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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.

  • Tax Laws (Second Amendment) Ordinance, 2021 likely today

    Tax Laws (Second Amendment) Ordinance, 2021 likely today

    ISLAMABAD: The government to withdraw a large number of tax exemptions through an ordinance on Thursday after the approval of President of Pakistan.

    The federal cabinet has approved the amendments to the Income Tax Ordinance, 2001 to withdraw tax exemptions. Tax Laws (Second Amendment) Ordinance, 2021 to be promulgated after the approval of the president.

    The executive board of International Monetary Fund (IMF) approved $500 million for Pakistan under Extended Fund Facility (EFF) on Wednesday.

    Withdrawal of income tax exemption was one of the conditions for the IMF disbursement.

    According to the draft ordinance approved by the federal cabinet, significant amendments have been made to Second Schedule of the Income Tax Ordinance, 2001.

    The second schedule is related to tax exemptions and concessions granted to different sectors of the economy and individual entities.

    The concessionary regime for Non-Profit Organization (NPOs) has been redrafted and limited the scope of exemption and concession.

    Sources in the Federal Board of Revenue (FBR) said that most of the exemptions had been converted with the tax credit.

    Many provisions related to tax exemptions have been deleted that were already expired, the sources added.

  • FBR urged to withdraw CNIC condition under sales tax law

    FBR urged to withdraw CNIC condition under sales tax law

    KARACHI: Federal Board of Revenue (FBR) has been urged to withdraw the mandatory requirement of Computerized National Identity Card (CNIC) on buying and selling under Sales Tax Act, 1990 till the time a sufficient number gets register for sales tax.

    Karachi Chamber of Commerce and Industry (KCCI) has highlighted the issue as by amendment to Section 8 (Sub-Sec.1, Clause M) of Sales Tax Act, and addition of 10th Schedule, it is mandatory to provide CNIC number of Unregistered person in the invoice. Similar statute has been added U/S.19A of Federal Excise Act, Sec.216A to ITO and Sec.156A of Customs Act.

    Moreover 3 percent further tax is also charged on sales to unregistered buyers even if the CNIC number is provided, which is totally unjust and tantamount to penalizing the registered persons who have to bear the burden of 3 percent further tax.

    The chamber said that rather than generating more revenue, this provision has resulted in proliferation of undocumented cash transactions.

    With hardly 45000 registered entities in Sales Tax Regime, it is very hard to find a registered buyer. This has affected the entire supply chain including manufacturers, importers and traders in Documented Sector and has led to greater advantage for smugglers and undocumented sectors as they do not have to face any such condition. Many registered person are now forced to issue flying invoices to registered persons to overcome CNIC condition and avoid 3 percent Further Tax.

    The chamber recommended that requirement of CNIC should not be mandatory till the time that number of registered persons in Sales Tax regime has substantially increased.

    Providing CNIC number should be optional and may be treated at par with STRN if provided in the Sales Tax Return.

    Further Tax on supplies to unregistered buyer should not be charged if CNIC number is provided in Sales Tax Return.

    In case CNIC number of unregistered buyer of Raw Materials is not provided, VAT may be charged at 1.7 percent on sellers of Raw Material.

    Giving rationale, the chamber said that it will discourage cash economy and encourage documentation by placing the trust in registered persons.

    Discourage Fake and Flying invoices which are issued to avoid 3 percent further tax.

    Enhance business transactions through banking channels and promote growth.

  • What is provisional assessment of taxable income?

    What is provisional assessment of taxable income?

    A provisional assessment is calculation of tax due on a person who has failed to file income tax return for a tax year. A commissioner of Inland Revenue of Federal Board of Revenue (FBR) has been empowered to make provisional assessment of such person under Income Tax Ordinance, 2001.

    According to Tenth Schedule of Income Tax Ordinance, 200, the Provisional assessment is:

    (1) Where for a tax year person’s tax has been collected or deducted in accordance with rule 1 and the person fails to file return of income for that tax year within the due date provided in section 118 or as extended by the Board, the Commissioner shall notwithstanding anything contained in sub-sections (3) and (4) of section 114, within sixty days of the due date provided in section 118 or as extended by the Board make a provisional assessment of the taxable income of the person and issue a provisional assessment order specifying the taxable income assessed and tax due thereon.

    (2) In making the provisional assessment under sub-rule (1), the Commissioner shall impute taxable income on the amount of tax deducted or collected under rule 1 by treating the imputed income as concealed income for the purposes of clause (d) of sub-section (1) of section 111:

    Provided that the provision of section 111 shall be applicable on unexplained income, asset or expenditure in excess of imputed income treated as concealed income under this rule.”

    “Explanation.- For the removal of doubt it is clarified that the imputable income so calculated or concealed income so determined shall not absolve the person so assessed, from requirement of filing of wealth statement under sub-section (1) of section 116, the nature and source of amounts subject to deduction or collection of tax under section 111, section of audit under section 177 or 214C or subsequent amendment of assessment as provided in rule 8 and all the provisions of the Ordinance shall apply.”

  • Metro Pakistan integrates point of sale with FBR

    Metro Pakistan integrates point of sale with FBR

    KARACHI: Metro Pakistan, a leading chain of stores, has integrated its sales with the Federal Board of Revenue (FBR) for real-time monitoring of transactions.

    A statement said on Tuesday said that METRO Pakistan in collaboration with the FBR, has completed integration of all its Point of Sales (POS) with the latest Electronic Device System (EDS) introduced by the FBR.

    The state-of-the-art system will allow the small retailers, medium retailers, and large tier-1 retailers to report and record their sales in real-time for taxation purposes and will ensure the sales tax paid by the customers at the POS counter and the GST at the cash counter will be deposited in the system.

    The inauguration ceremony for the new system was held at METRO Store Islamabad with a live demonstration.

    Dr. Waqar Masood Khan, the Special Assistant to Prime Minister on Revenue, was the Chief Guest, whereas Dr. Philipp Deichmann, Deputy Head of Mission, Embassy of Federal Republic of Germany in Pakistan, graced the occasion as the Guest of Honor, along with number of other of distinguished guests from the business community.

    Speaking at the ceremony, Marek Minkiewicz, Managing Director METRO said: “METRO Pakistan is a prime example of foreign investment and fully respects the laws of the land, maintains its global high standards for social responsibility, and cooperates with the Government to the extent possible.

    “METRO Pakistan supports and strengthens the documented economy and is an important exchequer collector.

    “It is one of the largest tax collector in shape of Sales Tax and Income Tax in the Wholesale/Retail sector, from its Customers and Suppliers, and depositing the same in Government treasury. On average METRO Pakistan is collecting Rs.8.1billion per annum”.

    Elaborating further, Asim Israr, Director Finance METRO added “After implementation of this integration at all tiers, there would be no hurdles left for the growth of wholesale and retail sector to flourish and also minimize any need for interaction between the taxpayer and tax-departments”.

    He also thanked the FBR team lead by Director General Retail Sajidullah Siddique for their guidance, support and cooperation in successful implementation of the project.

    Expressing his views at the occasion, the Chief Guest Dr. Waqar Masood Khan said: “I am extremely pleased that METRO and FBR have put in a lot of effort to implement current system and have worked for the betterment of the business and country.

    I am hopeful that once all tiers will be covered by the government, the business community will enjoy a new viable, tax compliant integrated business model, something that will serve as a benchmark for our country in the future”.

    Guest of Honour Dr. Philipp Deichmann, said: “I am impressed with the automation drive being introduced in tax system to facilitate the taxpayers and increase revenue. Pakistan’s economy is improving, however, the country need to focus on cohesive economic policies, improve tax regime to widen tax base and streamline lengthy litigation procedures to promote ease of doing business and attract more investment”.

    The ceremony was followed by live demonstration session for the attendees, including METRO staff, Customers, Retailers, and businessmen present.

  • Weekly ATL shows 60,000 taxpayers pay surcharge to get active status

    Weekly ATL shows 60,000 taxpayers pay surcharge to get active status

    ISLAMABAD: Around 60,000 taxpayers paid surcharge for including their names in Active Taxpayers List (ATL) for tax year 2020 during the week ended March 21, 2021.

    According to weekly updated ATL -2020 issued on March 22, 2021 by the Federal Board of Revenue (FBR), the number of active taxpayers increased to 2.43 million on the basis of return filed / surcharge payment for appearance on the ATL.

    The number of active taxpayers was 2.37 million in the preceding week.

    The FBR issued the ATL for the tax year 2020 on March 01, 2020 and the total number of active taxpayers on the list was 2.17 million.

    The appearance of taxpayers’ name on the ATL guarantees exemption from withholding tax on various transactions and reduction of withholding tax rate.

    The FBR includes names of only those taxpayers, who file their annual returns within due date or it was extended by commissioner appeals on the basis of request filed by the taxpayers.

    However, late filers can also enlist their names on the ATL after payment of surcharge.

    The payment of surcharge is Rs1,000 for individuals, Rs10,000 for Association of Persons and Rs20,000 is for corporate entities.

  • Minimum penalty Rs10,000 for failure in updating taxpayer profile

    Minimum penalty Rs10,000 for failure in updating taxpayer profile

    ISLAMABAD: A minimum penalty of Rs10,000 has been prescribed for one day after deadline for updating taxpayer profile under Section 114A of the Income Tax Ordinance, 2001.

    The updating profile by a taxpayer has been mandatory through Finance Act, 2020. The last date for updating the profile is March 31, 2021.

    According to Section 182 of Income Tax Ordinance, 2001 any person who is required to furnish or update a taxpayer’s profile but fails to furnish or update within due date then such a person shall pay a penalty of Rs2,500 for each day of default from the due date subject to a minimum penalty of Rs10,000.

    According to the Section 114A:

    Taxpayer’s profile.-(1) Subject to this Ordinance, the following persons shall furnish a profile, namely:-

    (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 Board.

    (2) A taxpayer’s profile-

    (a)shall be in the prescribed form and shall be accompanied by such annexures, statements or documents as may be prescribed;

    (b) shall fully state, in the specified form and manner, the relevant particulars of –

    (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;

    (c) shall be signed by the person being an individual, or the person’s representative where section 172 applies; and

    (d) shall be filed electronically on the web prescribed by the Board.

    (3) A taxpayer’s profile shall be furnished,-

    (a) on or before the 31st day of December, 2020 in case of a person registered under section 181 before the 30th day of September, 2020; and

    (b) within ninety days registration in case of a person not registered under section 181 before the 30th day of September, 2020.

    (4) A taxpayer’s profile shall be updated within ninety days of change in any of the relevant particulars of information as mentioned in clause (b) of sub-section (2).

    Through Circular No. 08 of 2020, the FBR extended the date of furnishing of taxpayer’s profile from December 31, 2020 to March 31, 2021.

  • Abolishing tax credit for new industrial setup proposed

    Abolishing tax credit for new industrial setup proposed

    ISLAMABAD: Federal Board of Revenue (FBR) has proposed to withdraw tax credit available for establishment of new industrial establishment as the facility was misused by existing industrial units.

    The investors have tax credit under Section 65D of Income Tax Ordinance, 2001 for five years.

    However, many misuses of exemption/concession claims under section 65D of the Income Tax Ordinance, 2001 by industrial undertakings had been detected in recent years, where an existing industrial undertaking took the guise of a new industrial undertaking to claim tax credit.

    The sources said that an amount of Rs5.57 billion was granted as tax concession during tax year 2020 for newly established industrial undertakings. However, the net impact of the tax credit is Rs15 billion every year.

    They said that the FBR had discovered that some ghee manufacturers were availing this credit by splitting up their existing industrial units with a newer one.

    Further, investigation revealed that the production of those ghee manufacturers were remained stagnant or growth with the pace of inflationary growth despite declaring to set up new units.

    The FBR on the directives of the federal government had started cleaning up exemptions and concessions granted under Income Tax Ordinance, 2001 to make the taxation system equitable.

    In a recent high level meeting chaired by the Prime Minister Imran Khan, the FBR proposed withdrawal of many provisions of the ordinance related to exemption and concession.

    The FBR proposed to omit the tax credit provision available to newly established industrial undertakings that is already expiring on June 30, 2021.

    The tax credit available under this provision is for five years from the date of setting up the new industrial unit. The sources said that those who claimed the tax credit or set up a new unit by June 30, 2021 would be able to avail the concessions for next five years.

    The provision for the grant of tax credit was introduced through the Finance Act, 2011 for next five years. However, it was extended to June 30, 2019 and then further extended up to June 30, 2021.

  • Key proposals to withdraw tax exemptions

    Key proposals to withdraw tax exemptions

    ISLAMABAD: The government is going to withdraw various exemptions allowed under Income Tax Ordinance, 2001.

    The exemption may be withdrawn through Income Tax (Second Amendment) Ordinance, 2021, the sources said on March 21, 2021.

    Following are the highlights of the proposed law:

    It is proposed to omit power of Federal Board of Revenue (FBR) to declare any sector or industry as industrial under taking under Section 2 Clause (29C) of Income Tax Ordinance. 2001.

    Under Section 23A of the Income Tax Ordinance, 2001 it is proposed to omit first year allowance equal to 90 percent of the cost of plant and machinery to mobile phone manufacturers and other industrial undertakings located in underdeveloped areas.

    Under Section 61 of the Income Tax Ordinance, 2001 it is proposed to enhance the scope of tax credit for contribution to non-profit and other organizations as direct deduction of such expense is being proposed to be done away with by omitting clause 61 of part I of the second schedule.

    Under Section 64C of the Income Tax Ordinance, 2001, it is proposed to omit tax credit available to persons employing fresh graduates. It was available maximum up to 5 percent of the tax liability.

    Under Section 65C of Income Tax Ordinance, 2001 it is proposed to omit tax credit to companies equal to 20 percent of tax payable for first two years and 10 percent for next two years  of enlistment at stock exchange.

    Section 65D of Income Tax Ordinance, 2001, it is proposed to omit tax credit available to newly established industrial undertakings.

    Under Section 65F of Income Tax Ordinance, 2001, it is proposed that the exemptions available to persons engaged in coal mining in Sindh, IT exports and startups to be replaced with tax credit.

    Under section 65G of Income Tax Ordinance, 2001, the exemptions available to greenfield industrial undertakings and industries engaged in manufacture of plant, machinery, equipment and items with dedicated use (no multiple uses) for generation of renewable energy have been proposed to be replaced with tax credit on the basis of  investment made in plant machinery, building, computer, hardware and software.

    Under Section 100C of Income Tax Ordinance, 2001 law related to tax credit available to charitable organizations has been re-drafted to make it simpler & easier besides streamlining the regime with other provisions. No substantial change.

    Under Section 152 of Income Tax Ordinance, 2001, technical correction in sub-section (1E) to synchronize with other sub-sections

  • FBR taking all measures to resolve taxpayers’ grievances: Javed Ghani

    FBR taking all measures to resolve taxpayers’ grievances: Javed Ghani

    The Federal Board of Revenue (FBR) is actively pursuing measures for redressal, as affirmed by FBR Chairman Muhammad Javed Ghani on Friday.

    (more…)
  • FBR collects Rs1.8bn as capital gain tax on sale of securities

    FBR collects Rs1.8bn as capital gain tax on sale of securities

    KARACHI: Federal Board of Revenue (FBR) has collected Rs1.8 billion as capital gain tax on sale of securities during first eight months (July – February) 2020/2021.

    The collection of capital gain tax on sale of securities has increased by 31 percent to Rs1.8 billion during first eight months of the current fiscal year as compared with Rs1.37 billion in the corresponding period of the last fiscal year, sources in Large Taxpayers Office (LTO) Karachi said on Friday.

    The collection was made under Section 147 (5B) of Income Tax Ordinance, 2001.

    Adjustable advance tax on capital gain from sale of securities shall be chargeable as under, namely:—

    Where holding period of a security is less than six months: the rate of advance tax shall be two percent of the capital gains derived during the quarter.

    Where holding period of a security is more than six months but less than 12 months: the tax rate shall be 1.5 percent of the capital gains derived during the quarter.

    Provided that such advance tax shall be payable to the Commissioner within a period of twenty-one days after the close of each quarter: Provided further that the provisions of this sub-section shall not be applicable to individual investors.