ISLAMABAD: Persons falling under final tax regime are now required to file annual income tax returns. In this regard amendment has been made through Finance Act, 2020.
(more…)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.
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FBR imposes restriction on deduction of profit on debt payable to associated enterprise
ISLAMABAD: Federal Board of Revenue (FBR) has imposed restriction on deduction of profit on debt payable to associated enterprise in order to comply with OECD action on profit shifting.
The restriction has been imposed through introduction of Section 106A of Income Tax Ordinance, 2001 through Finance Act, 2020, recently passed by the National Assembly of Pakistan.
Tax experts at EY Ford Rhodes Chartered Accountants said that in line with Action Plan 4 of the OECD’s recommendations on Base Erosion and Profit Shifting (BEPS), the new section has been introduced which imposes a restriction on deduction of profit on debt payable to associated enterprise.
The salient features of the new section are:
— Deduction of foreign profit on debt in excess of fifteen percent of taxable income before depreciation, amortization and foreign profit on debt shall be disallowed to a foreign controlled resident company (other than an insurance or banking company);
— The section shall not apply if the total foreign profit on debt claimed as a deduction is less than Rs10 million for a tax year;
— Where the foreign profit on debt cannot be fully adjusted against the taxable income for a tax year, the excess amount shall be added to the amount of foreign profit on debt for the following tax year and shall be treated to be part of that deduction, or if there is no such deduction for that tax year, be treated as the deduction for that tax year and so on for three tax years following the year in which the foreign profit on debt was claimed as an expense;
According to FBR sources this section shall apply in respect of foreign profit on debt accrued with effect from the first day of July, 2020, even if debts were contracted before the first day of July, 2020;
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Finance Act 2020: Hotel business allowed carry forward loss for eight years
ISLAMABAD: The hotel industry in Pakistan has received a significant tax relief, as the government has allowed businesses in this sector to carry forward losses for a period of eight years starting from the tax year commencing on July 1, 2020. This amendment, introduced through the Finance Act, 2020, was recently approved by the National Assembly.
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FBR issues formula for computing capital gain tax on immovable property sale
ISLAMABAD: Federal Board of Revenue (FBR) has issued formula for computation of capital gain tax on disposal of immovable property as amended through Finance Act, 2020.
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Finance Act 2020: Cash payment Rs250,000 allowed as deduction
ISLAMABAD: Federal Board of Revenue (FBR) has relaxed the condition for business community by allowing deduction of cash payment up to Rs250,000 while computing business income.
According to Finance Act 2020 approved by the National Assembly amendments have been introduced to Section 21 of Income Tax Ordinance, 2001.
Section 21 of the Ordinance prescribes a list of expenditures that are not allowed as a deduction when computing Income from Business.
This includes certain expenditures that are not made through banking channels if they exceed the prescribed thresholds.
According to EY Ford Rhodes Chartered Accountants, the Finance Bill had proposed to enhance the threshold of aggregate expenditure under a single account head from Rs50 thousand to Rs250 thousand, not made through banking channels, that would be allowed as a deduction when computing Income from Business..,
Further the relaxation of a single cash transaction in the above limit has been enhanced from Rs10 thousand to Rs25 thousand.
Similarly, the threshold of salary, not paid through banking channels, has been proposed to be increased from Rs15 thousand to Rs25 thousand.
Similar to the provisions of the sales tax laws, the Bill also proposes to introduce a new Clause whereby an industrial undertaking would not be entitled to claim a deduction for any expenditure attributable to sales made to persons required to be registered but not registered under the Sales Tax Act, 1990 computed according to the following formula, namely;
(A/B) x C
Where –
A is the total amount of deductions claimed;
B is the turnover for the tax year; and
C is the total amount of sales exclusive of sales tax and federal excise duty to persons required to be registered but not registered under the Sales Tax Act, 1990 where sales equal or exceed rupees 100 million per person.
Provided that disallowance of expenditure under this Clause shall not exceed twenty percent of total deductions claimed and that the FBR may, by notification in the official Gazette, exempt persons or classes of persons from this Clause on the basis of hardship.
Another Clause is also proposed to be inserted under which any expenditure on account of utility bills in excess of prescribed limits and conditions would not be allowed as a deduction.
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Finance Act 2020: Suppression of sales to be taxed under income from business
An attempt by a businessman to suppress sales chargeable to tax in order to reduce tax liability shall be taxed under the head of income from business, according to the Finance Act 2020 recently passed by the National Assembly.
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Finance Act 2020: taxpayers given deadline of December 31 to update profile
ISLAMABAD: Federal Board of Revenue (FBR) has given taxpayers a deadline of December 31, 2020 to complete their profile through online system otherwise their name will be removed from active taxpayers list (ATL).
The National Assembly approved the new amendment of taxpayers profiling through new section 114A to Income Tax Ordinance, 2001.
Section 114A: Taxpayer’s profile:
Sub-section 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 [FBR].
Sub-section 2: A taxpayer’s profit:-
(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 as prescribed by the Board [FBR].
Sub-section 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 30the 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.
Sub-Section 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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Nausheen Amjad removed from post of FBR chairperson
ISLAMABAD: The government on Saturday removed the chairperson of Federal Board of Revenue (FBR) Ms. Nausheen Javaid Amjad and assigned look after charge to another senior officer of Pakistan Customs Service (PCS) with immediate effect.
Ms. Nausheen Javaid Amjad was assigned the post of FBR chairperson on April 08, 2020 after the resignation of Syed Muhammad Shabbar Zaidi, who served as FBR Chairman from private sector during May 10, 2019 to April 08, 2020.
Sources said that the removal of Ms. Nausheen was linked to the tax profile of wife of Justice Qazi Faiz Essa. The sources said that Ms. Nausheen had not compromised the integrity of tax department.
The Establishment Division on Saturday issued a notification and assigned additional charge of the post of FBR Chairman to Muhammad Javed Ghani, a BS-22 officer of PCS, presently posted as Member, FBR, for a period of three months or till the posting /appointment of a regular incumbent, whichever is earlier, with immediate effect.
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FBR extends date for retail outlet integration up to August 31
ISLAMABAD: Federal Board of Revenue (FBR) on Friday extended date for retailers to integrate their Point of Sale (POS) up to August 31, 2020.
The last date for integrating the POS for Tier-1 retailers was June 30, 2020.
The FBR said that only those retailers can integrate their POS by August 31 who submit their intention to RTOs/LTUs by August 20, 2020.
FBR sources said that the decision had been taken due to lockdown in the many parts of the country in order to prevent spread of coronavirus the business activities had become stand still.
They said that big outlets and shopping plazas are observing closure during the lockdown and many of those big retailers would not able to make compliance.
The deadline was expired on December 15, 2019 which was given by the FBR to tier-1 retailers to integrate their POSs with the FBR online system. However, the date was extended in order to give opportunity to big retailers to make compliance.
All tier-1 retailers are required to integrate all their POSs with FBR’s computerized system.
Tier-1 retailer is defined in section 2(43A) of the Sales Tax Act, 1990, to be a person who falls in any of the following categories:
(a) a retailer operating as a unit of a national or international chain of stores;
(b) a retailer operating in an air-conditioned shopping mall, plaza or centre, excluding kiosks;
(c) a retailer whose cumulative electricity bill during the immediately preceding twelve consecutive months exceeds Rupees twelve hundred thousand;
(d) a wholesaler-cum-retailer, engaged in bulk import and supply of consumer goods on wholesale basis to the retailers as well as on retail basis to the general body of the consumers; and
(e) a retailer, whose shop measures one thousand square feet in area or more.
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Finance Act 2020: Commissioner empowered to cancel exemption certificate
ISLAMABAD: A commissioner of Inland Revenue has been authorized to cancel or modify exemption certificate issued automatically by online system IRIS.
Through Finance Act, 2020 amendment has been made to Section 153 of Income Tax Ordinance, 2001.
As per the amendment the commissioner of Inland Revenue of Federal Board of Revenue (FBR) is required to issue certificate to taxpayer within prescribed time frame. However, if application is filed by taxpayer and commissioner fails to take action than the IRIS will automatically issue certificate to the taxpayer.
However, the commissioner is empowered to modify or cancel the certificate on reasonable ground.
The amendment in this regard is as:
“Provided that the Commissioner shall issue certificate for payment under clause (a) of sub-section (1) without deduction of tax within fifteen days of filing of application to a public company listed on a registered stock exchange in Pakistan if advance tax liability has been discharged.
“Provided further that the Commissioner shall be deemed to have issued the exemption certificate upon the expiry of fifteen days to the aforesaid public listed company and the certificate shall be automatically processed and issued by Iris:
“Provided also that the Commissioner may modify or cancel the certificate issued automatically by IRIS on the basis of reasons to be recorded in writing after providing an opportunity of being heard.”