Tag: Federal Board of Revenue

KARACHI: The Karachi Tax Bar Association (KTBA) has proposed the discretionary power of commissioner Inland Revenue to select audit cases should be eliminated.

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KARACHI: Federal Board of Revenue (FBR) has been suggested to double threshold for collection of withholding tax on consumption of electricity by domestic users.

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KARACHI: Karachi Tax Bar Association (KTBA) has highlighted that genuine Non-Profit Organizations (NPOs) are unable to gent benefit of 100 per cent ax credit.

In its proposals for budget 2022/2023, the tax bar informed the Federal Board of Revenue (FBR) that through Finance Act 2017 an additional condition was inserted to avail the benefit of 100 per cent tax credit.

READ MORE: Changes sought in withholding on non-resident payment

Also, provision for taxation of surplus funds has also been introduced. The condition debarred the NPO could be from having admin and management expenses of more than 15 per cent of its total receipts.

The legitimately collected funds properly invested in specified securities are subjected to tax.

“These harsh provisions was introduced in the wake of the trust gap between the FBR and the NPO’s whereby certain cases found susceptible of the genuineness or negligent toward compliances,” the tax bar said, adding that the condition was imposed across the board on all NPOs regardless of the fact that nature of some of the NPOs activities is such that it is impossible for them to restrict these expenses under the threshold of 15 per cent.

READ MORE: FBR urged to allow all tax adjustment in salary income

This has resulted in many genuine NPOs being unable to claim the benefit of 100 per cent tax credit.

It is recommended that NPO’s should be categorized according to their nature objectives and purposes and not one single standardized rule should be made applicable. The said condition be deleted or a clarification should be issued whereby certain nature of NPO’s are excluded from this condition.

Alternatively, the provision for taxation of surplus funds should not be applicable in case those funds are invested in Federal Government securities.

This will ensure that genuine NPOs are not punished for the compliances under which they have no control.

READ MORE: PYMA seeks duty, taxes cut on yarn in budget 2022/2023

The tax bar further informed the FBR that the Rule 214 of the Income Tax Rules, 2002 spells that approval of the Commissioner shall be valid for three years unless withdrawn.

Despite this position as per the Rules, the Commissioner in general issue certificates valid for only one year or even half year.

A clarification is proposed U/s. 2(36) of the Ordinance that approval of Commissioner shall be deemed in conformity with the Rule 214 of the Rules. To bring consistency between the law and the procedures in place.

Entitles not registered as Trust, Society or company. A condition has been imposed a requirement for NPOs to be formed and registered by or under any law as a non-profit organization.

READ MORE: CGT exemption on private company shares suggested

This has caused hardship to the entities that are not registered as Trust, Society or Section 42 company who yet completely fall within the four corners of Non- Profit

The law should be appropriately amended to exclude this requirement. Following amended words are suggested: “formed or registered by or under any law for the time being enforce”

It is a cardinal principal that income tax law is self-regulated law. Its applicability should not be linked with any other statutory status.

KARACHI: Karachi Tax bar Association (KTBA) has sought amendment to withholding on payments to non-resident persons under Section 152(5A) of Income Tax Ordinance, 2001.

The tax bar in its proposals for budget 2022/2023 informed the Federal Board of Revenue (FBR) that in case of payment to non-resident where the payment is not likely to be chargeable to tax, the payer is required to file an intimation to the Commissioner and the Commissioner is required to make an order within 30 days.

READ MORE: FBR urged to allow all tax adjustment in salary income

The period of 30 is on higher side and in certain cases, the non-resident recipient cannot be kept to wait for this long and gets practically in possible. Further, there is no mention in the law that if a Commissioner does not pass an order within 30 days, what should be the outcome.

READ MORE: PYMA seeks duty, taxes cut on yarn in budget 2022/2023

The KTBA suggested that the period of 30 days be curtailed to 15 days. Further, a proviso should be inserted that if the taxpayer is not served with an order within 15 days, the notice shall be taken as grant of exemption from withholding tax.

Furthermore, in case of multiple payments of the same nature a formal agreement / approval by the Commissioner for should be treated as enough for all other similar payments.

READ MORE: CGT exemption on private company shares suggested

The desired amendment will save the Commissionerate of the unnecessary administrative hassle, the tax bar added.

It further highlighted payment of Dividend to non-resident persons under Section 152 of the Income Tax Ordinance, 2001.

Section 152 broadly covers withholding tax incidences in the case of non-resident persons. The dividend is excluded from this purview. Bringing withholding tax regime at equity; and entitling non-residents to avail treaty benefits.

READ MORE: KTBA proposes up to 20% capital gain tax on real estate

The tax bar proposed that this section should include dividend paid to non-resident which are currently covered under section 150. Dividend to non-residents currently falls in section 150. Though the Board has clarified that DTT rates should apply however amendment in law is required. If fall U/s. 150, reduced treaty rates u/s 152(5) would be applicable for withholding agents for remitting dividend.

KARACHI: The Federal Board of Revenue (FBR) has been urged to allow complete tax adjustment at the time of deduction by employee on the time paid as salary under Section 149 of the Income Tax Ordinance, 2001.

Karachi Tax Bar Association (KTBA) in its proposals for budget 2022/2023 informed the FBR as per section 149, every person paying salary to employee shall deduct tax from the amount paid at specified rate after making tax adjustment of tax credit U/s. 61, 62, 63 and 64 and other adjustments.

READ MORE: PYMA seeks duty, taxes cut on yarn in budget 2022/2023

Complete tax credits though legally available are not adjusted in payroll, the tax bar said.

“This section should include all tax credit under Part X Chapter III as are admissible against salary income,” it suggested.

The current scheme has apparently missed tax credit U/s. 62A. The proposed amendment would cater all the current credits and those to be introduced from time to time.

READ MORE: CGT exemption on private company shares suggested

The tax bar also suggested amendment related to Employer contribution to Provident Fund under Section 12 of the Income Tax Ordinance, 2001.

Under Clause (3), Part I, Sixth Schedule, the employer’s contribution in the recognized provident fund in excess of Rs.150,000 (increased from Rs.100,000 by Finance Act, 2016) is deemed to be income of the employee.

This provision is invalid as the accumulated balance (it includes employer’s contribution) due and becoming payable to an employee participating in a recognized provident fund is totally exempt from tax under Clause (23), Part I, Second Schedule.

READ MORE: KTBA proposes up to 20% capital gain tax on real estate

Without prejudice to foregoing, since employer’s contribution does not constitute an actual receipt as the same is not at the disposal of an employee and therefore tax incidence should not be levied at the time of contribution.

Clause (3) Part 1, Sixth Schedule be amended to exempt employer contribution to bring it at par with clause (23) Part 1, Second Schedule.

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Alternatively, the threshold be based as Rs 150,000 or 1/10th of the salary whichever is higher.

Since employer’s contribution does not constitute an actual receipt as the same is not at the disposal of an employee and therefore tax incidence should not be levied at the time of contribution, the tax bar said.