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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.

  • MoU signed for single sales tax return

    MoU signed for single sales tax return

    ISLAMABAD: The revenue authorities of federal and provincial governments on Wednesday reached on an agreement to provide a single web portal to taxpayers for filing only one sales tax return for all revenue authorities.

    A statement stated that Federal Board of Revenue (FBR) and all the four provincial revenue authorities Wednesday signed a Memorandum of Understanding (MOU) for a single sales tax return and single web portal.

    According to the statement issued by the FBR, the signing of the MOU was one of the most significant components of harmonization of sales tax initiative currently underway between the Federation and the provinces.

    On behalf of FBR, the MoU was signed by Chairman FBR, M. Javed Ghani whereas the heads of all provincial revenue authorities signed the document on behalf of their respective departments.

    The representatives of Khyber Pakhtunkhwa Revenue Authority (KPRA) and Balochistan Revenue Authority (BRA) were physically present in the ceremony whereas the representatives of Sindh Revenue Board (SRB) and Punjab Revenue Authority (PRA) participated virtually through Zoom.

    Speaking on the occasion, Special Assistant to Prime Minister on Revenue, Dr. Waqar Masood Khan said that signing of the document was another step towards completion of Prime Minister’s vision to make FBR fully automated.

    “This step will bring facilitation for taxpayers and it will help a great deal in improving the country’s position on ‘Ease of Doing Business Index’,” he added.

    He further added that now persons associated with businesses would only have to file one Sales Tax Return instead of many returns.

    He further said that this step would help bring simplification in tax system and procedure and expressed commitment that other issues currently existing between FBR and provincial revenue authorities would soon be resolved which would further bring ease for business community.

    Waqar Masood congratulated Chairman FBR, heads of Provincial Revenue Authorities and FBR’s Policy Wing Team on achieving this significant milestone.

  • FBR urged to provide option for business principal activity in sales tax registration

    FBR urged to provide option for business principal activity in sales tax registration

    The Karachi Chamber of Commerce and Industry (KCCI) has called upon the Federal Board of Revenue (FBR) to address challenges in the business registration process, emphasizing the need for streamlined options in the IRIS registration form.

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  • FBR collects Rs24 billion on purchases of immovable properties

    FBR collects Rs24 billion on purchases of immovable properties

    ISLAMABAD: Federal Board of Revenue (FBR) has collected Rs24 billion as withholding tax on purchase of immovable properties during tax year 2020.

    According to collection statistics for tax year 2020 released by the FBR on Tuesday revealed the withholding tax collection on purchase of immovable properties increased to Rs24 billion as compared with Rs13.50 billion in the preceding fiscal year, showing an increase of 78 percent.

    The collection of withholding tax on purchase of immovable properties is made under Section 236K of the Income Tax Ordinance, 2001.

    Prior to Finance Act, 2019, the withholding tax rate was at zero percent where value of immovable property was up to Rs4 million. While, withholding tax at two percent for income tax return filer was to be collected where the value of immovable property is more than Rs4 million. However, at this value of immovable properties the withholding tax for non-filers was prescribed at 4 percent.

    However, through Finance Act, 2019 the withholding tax rate was amended to one percent on fair market value of the immovable properties purchased during tax year 2020 and onwards in case the purchase is on the Active Taxpayers List (ATL).

    The rate of withholding tax in case person is not on the ATL is 2 percent.

    The withholding tax was imposed on purchase of immovable properties under Section 236K was introduced through Finance Act, 2014 in order to encourage income tax return filing.

    According to the Section 236K of Income Tax Ordinance, 2001, any person responsible for registering, recording or attesting transfer of any immovable property shall collect withholding tax at the time of registering, recording or attesting the transfer shall collect from the purchaser or transferee.

    It further said that the person responsible for registering, recording or attesting transfer includes person responsible for registering, recording or attesting transfer for local authority, housing authority, housing society, co-operative society and registrar of properties.

  • FBR removes additional customs duty on import of auto disable syringes

    FBR removes additional customs duty on import of auto disable syringes

    ISLAMABAD: Federal Board of Revenue (FBR) has removed additional customs duty on import of auto disable syringes with or without needles.

    The FBR issued SRO 367(I)/2021 dated March 30, 2021 and amended the SRO 572(I)/2020 dated June 30, 2020.

    According to the latest notification the additional customs duty shall not be collected on the import of auto disable syringes with or without needles under PCT codes 9018.3110, 9018.3120 up to June 30, 2021.

    Similarly, the additional customs duty is also not leviable on import of tubular metal needles under PCT code 9018.3200 and rubber gaskets under PCT 4016.9310 imported by sales tax registered manufacturers of auto disable syringes up to June 30, 2021.

    Prior to this through Tax Laws (Second Amendment) Ordinance, 2021, the import of auto disable syringes with or without needles were allowed sales tax exemption.

    Similarly, import of raw materials for the manufacturers of auto disable syringes including tubular metal needles and rubber gaskets were allowed sales tax exemption.

  • Tax collection from cash withdrawals falls by 52 percent in Tax Year 2020

    Tax collection from cash withdrawals falls by 52 percent in Tax Year 2020

    ISLAMABAD: The income tax collection on cash withdrawal from banking system fell by around 52 percent during tax year 2020 following return filers allowed tax free transactions.

    According to statistics released by the Federal Board of Revenue (FBR) the collection of income tax under Section 231A of Income Tax Ordinance, 2001 was at Rs15.17 billion as compared with Rs31.75 billion in the preceding tax year.

    Prior to March 2019 the person filing income tax return and were on the Active Taxpayers List (ATL) were liable to pay 0.3 percent on cash withdrawal above Rs50,000 in a day from banking system. Meanwhile, the persons not on the ATL were required to pay 0.6 percent on the cash withdrawal above Rs50,000 in a day.

    However, through Finance Supplementary (Second Amendment) Act, 2019 amendment was made to Section 231A Income Tax Ordinance, 2001 and persons on the ATL were exempt from paying 0.3 percent income tax on making cash withdrawal above Rs50,000.

    The levy of withholding income tax on cash withdrawal was introduced through Finance Act, 2005. Initially the tax was payable on withdrawal of above Rs25,000 per day. But through Finance Act, 2012 the limit was increased to Rs50,000.

    According to Section 231A of the Income Tax Ordinance, 2001 every banking company shall deduct tax, if the payment for cash withdrawal, or the sum total of the payment for cash withdrawal in a day, exceeds fifty thousand rupees.

    The FBR clarified that the said fifty thousand rupees shall be aggregate withdrawals from all the bank accounts in a single day.

  • FTO proposes initiating criminal prosecution against smugglers

    FTO proposes initiating criminal prosecution against smugglers

    ISLAMABAD: Federal Tax Ombudsman (FTO) has recommended that tax authorities should initiate criminal prosecutions against persons involved in smuggling or selling non-duty paid goods.

    In its proposals for budget 2021/2022, the FTO recommended measures on the issues of smuggling, misdeclarations, under-invoicing and non-transparent auctions.

    In order to effectively check the smuggling, it was recommended that criminal prosecution should be initiated against the persons/owners of the showrooms involved in business of Non-Duty Paid (NDP) vehicles, fuel pumps of smuggled oil and storage godowns of other smuggled items, from whom the NDP goods were recovered as provided in the Customs Act, 1969 read with the Prevention of Smuggling Act, 1977.

    Installation of scanners on the ports was recommended to be given top priority. It was emphasized that if government invested herself in this project, it will raise the potential of higher revenue and more effective check on misdeclaration of description or quantity of imported goods.

    So far two scanners have been added at Karachi Ports in addition to one already installed there. Two scanners have also been installed at Jamrud and Torkham, Peshawar.

    It was recommended to provide a mechanism in law for cross-matching of value declared on export documents of exporting station to import documents at importing station.

    Federal Board of Revenue (FBR) was asked to prescribe Model Auction Rules for auction through electronic means and prepare/operationalize an auction module in the WeBOC system to bring transparency and efficiency in the auctions.

    According to FBR, under the WeBOC-Glo initiative (an enhanced version of WeBOC), an electronic auction module has been developed and deployed in the system. This module envisages online registration of bidders who can bid for all auctionable goods displayed on website by the Customs authorities. Pilot is being run at Karachi Port (South Asia Port Terminal only).

    In view of constant complaints about delayed clearance at the border stations, generators should be provided on priority for speedy passengers/goods clearances and maintenance of IT and infrastructure support.

  • List of exemptions from total income withdrawn through ordinance

    List of exemptions from total income withdrawn through ordinance

    KARACHI: officials in the Federal Board of Revenue (FBR) have said that through Tax Laws (Second Amendment) Ordinance, 2021 various clauses of Second Schedule of Income Tax Ordinance, 2001 have been deleted that have allowed tax exemptions from total income.

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  • Minimum penalty of Rs10,000 fixed for defaulting withholding statement

    Minimum penalty of Rs10,000 fixed for defaulting withholding statement

    KARACHI: A minimum penalty of Rs10,000 has been fixed for defaulting withholding statement where no tax is required to be deposited.

    Official at the Federal Board of Revenue (FBR) said that the amendment has been brought into Section 182 of Income Tax Ordinance, 2001 through Tax Laws (Second Amendment) Ordinance, 2021.

    Chartered Accountants said that prior to the amendment following penalties are prescribed for non-filing of statements under sections 165, 165A or 165B within due date:

    a) Rs. 5,000 where the person has deposited the tax withheld within due date and the statement is filed within 90 days;

    b) In all other cases, Rs. 2,500 for each day of default with a minimum penalty of Rs. 10,000.

    However, a new proviso has been inserted whereby minimum penalty has been prescribed at Rs. 10,000 in cases where there is no tax withholding to be deposited in a particular period.

  • 100pc tax credit allowed with mandatory return filing

    100pc tax credit allowed with mandatory return filing

    KARACHI: The tax exemption regime transposed into tax credit regime and certain businesses have been allowed 100 percent tax credit with mandatory requirement of income tax return filing.

    Chartered Accountants at PwC A. F. Ferguson & Co. in a commentary on Tax Laws (Second Amendment) Ordinance, 2021 said that income / profits and gains of the following persons were exempt from tax under Part I of the Second Schedule to the Ordinance:

    (i) persons engaged in coal mining projects in Sindh supplying coal exclusively to power generation projects – clause (132B);

    (ii) a startup (as defined in section 2(62A) of the Ordinance) for the tax year in which the startup is certified by the Pakistan Software Export Board and the next following two tax years – clause (143); and

    (iii) persons deriving income from exports of computer software or IT services or IT enabled services (as defined) up to the period ending on June 30, 2025; provided that 80 percent of the export proceeds is brought into Pakistan in foreign exchange remitted from outside Pakistan through normal banking channels- clause (133).

    Through the Amendment Ordinance, the exemptions have been transposed into tax credit regime whereby the aforementioned persons shall be allowed a tax credit equal to 100 percent of the tax payable including minimum and final taxes for the period upon fulfillment of the following conditions:

    (a) return has been filed;

    (b) tax required to be deducted or collected has been deducted or collected and paid;

    (c) withholding tax statements for the immediately preceding tax year have been filed; and

    (d) sales tax returns for the tax periods corresponding to relevant tax year have been filed.

    They said that it has also been provided that the benefit contained in this newly inserted section shall not preclude the aforesaid persons’ case from audit selection by the Federal Board of Revenue (FBR) or the Commissioner Inland Revenue.

    Since these taxpayers are now allowed 100 percent tax credit against tax payable (including minimum tax), tax exemption presently available to them (under Part I of the Second Schedule) has been withdrawn whereas relevant clauses for exemption from turnover tax of section 113(provided under Part IV of the Second Schedule) though not withdrawn have effectively become redundant.

  • Transposition of exemption into tax credit to create complications

    Transposition of exemption into tax credit to create complications

    KARACHI:  The immediate withdrawal of tax exemptions to certain business into tax credit regime may create complications for taxpayers in the income year.

    In a commentary on Tax Laws (Second Amendment) Ordinance, 2021, chartered accountants at PwC A. F. Ferguson & Co. said since the amendment ordinance has been enforced with immediate effect, businesses which have been transposed from exemption to tax credit regime would have to account for such change during the income year.

    “This would create multiple complications. Such complication would also arise for the other exemptions withdrawn/ amended with immediate effect,” they said.

    The Federal Board of Revenue (FBR) is expected to issue clarification on this matter. It is also expected that when Amendment Ordinance would be made part of forthcoming finance bill, all the amendments proposed through the Amendment Ordinance, with appropriate changes, would be suitably placed and accounted for to make these amendments effective from July 1, 2021.

    The chartered accountants said that the concept of tax credit regime was introduced few years back whereby blanket tax exemptions are codified into a tax credit regime subject to fulfilment of certain conditions.

    The change in regime in effect means that taxable income and tax liability (which is not computed under the exemption regime) is computed under the tax credit regime, against which full or partial credits are allowed.

    The tax credit regime provides a more transparent mechanism for allowing tax break. However, certain enabling amendments are required to be made to make tax credit regime more effective (e.g., provisions which allow issuance of exemption certificate do not account for or treat tax credit regime equivalent to tax exemption regime as a result of which those who avail tax credit regimes suffer tax withholdings which is eventually refundable).