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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.

  • Associates defined under Sales Tax Act 1990

    Associates defined under Sales Tax Act 1990

    Associates or Associated Persons have been defined under Sales Tax Act, 1990.

    Section 2 of Sales Tax Act, 1990 (updated up to June 30, 2020 issued by the Federal Board of Revenue (FBR) explained associates as:

     (3) associates (associated persons) means, –

    (i) subject to sub-clause (ii), where two persons associate and the relationship between the two is such that one may reasonably be expected to act in accordance with the intentions of the other, or both persons may reasonably be expected to act in accordance with the intentions of a third person;

    (ii) two persons shall not be associates solely by reason of the fact that one person is an employee of the other or both persons are employees of a third person;

    (iii) without limiting the generality of sub-clause (i) and subject to sub-clause (iv), the following shall be treated as associates, namely: –

    (a) an individual and a relative of the individual;

    (b) members of an association of persons;

    (c) a member of an association of persons and the association, where the member, either alone or together with an associate or associates under another application of this section, controls fifty per cent or more of the rights to income or capital of the association;

    (d) a trust and any person who benefits or may benefit under the trust;

    (e) a shareholder in a company and the company, where the shareholder, either alone or together with an associate or associates under another application of this section, controls either directly or through one or more interposed persons–

    (i) fifty per cent or more of the voting power in the company;

    (ii) fifty per cent or more of the rights to dividends; or

    (iii) fifty per cent or more of the rights to capital; and

    (f) two companies, where a person, either alone or together with an associate or associates under another application of this section, controls either directly or through one or more interposed persons –

    (i) fifty per cent or more of the voting power in both companies;

    (ii) fifty per cent or more of the rights to dividends in companies; or

    (iii) fifty per cent or more of the rights to capital in both companies.

    (iv) two persons shall not be associates under sub-clause (a) or (b) of paragraph (iii) where the Commissioner is satisfied that neither person may reasonably be expected to act in accordance with the intentions of the other.

    (v) In this clause, “relative” in relation to an individual, means–

    (a) an ancestor, a descendant of any of the grandparents, or an adopted child, of the individual, or of a spouse of the individual; or

    (b) a spouse of the individual or of any person specified in sub-clause (a).

    (3A) “association of persons” includes a firm, a Hindu undivided family, any artificial juridical person and anybody of persons formed under a foreign law, but does not include a company;

    (3AA) “banking company” means a banking company as defined in the Banking Companies Ordinance, 1962 (LVII of 1962) and includes anybody corporate which transacts the business of banking in Pakistan;

  • FBR to start marking tax stamps from July 2021

    FBR to start marking tax stamps from July 2021

    ISLAMABAD: The Federal Board of Revenue (FBR) announced a significant step towards curbing counterfeit products and enhancing tax collection through tax stamps.

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  • Hamid Ali posted as Member Customs Policy

    Hamid Ali posted as Member Customs Policy

    ISLAMABAD: Syed Hamid Ali, a BS-21 officer of Pakistan Customs Service (PCS) has been transferred and posted as Member (Customs-Policy), Federal Board of Revenue (Headquarter), Islamabad, a notification said on Monday.

    Hamid Ali was previously posted as Member (Legal & Accounting – Customs), FBR (Hq), Islamabad.

    The post of Member Customs was remained vacant after Muhammad Javed Ghani assumed the charge as Chairman of the FBR.

    Ms. Zeba Hai Azhar, a BS-21 officer of PCS, has been transferred and posted as Member (Legal & Accounting – Customs), FBR (Hq), Islamabad from the post of Director General, Directorate General of Training and Research (Customs), Karachi.

  • NSS: tax rate at 10% on profit subject to furnishing certificate

    NSS: tax rate at 10% on profit subject to furnishing certificate

    ISLAMABAD: Persons deriving profit less than Rs500,000 on national saving schemes are required to provide a certificate in order to get reduced income tax rate at 10 percent, official sources said.

    Officials at Central Directorate of National Savings (CDNS) said that at present the rate of income tax on profit from national savings scheme is 15 percent. However, the rate shall be 10 percent in case annual profit is up to Rs500,000 if a person receiving the profit provide a certificate that his return on saving schemes shall not be above the threshold.

    They said that the rate of tax shall be 15 percent in case the annual profit is above 15 percent if the profit is above Rs500,000 in the said schemes. However, the rate at 15 percent is available only to persons on the Active Taxpayers List (ATL). In other case where person is not on the ATL the tax rate shall be 30 percent.

    The sources said that the CDNS had circulated information about the amendments to the Income Tax Ordinance, 2001 through a letter issued early this fiscal year to all zonal heads and other concerned stakeholders.

    Through Finance Act, 2020, an amendment introduced to Section 151 of Income Tax Ordinance, 2001 which related to profit on debt.

    Section 151 (1)(a) explained that yield on profit (profit on debt) on account, deposit or a certificate under the National Saving Schemes or Post Office Savings Account, the rate of tax shall be 10 percent of the gross yield/profit paid on amount up to Rs500,000.

    The rate of tax exceeding Rs500,000 shall be 15 percent of the gross yield / profit paid. The rate of tax on persons not appearing in the ATL, the applicable tax rate is be increased by 100 percent.

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  • FBR issues 1.4 million notices for not filing returns, concealing income

    FBR issues 1.4 million notices for not filing returns, concealing income

    ISLAMABAD: Federal Board of Revenue (FBR) has issued around 1.4 million notices to non-filers of income tax returns and those who concealed income in their declaration, a statement said on Saturday.

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  • FY21 tax target requires Rs2,393 billion or 53.4 percent growth in next five months

    FY21 tax target requires Rs2,393 billion or 53.4 percent growth in next five months

    ISLAMABAD: Federal Board of Revenue (FBR) needs to collect an amount of Rs2,393 billion during next five months of fiscal year 2020/2021 (FY21) to achieve the annual target of Rs4,963 billion.

    According to provisional revenue figures released on Saturday, the FBR collected Rs2,570 billion during July – January 2020/2021 as compared with Rs2,416 billion in the corresponding period of the last fiscal year, showing an increase of 6.4 percent.

    In order to achieve the revenue collection target the FBR required to maintain 53.4 percent growth in revenue collection during remaining months of the current fiscal year. The FBR collected Rs1,560 billion during February – June of the last fiscal year. However, the revenue body needs Rs2,393 billion in the remaining five months of the current fiscal year.

    It is worth mentioning that the revenue collection was adversely affected during March – June 2020/2021 due to spread of coronavirus in the same period. This has cost around Rs500 billion to the revenue collection.

    The net collection for the month of January was Rs.364 billion against a target of Rs340 billion, representing an increase of 12.3 percent over last January and 107 percent of the target. This is the first double-digit monthly growth during the fiscal year.

    On the other hand, the gross collections increased from Rs.2464 billion to Rs.2699 billion, showing an increase of nearly 10 percent.

    The amount of refunds was Rs129 billion compared to Rs69 billion paid last year, showing an increase of 87 percent. This is reflective of FBR’s resolve to fast-track refunds to prevent liquidity issues of the industry.

    The improved revenue performance is a reflection of growing economic activities in the country despite facing the challenge of second wave of COVID-19. Going forward, it is expected that this revenue performance would be further strengthened as economic recovery gains more momentum.

  • FBR initiates action against non-filer corporate taxpayers

    FBR initiates action against non-filer corporate taxpayers

    ISLAMABAD: Federal Board of Revenue (FBR) on Saturday directed tax offices to ensure recovery of penalty amount from corporate taxpayers, who failed to file income tax returns by due date.

    The last date for filing income tax returns for tax year 2020 was December 31, 2020. However, the FBR said that a large number of companies had failed to comply with the mandatory requirement.

    The revenue body said that the data obtained from PRAL in respect of non-filer companies,  which are filers for tax year 2019, goes to reveal that not only that they have not filed tax returns but also that a considerable amount of revenue has not been paid by these taxpayers.

    It may be noticed that notices u/s 182 of the Income Tax Ordinance, 2001 were issued to all non-filers currently by the FBR Head Office.

    All Chief Commissioners of Inland Revenue (CCIRs) have been directed to monitor progress of penalty progress proceedings particularly in company cases and make sure enforcement of returns and also to realize due revenue. Formation-wise lists of such cases have been sent through email to all concerned.

    The FBR directed all the CCIRs to share the progress on enforcement measures in recovery of penal amount and payment of outstanding dues by February 15, 2021.

  • Tax offices directed to issue penalty notices to sugar mills for not complying VAS

    Tax offices directed to issue penalty notices to sugar mills for not complying VAS

    ISLAMABAD: Federal Board of Revenue (FBR) has directed tax offices to issue penalty notices to sugar mills, which have failed to install video analytics system, sources said on Saturday.

    The FBR directed Chief Commissioners of LTO, MTO, CTO of Karachi, Lahore and RTO Peshawar to issue penalty notices to non-compliant sugar mills which have not followed FBR guidelines.

    The FBR also decided to launch stern action from next week against sugar mills and suppliers of video analytics system (VAS), who failed to comply with the mandatory requirement under the law.

    “The FBR will take action by imposing heavy penalties on non-compliant sugar mills and non-compliant vendors if they fail to install the video analytic equipment at their factory premises by January 31, 2021,” according to a notice sent to vendors of VAS.

    The notice has been sent to all the pre-qualified vendors, included: M/s. AJCL (Pvt) Ltd., M/s. TPL Trekker, M/s. CNS Engineering & Technology, M/s. NRTC and GCS, M/s. COMMTEL, M/s. DWP Technologies and M/s. Focus Technology Pvt Ltd.

    The FBR said that it had authorized seven vendors through its report on November 20, 2020 for VAS and the copy was shared with Pakistan Sugar Mills Association (PSMA) and all pre-qualified vendors to initiate the process.

    In order to ensure the implementation of VAS, the FBR issued a letter on December 02, 2020 directing the PSMA to provide mill wise update status of deployment of VAS by December 31, 2020, which was further extended up to January 31, 2021.

    “In response to the letters only few sugar mills have issued final quotations to the vendors for installation of the system. However, large number of sugar mills is not willing to implement the system as they have either issued provisional quotations or not issued any quotation at all the process of VAS.”

    The FBR observed that the pre-qualified vendors had failed to install the video analytics equipment on the sugar mills, which had issued final quotations to the pre-qualified vendors for the system.

    It is pertinent to mention that the Video Analytics Rules, 2020 were issued through SRO 889(I)/2020 dated September 21, 2020. These clearly laid down responsibilities of the manufacturer to provide unhindered availability of production facilities for installation of the system.

    Besides, Rule 150ZQT(2) of the rules provides severe penalty of non-removal goods from business premises by non-compliant manufacturing units.

  • Salary persons require retaining tax deduction certificate for six years

    Salary persons require retaining tax deduction certificate for six years

    ISLAMABAD: A person deriving income salary is required to retain salary certificate indicating amount of salary and tax deducted for six years, sources said on Friday.

    The sources said that the requirement of retaining record for six years is mandatory under income tax laws.

    Similarly taxpayers deriving income from property are required to retain following records for six years:

    a. Tenancy agreement, if executed;

    b. Tenancy termination agreement, if executed;

    c. Receipt for amount of rent received; and

    d. Evidence of deductions claimed in respect of premium paid to insure the building, local rate, tax, charge or cess, ground rent, profit/interest or share in rent on money borrowed, expenditure on collecting the rent, legal services and unpaid rent.

    In case taxpayers deriving income from capital gains, the following documents shall be retained for six years:

    a. Evidence of cost of acquiring the capital assets;

    b. Evidence of deduction for any other costs claimed; and

    c. Evidence in respect of consideration received on disposal of the capital asset.

    In case taxpayers deriving income from other sources are required to keep following records for six years:

    a. Dividend; dividend warrants.

    b. Royalty; Royalty agreement

    c. Profit on debt: Evidence and detail of profit yielding debt; Evidence of profit on debt and tax deducted thereon, like certificate in the prescribed form or bank account statement; and evidence of Zakat deducted, if any.

    d. Ground rent, rent from the sub-lease or land or building, income from the lease of any building together with plant or machinery and consideration for vacating the possession of a building or part thereof: Lease agreement; and lease termination agreement.

    e. Annuity or pension: evidence of amount received.

    f. Prize money on bond, winning from a raffle, lottery or cross word puzzle: Evidence of income and tax deducted thereon, like certificate in the prescribed form.

    g. Provision use or exploitation of property: agreement

    h. Loan, advance, deposit or gift: evidence of model of receipt of a loan, advance, deposit or gift i.e. by a crossed cheque or through a banking channel.

    i. General: Evidence of deduction for any other expenditure claimed.

  • FBR’s representation in bogus refunds rejected

    FBR’s representation in bogus refunds rejected

    ISLAMABAD: A representation of Federal Board of Revenue (FBR) has been rejected by the President of Pakistan on Friday that was filed against an order passed by the Federal Tax Ombudsman (FTO) in bogus refund case.

    According to details, President Dr. Arif Alvi rejected the FBR’s representations directing the tax authorities to recover amount of Rs14 million paid in bogus refund claim.

    The President upheld the decision of Federal Tax Ombudsman (FTO) following its suo-moto action against the irregularities committed by the FBR field formations in registering, processing, sanctioning and issuing sales tax refunds to fake refund payments during the period 2012-2013.

    President Alvi in his decision wrote: “it was surprising and shocking that FBR failed to investigate fake claims where refund had already been made in full connivance with FBR officials”.

    Expressing strong displeasure over the scam, he said: “How can we afford not to recover and criminally charge the fraudsters.”

    The President stressed recovery of the embezzled money, saying: “instead of resistance by FBR to the suo-moto action by FTO, they should recover the precious money of the people of Pakistan.”

    It is worth-stating that FBR has filed 74 similar representations with the office of the President against the orders of FTO. Out of 74 representations, 22 cases have been decided while 52 are still awaiting adjudication.

    Furthermore, according to the relevant record, FBR had allowed Rs 875.277 million to be paid to fake RPs, of which a payment of Rs 223.312 Million has already been made.

    The FTO in its verdict, dated April 27, 2020, had directed the Chief Commissioner-Inland Revenue and Corporate Regional Tax Office (RTO), Karachi to investigate and identify the officials involved in registration of fake RPs and initiate disciplinary/criminal action against those found involved and report compliance within 45 days.

    The FTO in its decision further directed FBR to initiate appropriate action including criminal proceedings leading to recovery of amount swindled from public exchequer through claiming inadmissible input tax and bogus refund.

    Instead of implementing the directives of FTO, the FBR challenged its jurisdiction and filed a representation with the President taking plea that it could not issue such orders and rely on interdepartmental correspondence of FBR.

    The President rejected FBR’s representation and made it clear that the body could exercise its power conferred under Section 9(1) of the Federal Tax Ombudsman Ordinance, 2000 to investigate irregularities in the department.

    It is to be mentioned here that the investigations conducted by Directorate General of I&I-IR (Intelligence & Investigation and Inland Revenue), Karachi in case of M/s Z.A. Exports — a fake RP with principal activity as manufacturer of iron and steel — revealed that bogus claims worth Rs 18.519 million were made in tax period 2012-13 against irrelevant invoices.

    The President lauded the Directorate General of I&I-IR (Intelligence & Investigation and Inland Revenue) for issuing Red Alerts and detecting fraudulent activities in FBR, and regretted that the “national exchequer was made to suffer colossal loss of revenue”.