction Industry

    • Tax Exemptions and Concessions for the Gwadar Port and the Gwadar Free Zone

    • Incorporation of Relief measures provided through SROs during the COVID pandemic.

  • Income tax exemptions surge by 166pc to Rs378bn

    Income tax exemptions surge by 166pc to Rs378bn

    ISLAMABAD: Despite massive shortfall in revenue collection the Federal Board of Revenue (FBR) granted Rs378 billion as income tax exemption during current fiscal year, which is 166.2 percent higher than the last fiscal year.

    According to Pakistan Economic Survey 2019/2020 released on Thursday the FBR granted provisionally Rs378 billion as income tax exemption and concession during the outgoing fiscal year as compared with Rs142 billion in the last fiscal year.

    The FBR granted around Rs212 billion as exemption from total income during the outgoing fiscal year. While another Rs104.5 billion concessions were granted as tax credit. An amount of Rs36.43 billion was exempted for allowances.

    It is pertinent to mention here that the FBR was assigned Rs5.55 trillion as collection target for the current fiscal year. However, slowdown in economy and COVID-19 outbreak the target was revised downward to Rs3.9 trillion.

    However, grant of exemption and concession fell 13.21 percent to Rs519 billion under the head of sales tax during current fiscal year as compared with Rs598 billion in the last fiscal year.

    The FBR granted sales tax exemption of Rs255.84 billion on imports. An amount of Rs74 billion granted exemption/concession as reduced rates of two percent under Eight Schedule of Sales Tax Act, 1990.

    Further, an amount of Rs35 billion has been granted as exemption/concession as reduced rates of 10 percent under Eight Schedule.

    The authorities granted Rs23.15 billion sales tax concession on cellular mobile phones under Ninth Schedule.

    The FBR granted exemption of Rs54.87 billion on local supplies during the fiscal year 2019/2020.

    The exemption and concessions under customs duty cost an amount of Rs253 billion to the revenue authority during outgoing fiscal year, which is 8.58 percent higher when compared with Rs233 billion the last fiscal year.

    Around Rs95 billion has been granted as duty exemption / concession to automobile sector, E&P companies and projects under CPEC. While an amount of Rs87 billion granted as exemption and concessions under Fifth Schedule of Customs Act, 1969.

    The concessions granted under Free Trade Agreement (FTA) and Preferential Trade Agreement (PTA) was around Rs45 billion during the current fiscal year.

    The FBR allowed exemption and concession an aggregate amount of Rs1150 billion during fiscal year 2019/2020 as compared with Rs972 billion in the last fiscal year.

  • Zero-rating elimination provides impetus to FBR collection

    Zero-rating elimination provides impetus to FBR collection

    ISLAMABAD: Elimination of zero-rating regime on five export oriented sectors has provided impetus to tax collection during current fiscal year, said Pakistan Economic Survey 2019/2020 issued on Thursday.

    The survey said that tax collection of Federal Board of Revenue (FBR) has witnessed a remarkable turnaround during the current fiscal year after posting negative growth of 0.4 percent in FY2019.

    The overall FBR tax collection grew by 10.8 percent to Rs3,300.6 billion during July-April, FY2020 against Rs 2,980.0 billion in the comparable period last year.

    Within the total, the domestic component of tax revenue collected by the FBR grew by 14.7 percent to stand at Rs 2,777.7 billion in first ten months of the current fiscal year against Rs 2,421.1 billion in the comparable period last year.

    “The rise in tax collection is attributed to various policy initiatives implemented at the start of FY2020 such as charging sales tax on more items at the retail price under 3rd Schedule, reinstatement of taxes on telecom services and an upward revision of tax rates on various salary slabs.

    “In addition, an upward revision in the federal excise duty (FED) rates and the abolishment of the zero-rating regime on five export-oriented sectors provided further impetus to FBR tax collection.”

    Direct Taxes

    The net collection of direct taxes has registered a growth of 14.1 percent during the first ten months of FY2020. The net collection has increased from Rs 1,071.7 billion to Rs 1,223.2 billion.

    The bulk of the tax revenues of direct taxes is realized from income tax. The major contributors of income tax are withholding tax, voluntary payments and collection on demand.

    Indirect Taxes

    The gross and net collections of indirect taxes have witnessed a growth of 11.4 percent and 8.9 percent respectively. It is accounted for 62.9 percent of the total FBR tax revenues.

    Sales Tax

    Within indirect taxes, net collection of sales tax increased by 15.7 percent. The gross and net sales tax collection during July-April, FY2020 has been Rs 1,424.8 billion and Rs 1,348.4 billion respectively, showing a growth of 20.1 percent and 15.7 percent respectively.

    In fact, around 55.0 percent of total sales tax was contributed by a sales tax on import during July-April, FY2020, while the rest was contributed by the domestic sector.

    Federal Excise Duty

    The collection of federal excise duties (FED) during July-April, FY2020 has recorded 12.0 percent growth. The net collection has stood at Rs 206.1 billion during July-April, FY2020 as against Rs 184.0 billion during the same period last year.

    The major revenue spinners of FED are cigarettes, cement, services and beverages.

    Customs Duty

    Customs duty has registered a negative growth of 6.8 percent and 6.5 percent in gross andnet revenues respectively.

    The net collection has decreased from Rs 558.9 billion duringJuly-April, FY2019 to Rs 522.8 billion during July-April, FY2020.

    The major revenuespinners of customs duty have been vehicles, mineral fuels, iron and steel, electricalmachinery, plastic, edible fruits etc.

    Impact of COVID-19 on FBR Tax Collection

    COVID-19 pandemic has casted a significant impact on revenue collection efforts of FBR.

    During the first eight months of FY2020, FBR recorded total revenue collection of Rs 2,738 billion with a growth rate of 17.5 percent over last fiscal year. FBR was able to achieve 91.4 percent of its (first revised) target for the period.

    However, after the outbreak of COVID-19 pandemic, an average negative growth rate of 13.4 percent was recorded during March 2020 and April 2020 as compared to last year as well as compared to the projected collection.

    The situation is likely to exacerbate further during the month of May and slight recovery is expected in the last month of the financial year because of usual lumped government spending.

    Assessment of the full impact of COVID-19 on FBR’s tax collection merits analysis of the various expected and projected revenue figures prior to the time of crisis emergence.

    FBR’s target which stood at Rs 4,807 billion was revised downwards to Rs 3,908 billion keeping in view the economic slowdown consequent to the pandemic.

    The aforementioned revision had thus forecasted a revenue loss of Rs 899 billion. Nevertheless, the actual shortfall is expected to be higher than what has been projected.

    The Federal Government has recently announced an incentive package for the construction sector, fulfilling the longstanding demand of builders and developers for fixed income tax and declaration of the construction sector as an industry.

    The package would not only revive the construction industry but also serve as a catalyst to enhance business activity in forty different economic sectors. Furthermore, FBR is also striving for simplification of laws and procedures to reduce the cost of doing business and lower administrative burden.

    The total impact of COVID-19 pandemic is yet to be determined. The dynamic and challenging nature of the crisis necessitates an equally dynamic and vigorous strategy that is capable of being evolved in response to the demands made on it.