The Federal Board of Revenue (FBR) has announced the restoration of the 100 percent depreciation deduction for depreciable assets used in a business for the first time.
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The Federal Board of Revenue is Pakistan’s apex tax agency, overseeing tax collection and policies. Pakistan Revenue is committed to providing timely updates on the Federal Board of Revenue to its readers.
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FBR notifies graduated tax rates on disposal of securities
ISLAMABAD: The Federal Board of Revenue (FBR) has notified rate of capital gain tax as introduced through Finance Act, 2022 and effective from July 01, 2022.
The FBR issued Income Tax Circular No. 15 of 2022-2023 to explain important amendment made through the Finance Act, 2022 to the Income Tax Ordinance, 2001.
The FBR said that a separate block of taxation of capital gains on disposal of securities is available under the Ordinance.
READ MORE: FBR applies separates CGT rates on immovable properties
Earlier, flat tax rate of 12.5 per cent was applicable on gain on disposal of securities irrespective of holding period.
Now graduated tax rates have been provided with respect to securities acquired after July 01, 2022, by substituting the Table in Division VII of Part I of First Schedule as under:
01. For holding period less than 1 year: the tax rate shall be 15 per cent.
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02. For holding period from 1 year to 2 years: the tax rate shall be 12.5 per cent.
03. For holding period from 2 years to 3 years: the tax rate shall be 10 per cent.
04. For holding period from 3 years to 4 years: the tax rate shall be 7.5 per cent.
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05. For holding period from 4 years to 5 years: the tax rate shall be 5 per cent.
06. For holding period from 5 years to 6 years: the tax rate shall be 2.5 per cent.
07. For holding period more than 6 years: the tax rate shall be zero per cent.
08. Future commodity contracts entered into by members of Pakistan Mercantile Exchange: the tax rate shall be five per cent.
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However, gain on disposal of securities acquired on or before 30th day of June, 2022 will continue to be charged to tax at the earlier flat rate of 12.5 per cent irrespective of the holding period, the FBR added.
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FBR applies separates CGT rates on immovable properties
ISLAMABAD: The Federal Board of Revenue (FBR) has implemented capital gain tax on disposal of immovable properties as amended through Finance Act, 2022.
The FBR issued Income Tax Circular No. 15 of 2022-2023 to explain the important amendments introduced through the Finance Act, 2022 to the Income Tax Ordinance, 2001.
READ MORE: FBR explains tax on deemed income from immovable property
The FBR said that earlier, the gain arising on the disposal of immovable property after the holding period of 4 years was exempt from tax.
Now the holding period concession will separately apply which for open plots is six years, for constructed property is four years and for flats is two years.
Further, whole amount of gain on disposal of immovable property will be taxable at graduated rates provided in Division VIII of Part I of First Schedule of the Ordinance given as under:
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01. Where the holding period does not exceed one year: the tax rate for open plots shall be 15 per cent; for constructed property at 15 per cent; and for flats 15 per cent.
02. Where the holding period exceeds one year but does not exceed two years: the tax rate for open plots shall be 12.50 per cent; for constructed property at 10 per cent; and for flats at 7.5 per cent.
03. Where the holding period exceeds two years but does not exceed three years: the tax rate for open plots shall be 10 per cent; for constructed property at 7.5 per cent; and zero per cent for flats.
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04. Where the holding period exceeds three years but does not exceed four years: the tax rate for open plots shall be 7.5 per cent; for constructed property at 5 per cent; and zero per cent for flats.
05. Where the holding period exceeds four years but does not exceed five years: the tax rate for open plots shall be 5 per cent; zero per cent for constructed property; and zero per cent for flats.
06. Where the holding period exceeds five years but does not exceed six years: the tax rate for open plot shall be 2.5 per cent; zero per cent for constructed property; and zero per cent for flats.
07. Where the holding period exceeds six years: the tax rate shall be zero for open plots, constructed property and flats.
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The concessional taxation regime for capital gains has been made applicable only to disposal of immovable properties situated in Pakistan.
The benefit of holding period and concessional rate of tax is not available in respect of capital gains arising on disposal of immoveable property situated outside Pakistan.
Furthermore, to streamline capital gains taxation regime, the concessions earlier available under sub-sections (3) and (3A) of section 37 in terms of reduction in capital gain by certain percentages on disposal of capital assets held for more than one year has been withdrawn.
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Sub-section (4A) of section 37 has been omitted.
Accordingly, non-recognition provision of section 79 will apply to determine the cost of acquisition on transfer of capital asset under the circumstances contained therein.
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FBR explains tax on deemed income from immovable property
ISLAMABAD: The Federal Board of Revenue (FBR) has explained the new introduced tax on deemed income through Finance Act, 2022.
The FBR issued Income Tax Circular No. 15 of 2022/2023 to explain important amendment brought through Finance Act, 2022 to the Income Tax Ordinance, 2001.
The FBR said that a new section 7E has been introduced through Finance Act, 2022 whereby for tax year 2022 and onwards, a resident person is treated to have derived income equal to five per cent of fair market value of the capital assets situated in Pakistan which will be chargeable to tax at the rate of 20 per cent under Division VIIIC of Part I of First Schedule of the Ordinance.
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Following exclusions have been provided to which this section will not apply:
(i) One capital asset owned by the resident person;
(ii) Self-owned business premises from where the business is carried out by the persons appearing on the active taxpayer’s list at any time during the year;
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(iii) Self-owned agriculture land where agriculture activity is carried out by the person but excluding farmhouse and annexed land. Farmhouse has been defined in this section;
(iv) Capital asset allotted to —
(a) A Shaheed or dependents of a Shaheed belonging to Pakistan Armed Forces;
(b) A person or dependents of a person who dies while in the service of Pakistan armed forces or federal or provincial government;
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(c) A war wounded person while in service of Pakistan armed forces or federal or provincial government;
(d) An ex-serviceman and serving personnel of armed forces or ex-employees or serving personnel of federal and provincial governments who are original allotees of the capital asset as duly certified by the allotment authority;
(v) Any property from which income is chargeable to tax under the Ordinance and tax leviable has been paid;
(vi) Capital asset in the first year of acquisition on which tax under section 236K has been paid;
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(vii) Where fair market value of the capital assets in aggregate excluding capital assets mentioned in serial nos. (i) to (vi) above does not exceed rupees twenty-five million;
(viii) Capital assets which are owned by a provincial government or local government;
(ix) Capital assets owned by local authority, a development authority, builders and developers for land development and construction subject to the condition that such persons are registered with Directorate General of Designated Non-Financial Businesses and Professions.
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FBR warns officials to shun exerting political pressure
ISLAMABAD: The Federal Board of Revenue (FBR) on Friday warned its officials to shun exerting political pressure in service matters.
The FBR in an official note said that it had observed with concern that some officers/officials resort to exerting political pressures on the top management in connection with their transfers/postings/deputations and other service matters in total disregard to Rule 19 & 29 of Government Servants (Conduct) Rules, 1964 read with the instructions (printed at S.No. 14.3, 14.4 & 14.5 of ESTA CODE, edition 2015).
READ MORE: Super tax to apply for Tax Year 2022 and onwards: FBR
Despite repeated counselling/warnings, the practice still continues and, therefore, it is once again informed that the said act is a “Misconduct” under the Government Servant (Conduct) Rules, 1964 read with Rule 2(1)(k) of Civil Servants (E&D) Rules, 2020 (unbecoming of officers professional conduct) and attracts disciplinary action under the relevant rules.
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In view of the above, all officers/officials of IRS & PCS are hereby warned once again to shun this attitude. It may please be noted that such officers/officials using political influences for service matters have been marked and necessary observations have been placed in their personal dossiers.
“It goes without saying that such observations will be one of the main considerations at the time of making their career decisions including promotion and disciplinary proceedings besides placement and rotations,” the FBR said.
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Therefore, at the cost of the repetition, all officers/officials of IRS are once again advised to be cautious of the seriousness of this subject at all times.
The FBR asked field heads to disseminate this information with the needed seriousness to all officers/officials under their command.
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Super tax to apply for Tax Year 2022 and onwards: FBR
ISLAMABAD: The Federal Board of Revenue (FBR) on Thursday said that super tax will be applicable for tax year 2022 and onwards.
The FBR issued Income Tax Circular No. 15 of 2022/2023 to explain important amendments made to Income Tax Ordinance, 2001 through Finance Act, 2022.
READ MORE: Pakistan enhances income tax rates for banks
The FBR said that a new section 4C to Income Tax Ordinance, 2001 has been introduced through Finance Act, 2022 and this section will apply for tax year 2022 and onwards.
Except for the persons whose income as envisaged in this section is below Rs150 million, all other persons including those assessed under Fourth, Fifth and Seventh Schedules to the Ordinance are liable to pay super tax on graduated rates ranging from 1% to 4% based on graduated income slabs provided in Division JIB of Part I of First Schedule given as under:
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S. No. Income under Section 4C Rate of Tax 1. Where income does not exceed Rs150 million 0% of the income 2. Where income exceeds Rs150 million 1% of the income but does not exceed Rs200 million 1% of the income 3. Where income exceeds Rs200 million 2% of the income but does not exceed Rs250 million 2% of the income 4. Where income exceeds Rs250 million but does not exceed Rs300 million 3% of the income 5. Where income exceeds Rs300 million 4% of the income However, for tax year 2022 the rate of super tax under this section will be 10% instead of 4%, where the income of the persons engaged, partly or wholly, in business of airlines, automobiles, beverages, cement, chemicals, cigarette & tobacco, fertilizer, iron & steel, LNG terminal, oil marketing, oil refining, petroleum & gas exploration and production, pharmaceuticals, sugar and textiles exceeds Rs.300 million. For tax year 2023, this super tax on income of banking companies will be 10% if the income for the year exceeds Rs. 300 million.
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For the purposes of this section, the income will 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 the Ordinance, excluding amounts specified in (i) above;
(iii) Imputable income as defined in clause (28A) of section 2 excluding amounts specified in clause (i) above; and
(iv) Income computed, other than brought forward depreciation, brought forward amortization and brought forward business losses under Fourth, Fifth and Seventh Schedule.
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Super tax payable under this section will be paid on the date and manner as specified in under section 137(1) of the Ordinance.
In case of default by the person liable to pay super tax under this section, Commissioner through an order in writing will determine the liability of the person and proceed to recover the same under applicable provisions of the Ordinance, the FBR added.
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Pakistan enhances income tax rates for banks
ISLAMABAD: Pakistan has enhanced tax rates for banks through amendments introduced through Finance Act, 2022.
In this regard the apex tax agency of the country, i.e. Federal Board of Revenue (FBR) on Thursday issued Income Tax Circular No. 15 of 2022/2023 to explain important amendments made to Income Tax Ordinance, 2001 through Finance Act, 2022.
READ MORE: Declaring beneficial owner made mandatory for companies, AOPs
The FBR said that tax rates for banking companies are enhanced as explained hereunder:
The taxable income arising from additional income of banking companies earned from additional investment in Federal Government securities for tax year 2020 and 2021 was taxable at the rate of 37.5 per cent instead of rates provided in Division II of Part I of First Schedule of the Income Tax Ordinance, 2001.
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This provision was further amended through Finance Act, 2021, whereby income attributable to investment in the Federal Government securities of banking companies was made taxable on the basis of advances to deposit ratios at graduated tax rates of 40 per cent, 37.5 per cent and 35 per cent, if ratio was up to 40 per cent, 40-50 per cent and above 50 per cent respectively.
The Finance Act, 2022 has introduced enhanced rates of tax on taxable income of banks attributable to investment in Federal Government securities.
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The enhanced rates for tax year 2022 are 55 per cent, 49 per cent and 35 per cent if gross advances to deposit ratio was upto 40 per cent, 40-50 per cent or above 50 per cent respectively.
For tax year 2023, and onwards tax rates will be 55 per cent, 49 per cent and 39 per cent if gross advances to deposit ratio is up to 40 per cent, 40 -50 per cent or above 50 per cent respectively.
The changes have been incorporated by substituting sub-rule (6A) of rule 6C of Seventh Schedule to the Ordinance.
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The tax rate on income of banking companies has been enhanced to 39 per cent for tax year 2023 from current 35 per cent through amendment in Division II of Part I of First Schedule of the Ordinance.
Additionally, the application of section 4B has been restricted up to tax year 2022 in case of banking companies.
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Declaring beneficial owner made mandatory for companies, AOPs
ISLAMABAD: The Federal Board of Revenue (FBR) on Thursday said that declaration of beneficial owner has been made mandatory for companies and Association of Persons (AOPs) under income tax laws.
The FBR issued Income Tax Circular No. 15 of 2022-2023 to explain the important amendment made through Finance Act, 2022 to Income Tax Ordinance, 2001.
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The FBR said that previously companies and AOPs were not required to disclose the natural individuals who are ultimate beneficial owners.
Thus beneficial ownership could be hidden through intervening companies and trusts.
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To bring transparency and to remove this obscurity, as per best international practices, companies and AOPs are now required to disclose details of their beneficial owners who are natural persons.
Definition of term ‘beneficial owner’ has been provided by inserting new clause (7A) in section 2 of the Income Tax Ordinance 2001.
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Corresponding new section 181E has been inserted in the Ordinance whereby every company and association of persons will furnish electronically, particulars of its beneficial owners and will be required to update these particulars as and when there is a change in particulars of beneficial owners.
Penalty of Rs. 1,000,000 has also been prescribed by incorporating entry No. 30 in the Table, in sub-section (1) of section 182 for each default of company or association of persons who contravenes the provisions of section 181E of the Ordinance.
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FBR to invite applications for 502 new posts in Inland Revenue
ISLAMABAD: The Federal Board of Revenue (FBR) has created 502 new posts in Inland Revenue filed formation and those will be filled through online applications, according to a notification issued on Tuesday.
According to the notification the FBR would advertise for filling up 502 posts in BS-1 to 15 in seventeen (17) Inland Revenue field formations of FBR.
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As the applicants have to apply online through National Job Portal being maintained by National Information Technology Board (NITB.
The FBR asked the NITB to complete necessary processes in their system for applying online by the candidates and convey their clearance to FBR, so that the Advertisement could be got published in the press by FBR, at the earliest.
According to the general instructions the eligible candidates are advised to apply online through National Job Portal Link https://nip.gov.pk. No manual or hard copy of application will be accepted by any office. Candidates applying for more than one post should apply online for each post separately.
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Vacancies for BS-I to 5 shall ordinarily be filled on local basis in terms of Rule 16 of Civil Servants (Appointment, Promotion & Transfer) Rules, 1973, whereas vacancies for BS-6 to 15 shall be filled by appointment of persons domiciled in the respective province or region of each office strictly under Rule 15 of the aforesaid rules and instructions issued by the Establishment Division from time to time.
Candidates will be required to bring original documents (Educational, domicile and Experience Certificate etc) alongwith one set of all attested copies of documents at the time of test/interview.
Screening tests and skills tests (where required) will be conducted as per recruitment policy of the Federal Government. Besides screening test for the post of Sepoy, physical fitness i.e. height and chest of the candidates at the requisite standard, shall also be mandatory.
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The contract employees (85-1 to 15), who were appointed under the Family Assistance Package for the families of Government employees, who died while in service, may also apply online for any of the above post, if they desire so, subject to their eligibility.
10% quota for women, 5% quota for minorities (non-Muslims) and 2% quota for disabled persons shall also be strictly observed by each office as per Government instructions. Disabled persons will have to submit a Certificate as proof of disability, duly issued by recognized Social Welfare Board/office or other authorized Government organization, at the time of test/interview.
The FBR reserves the right not to fill any vacancy or to reduce the number of vacancies, if the circumstances so warranted at the time of final selection.
READ MORE: Defacing sales tax invoice declared as offence
The candidates working in Public Sector Departments/Organizations shall have to submit Departmental Permission Certificates from the respective employers at the time of test/interview, failing which they will not be allowed to participate in test/interview process.
In addition to 05 years general upper age relaxation by the Government, further upper age relaxation shall be restricted up to the following categories of candidates, as per relevant rules/policy of the Federal Government.
Minimum and Maximum age shall be calculated on the closing date of receipt of applications.
Information provided in the online Application Form will be verified. In case of any false or forged information, FBR reserves the right to cancel candidature of any candidate at any stage (even after employment, if so revealed later) and to initiate legal action against the applicant.
Only short-listed candidates will be called for test/ interview. All the candidates will be allowed to appear in the test/interview on provisional basis, subject to detailed scrutiny of their eligibility as per relevant criteria.
No TA/ DA will be admissible for the Test/ Interview.
The candidates may apply online within 15 days from the date of publication of this Advertisement in the press. Applications received after 15 days of publication of Advertisement will not be entertained.
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FBR posts Ansari as Member Customs Operations
The Federal Board of Revenue (FBR) has undertaken a reshuffle in the senior echelons of the Pakistan Customs Service (PCS), announcing the transfer and posting of officers in the BS-21 cadre with immediate effect until further orders.
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