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Tag: Federal Board of Revenue

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.

  • Illicit cigarettes worth Rs549 million confiscated in seven months

    Illicit cigarettes worth Rs549 million confiscated in seven months

    ISLAMABAD: Pakistan Customs has confiscated non-duty paid cigarettes worth Rs549 million during first seven months of the current fiscal year, a statement said on Sunday.

    A spokesman of Federal Board of Revenue (FBR) said that over 7.1 million sticks of illegal cigarettes had been confiscated during the period under review.

    The spokesman said that the FBR had issued instructions to field formation of Inland Revenue and Pakistan Customs to accelerate their efforts against smuggled and non-duty paid cigarettes.

    The FBR chairman issued instructions to both the field formations in this regard.

    In the anti-smuggling efforts to prevent movement of illegal cigarettes the Intelligence and Investigation of Inland Revenue had conducted 65 operations. In these operations, the IR authorities confiscated 44.827 million sticks of cigarettes worth Rs95.51 million. Out of these amount the authorities had recovered Rs2.2 million and remaining amount was in litigation before the court.

    The FBR chairman had directed the tax authorities to expand the anti-smuggling operation across the country.

    The customs authorities have been issued special instructions for enhancing vigilance at sea ports, air ports and dry ports to prevent smuggling of illicit cigarettes.

    The spokesman said that the customs authorities had recovered huge quantity of non-duty paid cigarettes on the basis of information.

    The spokesman further said that in order to avoid misuse auction process, the FBR had imposed complete ban on auction of confiscated cigarettes.

  • Foreign source of income defined by ITO 2001

    Foreign source of income defined by ITO 2001

    Income Tax Ordinance, 2001 has defined the meaning of ‘foreign source of income’ derived by Pakistani individual by working or giving services abroad.

    Income Tax Ordinance, 2001 updated up to June 30, 2020 issued by the Federal Board of Revenue (FBR) stated that an amount shall be foreign-source income to the extent to which it is not Pakistan-source income.  

    The Ordinance further explained as:

    Any foreign-source salary received by a resident individual shall be exempt from tax if the individual has paid foreign income tax in respect of the salary.

    A resident individual shall be treated as having paid foreign income tax in respect of foreign-source salary if tax has been withheld from the salary by the individual’s employer and paid to the revenue authority of the foreign country in which the employment was exercised.

    It explains:

    Where a resident taxpayer derives foreign source income chargeable to tax under this Ordinance in respect of which the taxpayer has paid foreign income tax, the taxpayer shall be allowed a tax credit of an amount equal to the lesser of –

    (a) the foreign income tax paid; or

    (b) the Pakistan tax payable in respect of the income.

    (2) For the purposes of clause (b) of sub-section (1), the Pakistan tax payable in respect of foreign source income derived by a taxpayer in a tax year shall be computed by applying the average rate of Pakistan income tax applicable to the taxpayer for the year against the taxpayer’s net foreign-source income for the year.

    (3) Where, in a tax year, a taxpayer has foreign income under more than one head of income, this section shall apply separately to each head of income.

    (4) For the purposes of sub-section (3), income derived by a taxpayer from carrying on a speculation business shall be treated as a separate head of income.

    (5) The tax credit allowed under this section shall be applied in accordance with sub-section (3) of section 4.

    (6) Any tax credit or part of a tax credit allowed under this section for a tax year that is not credited under sub-section (3) of section 4 shall not be refunded, carried back to the preceding tax year, or carried forward to the following tax year.

    (7) A credit shall be allowed under this section only if the foreign income tax is paid within two years after the end of the tax year in which the foreign income to which the tax relates was derived by the resident taxpayer.

    (8) In this section,—

    “average rate of Pakistan income tax” in relation to a taxpayer for a tax year, means the percentage that the Pakistani income tax (before allowance of the tax credit under this section) is of the taxable income of the taxpayer for the year;

    “foreign income tax” includes a foreign withholding tax; and

    “net foreign-source income” in relation to a taxpayer for a tax year, means the total foreign-source income of the taxpayer charged to tax in the year, as reduced by any deductions allowed to the taxpayer under this Ordinance for the year that –

    (a) relate exclusively to the derivation of the foreign-source income; and

    (b) are reasonably related to the derivation of foreign-source income in accordance with sub-section (1) of section 67 and any rules made for the purposes of that section.

  • ITO 2001 explains ‘fee for technical services’

    ITO 2001 explains ‘fee for technical services’

    Income Tax Ordinance, 2001 has explained the meaning of ‘fee for technical services’ rendered by non-resident persons to users in Pakistan.

    The Income Tax Ordinance, 2001 updated up to June 30, 2020 issued by the Federal Board of Revenue (FBR) explained the fee for offshore digital services as:

    “Fee for technical services” means any consideration, whether periodical or lump sum, for the rendering of any managerial, technical or consultancy services including the services of technical or other personnel, but does not include —

    (a) consideration for services rendered in relation to a construction, assembly or like project undertaken by the recipient; or

    (b) consideration which would be income of the recipient chargeable under the head “salary”.

    It also explained the following:

    ”Fee for offshore digital services” means any consideration for providing  or rendering services by a non-resident person for online advertising including digital advertising space, designing, creating, hosting or maintenance of websites, digital or cyber space for websites, advertising, e-mails, online computing, blogs, online content and online data, providing any facility or service for uploading, storing or distribution of digital content including digital text, digital audio or digital video, online collection or processing of data related to users in Pakistan, any facility for online sale of goods or services or any other online facility.

  • Fast moving consumer goods explained

    Fast moving consumer goods explained

    Income Tax Ordinance, 2001 has explained the meaning of ‘fast moving consumer goods’ for calculation and imposition of income tax.

    The Income Tax Ordinance, 2001 updated up to June 30, 2020 issued by the Federal Board of Revenue (FBR) explained it as:

    “Fast moving consumer goods” means consumer goods which are supplied in retail marketing as per daily demand of a consumer excluding durable goods.

    The income tax applied under Section 153 shall be:

    In the case of supplies made by the distributer of fast moving consumer goods,─

    (i) in case of a company, 2 percent of the gross amount payable; and

    (ii) in any other case, 2.5 percent of the gross amount payable.

  • ITO 2001 defines employee, employer

    ITO 2001 defines employee, employer

    Income Tax Ordinance (ITO), 2001 has explained the meaning of employee and employer for calculation and imposition of income tax.

    The Income Tax Ordinance, 2001 updated up to June 30, 2020 issued by the Federal Board of Revenue (FBR) explained the terms as:

    “Employee” means any individual engaged in employment;

    “Employer” means any person who engages and remunerates an employee;

    “Employment” includes –

    (a) a directorship or any other office involved in the management of a company;

    (b) a position entitling the holder to a fixed or ascertainable remuneration; or

    (c) the holding or acting in any public office.

  • Electronic record defined by ITO 2001

    Electronic record defined by ITO 2001

    Income Tax Ordinance (ITO), 2001 has defined ‘electronic record’ as electronic resources or information in electronic form.

    The Income Tax Ordinance, 2001 – updated up to June 30, 2020 issued by the Federal Board of Revenue (FBR) – explained the following:

    “Electronic record” includes the contents of communications, transactions and procedures under this Ordinance, including attachments, annexes, enclosures, accounts, returns, statements, certificates, applications, forms, receipts, acknowledgements, notices, orders, judgments, approvals, notifications, circulars, rulings, documents and any other information associated with such communications, transactions and procedures, created, sent, forwarded, replied to, transmitted, distributed, broadcast, stored, held, copied, downloaded, displayed, viewed, read, or printed, by one or several electronic resources and any other information in electronic form;

     “Electronic resource” includes telecommunication systems, transmission devices, electronic video or audio equipment, encoding or decoding equipment, input, output or connecting devices, data processing or storage systems, computer systems, servers, networks and related computer programs, applications and software including databases, data warehouses and web portals as may be prescribed by the Board from time to time, for the purpose of creating electronic record;

     “Telecommunication system” includes a system for the conveyance, through the agency of electric, magnetic, electro-magnetic, electro-chemical or electro-mechanical energy, of speech, music and other sounds, visual images and signals serving for the impartation of any matter otherwise than in the form of sounds or visual images and also includes real time online sharing of any matter in manner and mode as may be prescribed by the Board from time to time.

  • Tax law defines dividend income

    Tax law defines dividend income

    Income Tax Ordinance, 2001 has defined types of income included in dividend distribution for the purpose of tax levy.

    The Income Tax Ordinance, 2001 updated up to June 30, 2020 issued by the Federal Board of Revenue (FBR), explained that dividend includes —

    (a) any distribution by a company of accumulated profits to its shareholders, whether capitalised or not, if such distribution entails the release by the company to its shareholders of all or any part of the assets including money of the company;

    (b) any distribution by a company, to its shareholders of debentures, debenture-stock or deposit certificate in any form, whether with or without profit, to the extent to which the company possesses accumulated profits whether capitalised or not;

    (c) any distribution made to the shareholders of a company on its liquidation, to the extent to which the distribution is attributable to the accumulated profits of the company immediately before its liquidation, whether capitalised or not;

    (d) any distribution by a company to its shareholders on the reduction of its capital, to the extent to which the company possesses accumulated profits, whether such accumulated profits have been capitalised or not;  

    (e) any payment by a private company as defined in the Companies Ordinance, 1984 (XLVII of 1984)] or trust of any sum (whether as representing a part of the assets of the company or trust, or otherwise) by way of advance or loan to a shareholder or any payment by any such company or trust on behalf, or for the individual benefit, of any such shareholder, to the extent to which the company or trust, in either case, possesses accumulated profits; or

     (f) remittance of after tax profit of a branch of a foreign company operating in Pakistan;

    but does not include —

    (i) a distribution made in accordance with sub-clause] (c) or (d) in respect of any share for full cash consideration, or redemption of debentures or debenture stock, where the holder of the share or debenture is not entitled in the event of liquidation to participate in the surplus assets;

    (ii) any advance or loan made to a shareholder by a company in the ordinary course of its business, where the lending of money is a substantial part of the business of the company;

    (iii) any dividend paid by a company which is set off by the company against the whole or any part of any sum previously paid by it and treated as a dividend within the meaning of sub-clause] (e) to the extent to which it is so set off; and

    (iv) remittance of after tax profit by a branch of Petroleum Exploration and Production (E&P) foreign company, operating in Pakistan.

  • Taxpayers advised to update profile to avoid penalty, exclusion from ATL

    Taxpayers advised to update profile to avoid penalty, exclusion from ATL

    KARACHI: Taxpayers have been advised to update their profile by March 31, 2021 to avoid penalty and exclusion from Active Taxpayers List (ATL).

    Sources in the Federal Board of Revenue (FBR) said that the last date for updating the profile was December 31, 2020. However, this date was extended by the FBR up to March 31, 2021 considering the problems faced by the taxpayers.

    Through the Finance Act, 2020 a Section 114A was inserted to Income Tax Ordinance, 2001 regarding taxpayer’s profile.

    As per the provision, following persons are required to update their profile on IRIS – the official web portal of the FBR:

    a. every person applying for registration under Section 181;

    b. every person deriving income chargeable to tax under the head ‘income from business’;

    c. every person whose income is subject to final taxation;

    d. any non-profit organization as defined in clause (36) of Section 2;

    e. any trust or welfare institution; or

    f. any other person prescribed by the FBR.

    Following details are required for updating the taxpayer’s profile:

    i. bank accounts;

    ii. utility connections;

    iii. business premises, including all manufacturing, storage or retail outlets operated or leased by the taxpayer;

    iv. types of businesses; and

    v. such other information as may be prescribed.

    The FBR issued a detailed explanation on the issue stating that complexity of return forms is an embodiment of the complexity of tax law. “Nevertheless, there is a dire need to simplify return forms without compromising on data required to verify accuracy of the declared version.”

    The FBR said that instead of endeavoring to obtain all the relevant information in the income tax return, a new section has been added wherein taxpayers’ profile may be prescribed in order to capture data relevant to the taxpayer.

    “Person who are already registered before September 30, 2020 and are deriving business income or income subject to final taxation, trust, welfare institutions, non-profit organizations and such other persons prescribed by the board are proposed to file a profile on or before December 31, 2020 (this has been extended up to March 31, 2021).”

    The FBR further said that persons who obtain their registration after September 30, 2020 are proposed to furnish such a profile within 90 days of registration. In case of any change in particulars of information, such persons shall update their profile within 90 days of the change in particulars.

    “The profile contains information relevant to income regarding bank accounts, utility connections, business premises including all manufacturing, storage or retail outlets operated or leased by the taxpayer, types of businesses and such other information as may be prescribed by the board.”

    The FBR said: “If a person fails to furnish or update a taxpayer’s profile within the due date or time period as extended by the FBR under Section 214A of the Ordinance, such person shall not be included in the active taxpayers’ list for the latest tax year ending prior to the aforesaid due date or extended date.”

    However, upon filing or updating the profile, such persons shall be allowed to be placed on the ATL upon payment of surcharge which is proposed to be Rs20,000 in the case of a company, Rs10,000 in the case of an association of persons (AOPs) and Rs1,000 in the case of an individual.

    “Further, a penalty for non-filing or not updating of profile is also proposed at the rate of Rs2,500 for each day of default subject to minimum penalty of Rs10,000,” the FBR added.

  • Wholesaler defined under Sales Tax Act

    Wholesaler defined under Sales Tax Act

    Sales Tax Act, 1990 has defined the word ‘wholesaler’ for the purpose of levying tax on supply of goods.

    Sales Tax Act, 1990 – updated up to June 30, 2020 issued by the Federal Board of Revenue (FBR) – explained the word ‘wholesaler’ as:

     “Wholesaler” includes a dealer and means any person who carries on, whether regularly or otherwise, the business of buying and  selling goods by wholesale or of supplying or distributing goods, directly or indirectly, by wholesale for cash or deferred payment or for commission or other valuable consideration or stores such goods belonging to others as an agent for the purpose of sale; and includes a person supplying taxable goods to a person who deducts income tax at source under the Income Tax Ordinance, 2001.

  • FBR takes all steps to facilitate taxpayers: Chairman

    FBR takes all steps to facilitate taxpayers: Chairman

    ISLAMABAD: Muhammad Javed Ghani, Chairman, Federal Board of Revenue (FBR) on Friday said that the tax authorities are taking all possible steps to facilitate taxpayers.

    As a sequel to E-Kutcheries held on monthly basis to comply with the directions of the Prime Minister of Pakistan, FBR chairman/Secretary Revenue Division, Muhammad Javed Ghani held an E-Kutchery at FBR HQ on Friday to listen to the complaints and issues of taxpayers.

    The complainants interacted directly with the Chairman FBR.

    Chairman FBR listened to the complaints of the taxpayers and issued on spot directions for resolution of complaints.

    Chairman FBR appreciated the suggestions put forth by the taxpayers and assured them that their comments and suggestions would be looked into.

    The chairman assured that FBR was taking all possible steps to facilitate the taxpayers.

    He also requested the taxpayers to visit their nearest RTO and Collectorate for redressal of any problem confronted by them.

    Chairman FBR has already strictly instructed all the field offices to resolve all outstanding issues of taxpayers’.