Pkrevenue.com

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.

  • 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’.

  • FBR launches first phase of pre-filing in tax returns

    FBR launches first phase of pre-filing in tax returns

    ISLAMABAD: Federal Board of Revenue (FBR) on Friday said it has launched first phase of pre-filling of some information enabled for individual taxpayers in annual income tax returns.

    In a statement regarding ongoing reform process, the FBR said that those efforts were bearing fruit.

    According to the statement, FBR has designed simplified income tax returns for individuals and small & medium enterprises (with turnover less than Rs.10 million).

    Auto-calculation and phase 1 of pre-filling of some information has been enabled for individual taxpayers.

     Phase 1 of automated income tax refunds has been enabled.

    The capability to file appeals through the system has been provided via the e-Appeals module.

    Automation of Sales Tax refunds via FASTER has been further improved.

    Similarly, the processing and payment of export duty drawbacks have also been automated.

    The revenue body said that in line with the vision of the Prime Minister as part of its reforms agenda, FBR has placed a lot of focus on facilitation of taxpayers, reducing human interaction, simplification of tax statutes and tax filing procedures through automation, integrity management, enforcement of tax code and policy measures to boost revenue and promote exports through increase in business activity, speedy payment of refunds and drawbacks and better service delivery.

    As a result of this reform process, significant improvement has been seen.

    FBR has exceeded the seven month revenue target for FY 2020 – 2021 by collecting Rs. 2,570 billion against the target of Rs. 2,550 billion.

    This target has been achieved despite the issuance of 80 percent more refunds in comparison with same period last FY (Rs.129 billion against 69 billion for last year). This has helped the business community in reducing cost of doing business and providing working capital for investment.

    A dedicated portal has been created to manage taxpayer complaints and to provide feedback. Large Taxpayers Office (LTO) has been opened in Multan to facilitate large taxpayers.

    Moreover, taxpayer registration for Sales Tax purposes has been enabled on the system (ICT based Sales Tax survey). Simultaneously, on the Customs side, an online import duty calculator has been enabled on WeBOC for the importers / customs agents in order to find the duty / taxes without filing of Goods Declaration.

    The Authorized Economic Operator (AEO) Program has been launched for trusted trade partners. This is also part of the Trade Facilitation Agreement (TFA) under WTO.

    A dedicated portal (Maloomat TaxRay) has been launched for taxpayers to view what information FBR holds about them. Moreover, the systems used for Prosecution, Appellate, and Alternate Dispute Resolution systems have been strengthened, revitalized, and automated.

    Additionally, on the Customs side, the Anti-Smuggling and Confiscation of goods portal has been enabled for data collection and analysis.

    FBR’s Integrity Management Mechanism has been strengthened. FBR Head Office & field formations have been restructured to improve efficiency.

    Customs Duty concessions and exemptions regime continues to be reviewed and simplified in collaboration with the tax policy board to further improve ease of doing business.

    Another positive development has been seen in the number of duty drawback claims processed via Automated Export Duty Drawback payment system. Since its official launch in end-December (as of 15 January 2021), 74 percent of all claims (55,790 out of 75,345) have been automated whilst 71 percent of amount has been remitted.

  • Value of supply defined for applying sales tax

    Value of supply defined for applying sales tax

    Sales Tax Act, 1990 has defined “value of supply” in respect of taxable supply, as the consideration in money including all federal and provincial duties and taxes, if any, which the supplier receives from the recipient for that supply.

    The Sales Tax Act, 1990 updated up to June 30, 2020 issued by the Federal Board of Revenue (FBR), explained the value of supply as

    “Value of supply” means:–

    (a) in respect of a taxable supply, the consideration in money including all Federal and Provincial duties and taxes, if any, which the supplier receives from the recipient for that supply but excluding the amount of tax:

    Provided that –

    (i) in case the consideration for a supply is in kind or is partly in kind and partly in money, the value of the supply shall mean the open market price of the supply excluding the amount of tax;

    (ii) in case the supplier and recipient are associated persons and the supply is made for no consideration or for a consideration which is lower than the open market price, the value of supply shall mean the open market price of the supply excluding the amount of tax; and

    (iii) in case a taxable supply is made to a consumer from general public on installment basis on a price inclusive of mark up or surcharge rendering it higher than open market price, the value of supply shall mean the open market price of the supply excluding the amount of tax.

    (b) in case of trade discounts, the discounted price excluding the amount of tax; provided the tax invoice shows the discounted price and the related tax and the discount allowed is in conformity with the normal business practices;

    (c) in case where for any special nature of transaction it is difficult to ascertain the value of a supply, the open market price;

    (d) in case of imported goods excluding those as specified in the Third Schedule, the value determined under section 25 of the Customs Act, including the amount of customs-duties and central excise duty levied thereon;

    (e) in case where there is sufficient reason to believe that the value of a supply has not been correctly declared in the invoice, the value determined by the Valuation Committee comprising representatives of trade and the Inland Revenue constituted by the Commissioner;

    (f) in case of manufacture of goods belonging to another person, the actual consideration received by the manufacturer for the value addition carried out in relation to such goods;

    (g) in case of a taxable supply, with reference to retail tax, the price of taxable goods excluding the amount of retail tax, which a supplier will charge at the time of making taxable supply by him, or such other price as the Board may, by a notification in the official Gazette, specify.

    (h) in case of supply of electricity by an independent power producer or WAPDA, the amount received on account of energy purchase price only; and the amount received on

    account of capacity purchase price, energy purchase price premium, excess bonus, supplemental charges etc. shall not be included in the value of supply;

    (i) in case of supply of electric power and gas by a distribution company, the total amount billed including price of electricity and natural gas, as the case may be, charges, rents, commissions and all duties and taxes local, provincial and federal but excluding the amount of late payment surcharge and the amount of sales tax; and

    (j) in case of registered person who is engaged in purchasing used vehicles from general public on which sales tax had already been paid at the time of import or manufacturing, and which are, later on, sold in the open market after making certain value addition, value of supply will be the difference between sale and purchase price of the said vehicle on the basis of the valuation method prescribed by the Board.

    Provided that, where the Board deems it necessary it may, by notification in the official Gazette, fix the value of any imported goods or taxable supplies or class of supplies and for that purpose fix different values for different classes or description of same type of imported goods or supplies:

    Provided further that where the value at which import or supply is made is higher than the value fixed by the Board, the value of goods shall, unless otherwise directed by the Board, be the value at which the import or supply is made.