ISLAMABAD: The Federal Board of Revenue (FBR) has received 2.3 million income tax returns for the tax year 2020 by December 31, 2020, according to an official statement released on Friday.
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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 clarifies date extension to incentive package for construction industry
The Federal Board of Revenue (FBR) issued a clarification on Thursday, shedding light on the extension of the Prime Minister’s incentive package for the construction industry.
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Amnesty date for developers, builders extended up to June 30
ISLAMABAD: The federal government has extended the last date for amnesty scheme to builders and developers up to June 30, 2021, sources said on Thursday.
The date for availing immunity from declaration of investment by builders and developers is expiring today i.e. December 31, 2020.
The sources said that the date has been extended for next six months.
Similarly, project completion date has also been extended up to September 30, 2023 from September 30, 2022.
Further, availing the fixed tax regime for builders and developers has also been extended up to December 31, 2021.
The amendment to existing laws may be made through presidential ordinance, the sources added.
Following is the existing law related to builders and developers:
Section 100D: Special provisions relating to builders and developers. –
(1) For tax year 2020 and onwards, the tax payable by a builder or a developer, as defined in sub-section (9), who opt to pay tax under this section shall be computed and paid in accordance with the rules in the Eleventh Schedule on a project by project basis on the income, profits and gains derived from the sale of buildings or sale of plots, as the case may be, from–
(a) a new project to be completed by the 30th day of September, 2022; or
(b) an incomplete existing project to be completed by the 30th day of September, 2022:
Provided that any income, profits and gains of a builder or developer of an incomplete existing project earned up to tax year 2019 shall be subject to the provisions of this Ordinance as were in force prior to the commencement of the Tax Laws (Amendment) Ordinance, 2020 (Ordinance I of 2020):
Provided further that any income of a builders or developer other than income, profits and gains subject to this section shall be subject to tax as per the provisions of this Ordinance.
(2) Where sub-section (1) applies,-
(a) the income shall not be chargeable to tax under any head of income in computing the taxable income of the person;
(b) no deduction shall be allowed under this Ordinance for any expenditure incurred in deriving the income:
(c) the amount of the income shall not be reduced by –
(i) any deductible allowance under Part IX of Chapter III: or
(ii) the set off of any loss;
(d) no tax credit shall be allowed against the tax payable under sub-section (1) except credit for tax under section 236A or 236K collected from the builder or developer after the commencement of the Tax Law (Amendment) Ordinance, 2020 (1 of 2020) on purchase of immoveable property utilized in a project;
(e) there shall be no refund of any tax collected or deducted under this Ordinance;
(f) if the tax payable has not been paid or short paid, the said amount of tax may be recovered and all the provisions of this Ordinance shall apply accordingly; and
(g) section 113 and 113C shall not apply on the turnover, income, profits and gains of a builder or developer from a project.
(3) The provisions of section 111 shall not apply to capital investment made in a new project under clause (a) of sub-section (1) in the form of money or land, subject to the following conditions, namely:-
(a) if the investment is made by a builder or developer being an individual-
(i) in the form of money, such builder or developer shall open a new bank account and deposit such amount in it on or before the 31st day of December, 2020; or
(ii) in the form of land, such builder or developer shall have the ownership title of the land at the time of commencement of the Tax Laws (Amendment) Ordinance, 2020 (I of 2020);
(b) if the investment is made by a person in a project through a company or an association of persons,-
(i) such company or association of person shall be a single object (builder or developer) company or association of persons registered under the Companies Act, 2017 (XIX of 2017), the Limited Liability Partnership Act, 2017 (XV of 2017) or the Partnership Act 1932 (IX of 1932), as the case may be, after the date of commencement of the Tax Laws (Amendment) Ordinance, 2020 (I of 2020) and on or before the 31st day of December, 2020; and
(ii) the person shall be a member or shareholder of such association of persons or company, as the case may be; and if the capital investment is made,-
(i) in the form of money, such amount shall be invested through a crossed banking instrument deposited in the bank account of such association of persons or company, as the case may be, no or before the 31st day of December, 2020; or
(ii) in the form of land, such land shall be transferred to such association of persons or company, as the case may be, on or before the 31st day of December, 2020:
Provided that the person shall have the ownership title of the land at the time of commencement of the Tax Laws (Amendment) Ordinance, 2020 (I of 2020)
(c) a person making an investment under clause (a) or (b) shall submit a prescribed form on Iris web portal;
(d) the money or land invested under clause (a) or (b) shall be wholly utilized in a project; and
(e) completion of the project shall be certified in the following manner, namely:-
(i) in case of a builder, the map approving authority or NESPAK shall certify that grey structure as per the approved map has been completed by the builder on or before the 30th day of September, 2022; and
(ii) in case of a develop,-
(A) the map approving authority or NESPAK shall certify that landscaping has been completed on or before the 30th day of September, 2022;
(B) a firm of chartered accountants having an ICAP QCR rating of ‘satisfactory’, notified by the Board for this purpose, shall certify that at least 50 percent of the plots have been booked for sale and at least 40 percent of the sale proceeds have been received by the 30th day of September, 2022; and
(C) at least 50 percent of the roads have been laid up to sub-grade level as certified by the approving authority of NESPAK.
(4) The provisions of section 111 shall also not apply to.-
(a) the first purchaser of a building or a unit of the building purchased from the builder in respect of purchase price of the building or unit of the building subject to the following conditions, namely:-
(i) full payment is made through a crossed banking instrument to the builder during a period starting from the date of registration of the project with the Board under this section and ending on the 30th day of September, 2022, in case the purchase is from a new project; and
(ii) full or balance amount of payment is made through a crossed banking instrument to the builder during a period starting from the date of registration of the project with the Board under this section and ending on the 30th day of September, 2022, in case the purchase is from an existing incomplete project; and
(b) the purchaser of a plot who intends to construct a building thereon, if-
(i) the purchase is made on a before the 31st day of December, 2020;
(ii) the full payment is made on or before the 31st day of December, 2020 through a crossed banking instrument;
(iii) construction on such plot is commenced on or before the 31st day of December, 2020;
(iv) such construction is completed on or before the 30th day of September, 2022;and
(v) the person registers himself with the Board on the online Iris web portal.
(5) Where sub-section (3) or (4) apply, the value or price of land or building, as the case may be, shall be the higher of clause (a) or (b) below:-
(a) 130 percent of the fair market value as determined by the Board under sub-section (4) of section 68; or
(b) at the option of the person making investment, the lower of the values as determined by at least two independent valuers from the list of valuers approved by the State Bank of Pakistan.
(6) Sub-sections (3) and (4) shall not apply to –
(a) holder of any public office as defined in the Voluntary Declaration of Domestic Assets Act, 2018 or his benamidar as defined in the Benami Transactions (Prohibition) Act, 2017 (V of 2017) or his spouse or dependents;
(b) a public listed company, a real estate investment trust or a company whose income is exempt under any provision of this Ordinance; or
(c) any proceeds derived from the commission of a criminal offence including the crimes of money laundering extortion or terror financing but excluding the offences under this Ordinance.
(7) Divided income paid to a person by a builder or developer being a company out of the profits and gains derived from a project shall be exempt from tax.
(8) Notwithstanding anything contained in this section or the Eleventh Schedule, where a return or declaration has been made through misrepresentation or suppression of facts, such return or declaration shall be void and all the provisions of this Ordinance shall apply:
Provided that no action under this sub-section shall be taken if such misrepresentation has been made on account of a bona fide mistake:
Provided further that no action under this sub-section shall be taken without providing an opportunity of being heard and without prior approval of the Board.
(9) In this section.-
(a) “builder” means a person who is registered as a builder with the Board and is engaged in the construction and disposal of residential or commercial buildings;
(b) “capital investment” means investment as equity resources and does not include borrowed funds;
(c) “developer” means a person who is registered as a developer with the Board and is engaged in the development of land in the form of plots of any kind either for itself or otherwise;
(d) “existing project” means a construction or development project, which-
(i) has commenced before the date of commencement of the Tax Laws (Amendment) Ordinance, 2020;
(ii) is incomplete;
(iii) is completed on or before the 30th day of September, 2022;and
(iv) a declaration is provided in the registration from under Eleventh Schedule to the effect of percentage of the project completed up to the last day of the accounting period pertaining to tax year 2019;
(e) “first purchaser” means a person who purchases a building or a unit, as the case may be, directly from the builder and does not include a subsequent or a substituted purchaser;
(f) “new project” means a construction or development project, which-
(i) is commenced during the period starting from the date of commencement of the Tax Laws (Amendment) Ordinance, 2020 and ending on the 31st day of December, 2020; and
(ii) is competed on or before the 30th day of September, 2022;
(g) “project” means a project for construction of a building with the object of disposal, or a project for development of land into plots with the object of disposal or otherwise;
(h) “registered with the Board” means registered after submission of form on project-by-project basis on the online Iris web portal;
(10) The provisions of the Ordinance not specifically dealt with in this section or the rules made thereunder shall apply mutatis mutandis to builders and developers in so far as they are not inconsistent with this section or the rules made thereunder.
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FBR facilitates taxpayers in updating profile; issues user guide
ISLAMABAD – The Federal Board of Revenue (FBR) has released comprehensive guidelines to facilitate taxpayers in updating their profiles, a mandatory requirement under the Income Tax Ordinance, 2001.
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FBR starts registration for grant of reduced tariff rate on electricity, gas supply
ISLAMABAD: Federal Board of Revenue (FBR) on Wednesday said it is starting registration of manufacturers of export oriented sectors from January 01, 2021 for grant of reduced tariff rate on supply of electricity and gas.
In this connection the FBR issued standard operating procedure (SOP) to start the registration process.
In a notification, the FBR said that the economic coordination committee of the cabinet had approved the reduced rate to manufacturers on supply of electricity and gas in a meeting held on December 12, 2020. The ECC also directed the FBR, ministry of commerce and other stakeholders to devise a standard operating procedure (SOP) for enrollment of registered persons under the export-oriented sectors (erstwhile zero-rated sectors) to quality concessionary regime of electricity, RLNG and gas tariff.
Accordingly, a meeting was held in FBR on December 22, 2020 and as a result of thorough deliberations amongst all stakeholders the requisite SOP has been agreed upon and being rolled onto.
The FBR said the following SOP adopted for enrollment of manufacturers for grant of reduced tariff rate:
(i) For new registration of manufacturers for concessionary tariff rates, applicants may apply respective representative association.
(ii) The Association concerned, after verifying the particulars on the prescribed format, may forward the application along with its element recommendations, duly signed by its chairman/president, to the export oriented sector registration cell (ESRC) of the FBR.
(iii) The ESRC shall examine the particulars and recommendations of the respective associations and counter-verify particulars of the taxpayer including declarations in the registration profile etc. as required, and forward the case to the ministry of commerce for allowing concessionary tariff through respective Distribution Companies (DISCOs)/Gas companies.
(iv) In case the ESRC spots any discrepancies in the verification report and data available with the FBR, the matter will be referred to Inland Revenue field formations for ground-check, report and recommendations.
(v) The newly enrolled taxpayers shall be entitled to avail concessionary tariff prospectively.
(vi) The DISCOs/gas companies shall ensure that the taxpayers are active on FBR’s (Sales Tax) Active Taxpayers List (ATL) as shared with DISCOs/gas companies each month before generating the monthly utility bills. In case the taxpayer is found non-active on the ATL, standard utility tariff shall apply on supply of utilities for the relevant period.
(vii) Any taxpayer aspiring to avail concessionary utility rates and who is not registered with the respective sector association, may approach the Inland Revenue field formation concerned for verification of its business particulars and onward submission of report on the prescribed format to the RSRC within 15 days of the submission of the application.
The procedure for the registration of new entrants in export oriented sectors shall become applicable with effect from January 01, 2021.
Following is the list of export oriented sectors associations:
01. All Pakistan Textile Mills Association (APTMA)
02. Pakistan Readymade Garments Manufacturers & Exporters Association (PRGMEA)
03. Pakistan Hosiery Manufacturers Association (PHMA)
04. Pakistan Textile Exporters Association (PTEA)
05. Pakistan Leather Garments Manufacturers & Exporters Association (PLGMEA)
06. Pakistan Sports Goods Manufacturers & Exporters Association
07. Surgical Instruments Manufacturing Association of Pakistan
08. Pakistan Denim Manufacturers and Exporters Association
09. All Pakistan Textile Processing Mills Association (APTPMA)
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FBR extends date for updating taxpayers’ profile up to March 31
ISLAMABAD: Federal Board of Revenue (FBR) on Wednesday extended the last date for updating taxpayers profile up to March 31, 2021.
The FBR granted the date extension for ninety days from the existing last date of December 31, 2020.
The tax body issued Circular No. 08 pf 2020 IR/Operations to extend the last date.
Through Finance Act, 2020 a new section 114A was inserted to Income Tax Ordinance, 2001 for making it mandatory for taxpayers to update their profile.
Following is the text of Section 114A:
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).
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Retailers share CNICs of consumers with FBR
ISLAMABAD: Retailers registered with Federal Board of Revenue (FBR) have started obtaining detail of Computerized National Identity Card (CNIC) of consumers, who buy goods above Rs100,000, tax officials said.
The sources on Tuesday said that retailers having sales tax registration number (STRN) were providing details of ordinary consumers on sale of goods above Rs100,000 through their monthly sales tax return.
The threshold amount was increased from Rs50,000 to Rs100,000 through Finance Act, 2020.
The sources said that through Finance Act, 2019 an important amendment was inserted to Sales Tax Act, 1990 under which it was made mandatory for registered retailers to collect information of ordinance consumers.
The FBR explains ordinary consumer as a person who is buying the goods for his own consumption and not for the purpose of re-sale or processing.
The retailers are required to collection information of retailers including name, address and CNIC etc.
This condition of CNIC or NTN was to apply from August 01, 2019. However, business community had demanded to extend the application of the condition of NTN besides it was also demanded to increase the threshold for requirement of CNIC.
The FBR explained the implementation of the CNIC through Circular No. 01 of 2019 dated July 26, 2019 that Section 23 of the Sales Tax Act, 1990, relating to issuance of invoices and particulars to be specified therein, has been amended to provide that in case of supplies to un-registered persons, their NIC or NTN number shall be specified in invoice.
The caveats, provided therein, are as under: NIC or NTN shall not be required in case of supplies made by a retailer where the transaction value inclusive of sales tax amount does not exceed rupees fifty thousand and the sale is being made to an ordinary consumer buying goods for his own consumption and not for the purpose of resale or processing;
If it is subsequently proved that NIC provided by the purchaser was not correct, liability of tax or penalty shall not arise against the seller, in case of sale made in good faith.
The FBR through Sales Tax Circular No. 02 of 2019 issued clarification in this regard stating that it had been observed in many cases, suppliers of goods and services are charging sales tax on invoices/receipts without identifying their sales tax registration number (STRN) on the invoice/receipts issued to the customers. At times, National Tax Number (NTN) is indicated on invoices, to exhibit that the suppliers is registered.
Customers are suggested to ask for invoices/receipts having sales tax number on the invoice/receipts on purchase of goods and services. Sales tax can only be recovered from the customer if the supplier is registered for sales tax purpose, and reflects the STRN on the invoice/receipt issued to the customer.
“In other cases, the supplier is not entitled to recover sales tax from the customers. Customers should beware of the same.”
Explaining the purpose of the clarification, the FBR said that may suppliers were charging sales tax from customers without getting them registered under the sales tax regime.
This practice is against the law and is liable to penal action. This practice leads to increase in prices and undue enrichment of sellers without any deposit of tax with the government. Customers are suggested to seek invoice/receipts from suppliers with STRN on the invoices/receipts issued, if sales tax is charged on their purchases.
The FBR further clarified that buyer is not required to provide his NIC in case of purchases from a person not registered for sales tax.
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Monument to be constructed for FBR’s martyrs
ISLAMABAD: Federal Board of Revenue (FBR) on Tuesday decided to construct a monument at its Headquarters at Islamabad to commemorate and pay homage to martyrs of the revenue body.
The FBR in its notification said that in order to commemorate and pay homage to martyrs of FBR who laid their lives in the line of duty, competent authority had desired that a monument shall be constructed at FBR (HQ).
The FBR instructed field offices to provide details of such martyrs including name of martyred, designation, age o the date of death, place of posting, date of death and nature of death i.e. COVID-19/other.
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Cash paid for housing unit above Rs2 million required to be reported under AML/CFT: FBR
ISLAMABAD: Every cash transaction for sale and purchase of a housing unit of above Rs2 million is required to be reported under anti-money laundering (AML) / Counter Financing of Terrorism (CFT) to comply with conditions of Financial Action Task Force (FATF), the Federal Board of Revenue (FBR) said on Monday.
The FBR issued guidelines to provide guidance to real estate agents (REAs) in implementing and complying with requirement in AML/CFT regime.
The FBR said that currency transaction report (CTR) is required to be submitted when a developer receives cash or bearer negotiable instruments Rs2 million and above for selling real estate e.g. developer sells directly to buyer and receives direct cash payments.
Similarly, a developer pays with cash or bearer negotiable instruments Rs2 million and above for buying real estate e.g. property developer or builder pays for purchase of real estate for development.
Likewise, a broker receives or pays in case Rs2 million and above to be used subsequently in the purchase of real estate e.g. broker is a buyer’s agent who receives cash to be used subsequently to pay deposit/ or a settlement (either receipt or subsequent use may meet the CTR threshold).
However, real estate agent would not be required to file any CTR if all financial transactions are via wire transfers. If REA pays cash to sales staff as remuneration over the threshold, or to a supplier, or purchase of an asset such as a motor vehicle, it would not be subject to CTR filing. They would not be considered as buying and selling real estate.
The FBR said that the reason REAs are subject to the FATF standards and AML/CFT measures is because the real estate sector provides attractive assets for persons to launder funds from criminal activities given the large sums involved. “There are many example of criminals or corrupt officials using funds acquired from illegal activities to purchase real estate. REAs and their salespersons help customers to transact real properties and this could involve or facilitate the movement of large amounts of funds, sometimes across international boundaries. Real estate may also be involved with the financing of terrorism as terrorist groups may buy or sell real estate.”
Pakistan’s AML/CFT regulatory regime is strongly informed by the international AML/CFT standards promulgated by the FATF. The FATF is an international task force established in 1989 to develop international standards to combat ML, TF and the financing of proliferation (PF). The FATF published a revised set of 40 Recommendations on AML/CFT measures in 2012, which are being continuously updated.
Pakistan is currently under the FATF International Cooperation Review Process (ICRG) “Jurisdictions under Increased Monitoring” or “Grey list” process. Pakistan has committed to working with the FATF to address strategic deficiencies to counter ML and TF. Pakistan has also committed to improving its broader compliance with the FATF standards as part of its membership with the APG.
There is a definition of a REA under both the AMLA and AML/CFT regulations, as extracted below:
– AMLA, Section 2.Definitions (xii) (a)
(a) real estate agents, including builders and real estate developers, when performing the prescribed activities in the prescribed circumstances and manner;
-FBR AML/CFT Regulations for DNFBPs in Section 2.Definitions (n):
(n) “Real Estate Agent” includes builders, real estate developers and property brokers and dealers when execute a purchase and sale of a real property, participate in a real estate transaction capacity and are exercising professional transactional activity for undertaking real property transfer;
While the FBR AML/CFT Regulations for DNFBPs identifies four categories of REAs, in reality, your business could include all four with different business lines, or your real estate agency business is just brokerage.
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PTBA demands 90-day date extension for taxpayers’ profile update
ISLAMABAD: Pakistan Tax Bar Association (PTBA) has demanded the Federal Board of Revenue (FBR) to extend the last date for taxpayers’ profile update at least for 90 days as system glitches creating hurdles in making compliance.
The PTBA on Monday sent a letter to FBR chairman Muhammad Javed Ghani highlighting issues related to updating the profiles of the taxpayers up till December 31, 2020 in compliance of the provisions of Section 114A of the Income Tax Ordinance, 2001 inserted through Finance Act, 2020.
The Section has made it compulsory for the taxpayers to update their profile electronically containing various information such as bank account, utilities etc. Furthermore, failure to file the prescribed form will also trigger the penal provisions as well as exclusion of the taxpayers from ATL list.
The PTBA highlighted that there are several issues which needs to be addressed in this cumbersome and time consuming process of updating profile of around 2.5 million taxpayers across the country.
The apex tax bar pointed out that the in the prescribed format for updating profile, the date can be put into it but there is no option for submission or is it just need to be entered into the said form? Hence, needs clarification in this regard.
“Whether the salaried individuals are also required to update their profile as there is no provision under Section 114A of the Ordinance, ibid requiring them to do so? Furthermore, the persons applying for registrations under section 181 are also required update their profiles. Will the same apply for the salaried individuals apply for registration under Section 181?”
The PTBA also pointed out that the tab/icon for the profile update is also appearing in the portals of the e-intermediary however, it does not work to update the profiles of the taxpayers appearing the portal of such e-intermediaries. The said issue needs to be rectified as most of the taxpayers rely on their representatives to do the e-filing work in this regard.
The necessary amendments needs to be made into IRIS system to allow the taxpayers to update their profile at the time of registration as the said updating is time consuming, cumbersome process as well as duplication of the information put through form 181.
Keeping in view the glitches, shortfall, issues the member has been requested to issue directions to the concerned IT department in order to do the needful in this regard as early as possible.
Furthermore, till such time these issues are resolved by the relevant IT department, the time line for updating the profile under the provisions of the Section 114A of the Ordinance, ibid may kindly be extended for further reasonable time (preferably 90 days).