In a significant move towards fostering the digital landscape and supporting local smartphone manufacturing, the Federal Board of Revenue (FBR) announced on Thursday a drastic reduction in taxes on imported smartphones.
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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.
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Provincial registered taxpayers require to pay advance income tax
KARACHI: Persons registered for sales tax with the provincial revenue authorities are required to pay advance income tax to Federal Board of Revenue (FBR) on the basis turnover declared before the provincial revenue authorities.
According to Section 147A of Income Tax Ordinance, 2001, every provincial sales tax registered person shall be liable to pay adjustable advance tax at the rate of three per cent of the turnover declared before the provincial revenue authority.
The Section 147A is read as:
Advance tax from provincial sales tax registered person.-
Sub-Section (1): Every provincial sales tax registered person shall be liable to pay adjustable advance tax at the rate of three per cent of the turnover declared before the provincial revenue authority.
Sub-Section (2): The advance tax under sub-section (1) shall be paid monthly at the time when sales tax return is to be filed with the provincial revenue authority.
Sub-Section (3): Advance tax paid under this section may be taken into account while working out advance tax payable under section 147.
Sub-Section (4): The provisions of this Ordinance shall apply to any advance tax due under this section as if the amount due were tax due under an assessment order.
Sub-Section (5): A taxpayer who has paid advance tax under this section for a tax year shall be allowed a tax credit for that tax in computing the tax due by the taxpayer on the taxable income of the taxpayer for that year.
Sub-Section (6): A tax credit allowed for advance tax paid under this section shall be applied in accordance with sub-section (3) of section 4.
Sub-Section (7): A tax credit or part of a tax credit allowed under this section for a tax year that is not able to be credited under sub-section (3) of section 4 for the year shall be refunded to the taxpayer in accordance with section 170.
Sub-Section (8): This section shall not apply to a person whose name was appearing in the active taxpayers’ list on the thirtieth day of June of the previous tax year.
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FBR establishes help desks for resolving issues in automated sales tax refunds
ISLAMABAD: Federal Board of Revenue (FBR) on Wednesday established help desks at various Regional Tax Offices (RTOs) and Large Taxpayers Units (LTUs) in order to facilitate taxpayers regarding resolving issues pertaining to Fully Automated Sales Tax e-Refund (FASTER).
The FBR nominated officers at RTOs and LTUs in order to resolves queries and issues regarding filing of Annexure-H and issuance of refunds under FASTER system.
The FBR nominated following officers for help desks:
01. Bilal Zamir, Deputy Commissioner – IR, LTU Lahore.
02. Ahmed Faiz, Assistant Commissioner-IR, RTO Faisalabad.
03. Najam- ul -Hassan Sial, Assistant Commissioner –IR, RTO Faisalabad.
04. Hafiz Muhammad Waris, IRAO, RTO-II Lahore.
05. Muhammad Suleman, Senior Auditor, RTO-II Lahore.
06. Malik M Javed Iqbal, Assistant Commissioner-IR, CRTO Lahore.
07. Ms. Sharmeen Qamar, Assistant Commissioner – IR, CRTO Lahore.
08. Aminullah Kakar, Deputy Commissioner-IR, CRTO Karachi.
09. Shahid Rehan, Senior Auditor, CRTO Karachi.
10. Sana Baluch, Deputy Commissioner-IR, RTO-III Karachi.
11. Abdul Sattar Palh, Assistant Director Audit, RTO-III Karachi.
12. Muhammad Imran Ali, Deputy Commissioner-IR, RTO Sialkot.
13. Muhammad Qamar Minhas, Deputy Commissioner-IR, RTO Multan.
14. Nadeem Ahmed, Deputy Commissioner-IR, RTO Multan.
15. Fayyaz Ahmed, Deputy Commissioner-IR, RTO Multan.
16. Ms. Riffat Aziz, Deputy Commissioner-IR, RTO Gujranwala.
17. Muhammad Ali, Assistant Commissioner-IR, RTO Gujranwala.
18. Amjad Ali Moroojo, Inland Revenue Audit Officer, LTU Karachi.
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FBR chairman on 14 days leave
The Chairman of the Federal Board of Revenue (FBR), Syed Muhammad Shabbar Zaidi, is set to take a 14-day leave, according to an official notification issued on Tuesday. The leave is effective from January 6, 2020, to January 19, 2020.
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FBR to launch simplified tax return form for small traders
ISLAMABAD: Federal Board of Revenue (FBR) is set to launch simplified income tax return form for small retailers, sources said on Tuesday.
“The FBR is likely to issue the return form for small return forms in pursuance to the agreement between the tax authorities and traders associations signed on October 30, 2019,” a senior tax official said.
The official said that the FBR had finalized all the formalities to facilitate the small traders as envisaged in the agreement.
The FBR has already extended the last date for filing income tax returns for tax year 2019 up to January 31, 2020.
Certain relaxation to traders have already been announced through Tax Laws (Second Amendment) Ordinance, 2019.
The term “trader” has been defined to mean an individual engaged in business of buying and selling of goods in the same state, including a retailer and a wholesaler but excluding a distributor.
According to PwC A F Ferguson Chartered Accountants the concessions provided to traders are as under:
(i)The general rate of minimum tax payable (under section 113 of the ITO 2001) has been reduced from 1.5 percent to 0.5 percent for tax year 2020 for traders having turnover up to Rs. 100 million. However, for traders who have filed income tax returns for tax year 2018, the tax liability for tax years 2019 and 2020 should not be less than the tax liability for tax year 2018, to become eligible for reduced rate of Minimum Tax of 0.5 percent.
(ii)Individual having turnover of Rs. 50 million or more in any of the preceding tax years is liable to deduct tax under section 153 while making payments against supply of goods, services and contracts.
Through the Second Amendment Ordinance, traders being individuals having turnover upto Rs. 100 million have been exempted from deducting tax under section 153 while making payment against supply of goods, services and contracts. The Board is expected to clarify the year with respect to which turnover of Rs100 million will be calculated by the trader.
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Higher inflation jacks FBR’s revenue collection up: SBP
KARACHI: Higher inflation has jacked up the revenue collection for Federal Board of Revenue (FBR) besides other factors including increase in tax rates and reinstatement of tax on telecom services, State Bank of Pakistan (SBP) said on Monday.
The SBP in its quarterly report on state of economy for July – September 2019/2020 said that the overall FBR taxes grew 15.2 percent in first quarter of 2019/2020, compared to the 8.8 percent rise noted in the same quarter of the last fiscal year.
This higher growth can be attributed to: (i) an increase in sales tax rates; (ii) reinstatement of taxes on telecom services; (iii) an upward revision of tax rates on various salary slabs; (iv) increase in interest rates and higher tax on profit on debt;3 (v) upward revision in the federal excise duty (FED) rates; and (vi) the abolishment of the zero rating regime on five export-oriented sectors.
“In addition to these measures, the impact of higher inflation also boosted revenue mobilization.”
For 2019/2020, the SBP’s projections at the start of the year (July 2019) clocked in at an elevated range of 11-12 percent. Not only was this range higher than previously projected, but it was also in excess of the medium-term target of 5-7 percent.
Despite this improvement, the FBR managed to achieve only 17.3 percent of the annual target of Rs 5,555.0 billion for 2019/2020. “This means that tax revenues would require a substantially higher growth in the remaining 9 months of the year to achieve the full year target.”
Moreover, import-related taxes, representing nearly half of FBR taxes, would remain under stress due to the ongoing declining trend in imports. Dutiable imports, in particular, declined sharply in the first quarter of 2019/2020.
Encouragingly, the fiscal authorities have introduced some initiatives to facilitate business and individual tax payers and to broaden the tax base.
For instance, in order to provide hassle-free refunds to exporters, the FBR has introduced the Fully Automated Sales Tax e-Refund (FASTER) system for tackling refund claims within 72 hours.
The FBR has also launched a mobile application, “FBR Tax Asaan,” to facilitate taxpayers in paying sales tax and claiming refunds.
In addition, video tutorials are prepared and uploaded online to guide taxpayers in filing their income tax returns.
These efforts to simplify and streamline the taxation mechanism have also contributed to the improvement in Pakistan’s ranking in the World Bank’s Ease of Doing Business: the digitization of tax collecting procedures was cited as one of the drivers of the improvement in the country’s ranking. In addition, the government has continued its drive to increase documentation in the economy.
However, businesses are resisting some of these documentation measures, such as the CNIC condition on business-to-business (B2B) and business-to-consumer (B2C) transactions.
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KTBA seeks FBR clarification on tax ordinance
KARACHI: Karachi Tax Bar Association (KTBA) on Monday urged Federal Board of Revenue (FBR) to issue necessary clarification related to issues in recently promulgated tax ordinance.
The KTBA sent a letter to Syed Shabbar Zaidi, Chairman, FBR and pointed out anomalies in the Tax Laws (Second Amendment) Ordinance, 2019 for clarification.
The KTBA highlighted that Sub-section 4 has been added to section 73 of Sales Tax Act, 1990, under which sales to an unregistered person by a registered manufacture cannot be made for more than Rs10 million in a month and Rs100 million in a year, failing which input tax will be disallowed proportionately.
Considering the implication of the phrase of unregistered person [i.e. singular term] used in drafting of the law, instead of the phrase unregistered persons [plural term], it implies that the restriction is applicable on sales to a single unregistered person instead of cumulative sales to all unregistered person(s).
In order to ensure that intent of law is not suffered by any legal infirmity due to any unintended or inadvertent drafting, the clarification must be issued in this respect on urgent note, it added.
It further pointed out that in addition to the above, it should also be clarified as to whether the all unregistered person will be effected or only those unregistered person who actually were required to be registered in Sale Tax but didn’t ?
In the event, the law is intended to cover all unregistered persons, without any discrimination, certain serious ramification would follow because of the fact that Manufacturers won’t be able to make sale to various Government/other authorities, armed forces hospitals, Universities, Charities & EPZ entities, which by law, are not required to be registered at all, in the first place.
The KTBA said that it is important to define the category of unregistered person who should not suffer due to any adverse implication of the law. Hence, a clarification is necessitated in this context.
The tax bar further highlighted the amendments introduced related to business license.
Through the Tax Laws (Second Amendment) Ordinance, 2019, various penalties have been prescribed for person who has not obtained business license, while the procedure to obtain business license has not been prescribed as yet.It is not possible to get a Business License either for any person or for any tax commissioner to issue one.
An unnumbered and undated draft SRO was issued by the FBR in July 2019, whereby Draft rules 83A to 83E were proposed in the Income Tax Rules, 2002 for the purpose, which were not finalized yet.
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Procedure for conducting audit of transfer pricing cases unveiled
KARACHI: The Director General of International Tax Operations has been empowered to select and conduct transfer pricing audit of cases under section 230E of Income Tax Ordinance 2001.
Federal Board of Revenue (FBR) in explanation to Tax Laws (Second Amendment) Ordinance, 2019 said that previously, there was no provision which specified the procedure to be adopted for conducting transfer pricing audit of taxpayers.
It has now been specified that transfer pricing audit of cases selected by the Director General of International Tax Operations shall be conducted as per procedure laid down in 177 of the Ordinance.
Moreover, the right to conduct transfer pricing audit under section 230E of the Ordinance shall not prejudice the right of the Commissioner to determine transfer price at arms length in transactions between associates while conducting audit under section 177 or 214C of the Ordinance or whilst making amendment under section 122 of the Ordinance.
Tax experts at PwC A F Ferguson Chartered Accountants said that Section 230E was introduced in the Income Tax Ordinance, 2001 through the Finance Act, 2017 for establishing a separate Directorate for conducting transfer pricing audit of taxpayers.
Through the Finance Supplementary (Second Amendment) Act, 2019, Section 230E was substituted so as to establish Directorate General of International Tax.
However, no specific procedure or mechanism for transfer pricing audit was prescribed in the said section which was causing ambiguity amongst the field officers and taxpayers.
Through the Second Amendment Ordinance, necessary amendment has been made in Section 230E to prescribe that transfer pricing audit is to be conducted as per the procedure laid down in section 177 and other provisions of the Ordinance.
This way, the ambiguity relating to the transfer pricing audit procedure has now been removed, the experts said.
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Traders associations nominate representatives to determine turnover for tax registration
ISLAMABAD: Traders associations has nominated their representatives for determination of business turnover for mandatory tax registration.
FBR spokesman said that traders associations had assured of income tax registration of medium and large size retailers.
The spokesman said that the FBR had agreed to genuine demands of small traders and necessary amendments had been introduced through Tax Laws (Second Amendment) Ordinance, 2019.
According to the FBR the condition of CNIC (Computerized National Identity Card) had become part of the law and it was genuine demand of traders to reduce the minimum income tax.
The traders were demanding to reduce the minimum tax because it was high considering their returns and it was the reason the traders were reluctant to declare their details.
In order to ensure filing declaration by the retailers the minimum tax rate has been rationalized, the spokesman said. Further to provide ease in doing business the traders have been excluded from collecting withholding tax.
The spokesman said that traders associations had assured to cooperate with the FBR for bringing medium and large size retailers into the tax net.
In this regard the traders associations had nominated their representatives to determine the turnover of traders for mandatory tax registration.
The traders associations also assured to cooperate with the FBR to resolve audit related issues. The spokesman said that the FBR wanted to better working relations with the trade community for betterment of the economy.
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Automatic issuance of exemption certificate granted
KARACHI: The Federal Board of Revenue (FBR) allowed automated issuance of exemption certificate in case commissioner delays in approval.
Tax experts at PwC A F Ferguson Chartered Accountants said Clause (72B) contained in Part IV of the Second Schedule to the ITO 2001 allows a taxpayer to obtain a withholding exemption certificate from the concerned Commissioner Inland Revenue so as to avoid tax collection at import stage.
Due to procedural issues, hardships were being faced by taxpayer in getting such withholding exemption certificates renewed, which are generally issued for 6-months validity although tax liability for the entire year as prescribed is discharged.
To facilitate the taxpayers, the relevant clause has now been amended to provide for automatic approval of application filed on FBR’s IRIS portal for renewal of the certificate in case no action is taken by the Commissioner by the expiry of prescribed time period.
The concerned Commissioner has, however, been empowered to cancel or modify any such certificate automatically issued on IRIS but any such cancellation or modification may be made after granting the taxpayer an opportunity of being heard and for reasons to be recorded by the Commissioner in writing.