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.

Budget salient features related to Income Tax

ISLAMABAD: Federal Board of Revenue (FBR) issued budget salient feature related to income tax presented through Finance Bill, 2020.

INCOME TAX

RELIEF MEASURES

• Deletion of Withholding Taxes

To augment efforts towards simplification of the withholding tax regime, the following withholding tax provisions are being deleted:

Section 236R: Collection of advance tax on education related expenses remitted abroad

Section 235B: Tax on steel melters and composite units

Section 156B: Withdrawal of balance under pension fund

Section 148A: Tax on local purchase of cooking oil or vegetable ghee by certain persons

Section 236D: Advance tax on functions and gatherings

Section 236F: Advance tax on cable operators and other electronic media

Section 236J: Advance tax on dealers, commission agents and arhatis etc.

Section 236U: Advance tax on insurance premium

Section 236X: Advance tax on tobacco

This measure would reduce the cost of the compliance of taxpayers, enhance the control of FBR over the withholding tax regime and would be pivotal in promoting ease of doing business.

• Enhancement of Threshold for Becoming Prescribed Person for Withholding of Tax on Supplies, Services and Contracts from fifty to hundred million rupees and a similar threshold of hundred million rupees is being prescribed for a sales tax registered person to become a withholding agent.

• Reduction in Holding Period and Tax Rates for Capital Gain on Immoveable Property to incentivize and propel economic activity in the real estate sector, the bifurcation of plots and constructed property for determining holding period of capital gains is being done away with i.e. the holding period for taxation of capital gains on disposal of immovable property is being restricted to 4 years. In addition, rates are also being reduced on capital gains emanating from disposal of immoveable property.

• Increase in Threshold of Section 21(l) per transaction delineated under section 21(l) is being increased from Rs. 10,000/- to Rs. 25,000/-. Similarly, the threshold of payments under a single from Rs.50,000/- to Rs.250,000/-.

• Increase in Threshold of Section 21(m) from Rs. 15,000/- per month to Rs.25,000/- per month.

• Enabling Adjustability of Property Expenses for All Individuals/AOPs

• Exempting Withholding Tax on Cash Withdrawal to the extent of Foreign Remittances

• Promoting Investment in Government Debt Instruments through a foreign bank account, a non-resident rupee account repatriable or a foreign currency account.

• Issuance of Centralized Income Tax Refunds

• Hajj Operators to be Exempted from Withholding Tax on Payments to Non-Residents

• Explanation for excluding Vehicles Up to 200cc from the Ambit of Advance Tax

• Advance Tax on Auction of Immovable Property to be Collected in Installments

• Prompt Issuance of Exemption Certificates to Public Listed Companies within 15 days

• Collection of Advance Tax by Educational Institutions not to Apply to Persons on the ATL

• Rationalizing Tax on Imports by shifting from person-specific rates to goods specific rates cascaded according to the type of goods, with tax @1% for capital goods, 2% for raw materials and 5.5% for finished goods irrespective of status of the importer. However, the prevailing concessional rates on certain items such as remeltable scrap of iron and steel, potassic and urea fertilizers, LNG, Gold, Cotton, goods that were importable by manufacturers under the rescinded SRO 1125(I)/2011 dated 31.12.2011, mobile phones etc. are being maintained.

• Agreed Assessment through arbitration by Assessment Oversight Committee

• Strengthening Alternate Dispute Resolution Mechanism

• Taxation Of Resident Shipping Companies as per latest marine policy

PROCEDURAL MEASURES

• Taxpayer’s Profile Automated Adjusted Assessment to rectify computational errors and wrongly claimed credits

• Real-Time Access to Databases of Certain Organizations

• Audit on the Basis of Benchmark Ratios

• Enabling E-Audit

• Strengthening Compliance Regime of Non-Profit / Welfare Organizations

• Electricity Expense to be Treated as an Inadmissible Business Deduction subject to non-disclosure of name of actual user from 01.01.2021

• Disallowance of Business Expenditure Proportionate to Sales Made to Sales Tax Unregistered Persons

• Rationalizing Depreciation Deduction based on the Half Year Rule

• Limiting Interest Deductibility to Foreign Affiliates

TECHNICAL MEASURES

• Rationalization of Cost of Transport Vehicle for Claiming Deduction on Account of Lease Rentals

• Filing of Withholding Statements under section 165 on Quarterly Basis

• Incentivizing and Promoting the Construction Industry

• Tax Exemptions and Concessions for the Gwadar Port and the Gwadar Free Zone

• Incorporation of Relief measures provided through SROs during the COVID pandemic.

June 12, 2020
Income tax exemptions surge by 166pc to Rs378bn

ISLAMABAD: Despite massive shortfall in revenue collection the Federal Board of Revenue (FBR) granted Rs378 billion as income tax exemption during current fiscal year, which is 166.2 percent higher than the last fiscal year.

According to Pakistan Economic Survey 2019/2020 released on Thursday the FBR granted provisionally Rs378 billion as income tax exemption and concession during the outgoing fiscal year as compared with Rs142 billion in the last fiscal year.

The FBR granted around Rs212 billion as exemption from total income during the outgoing fiscal year. While another Rs104.5 billion concessions were granted as tax credit. An amount of Rs36.43 billion was exempted for allowances.

It is pertinent to mention here that the FBR was assigned Rs5.55 trillion as collection target for the current fiscal year. However, slowdown in economy and COVID-19 outbreak the target was revised downward to Rs3.9 trillion.

However, grant of exemption and concession fell 13.21 percent to Rs519 billion under the head of sales tax during current fiscal year as compared with Rs598 billion in the last fiscal year.

The FBR granted sales tax exemption of Rs255.84 billion on imports. An amount of Rs74 billion granted exemption/concession as reduced rates of two percent under Eight Schedule of Sales Tax Act, 1990.

Further, an amount of Rs35 billion has been granted as exemption/concession as reduced rates of 10 percent under Eight Schedule.

The authorities granted Rs23.15 billion sales tax concession on cellular mobile phones under Ninth Schedule.

The FBR granted exemption of Rs54.87 billion on local supplies during the fiscal year 2019/2020.

The exemption and concessions under customs duty cost an amount of Rs253 billion to the revenue authority during outgoing fiscal year, which is 8.58 percent higher when compared with Rs233 billion the last fiscal year.

Around Rs95 billion has been granted as duty exemption / concession to automobile sector, E&P companies and projects under CPEC. While an amount of Rs87 billion granted as exemption and concessions under Fifth Schedule of Customs Act, 1969.

The concessions granted under Free Trade Agreement (FTA) and Preferential Trade Agreement (PTA) was around Rs45 billion during the current fiscal year.

The FBR allowed exemption and concession an aggregate amount of Rs1150 billion during fiscal year 2019/2020 as compared with Rs972 billion in the last fiscal year.

June 12, 2020
Zero-rating elimination provides impetus to FBR collection

ISLAMABAD: Elimination of zero-rating regime on five export oriented sectors has provided impetus to tax collection during current fiscal year, said Pakistan Economic Survey 2019/2020 issued on Thursday.

The survey said that tax collection of Federal Board of Revenue (FBR) has witnessed a remarkable turnaround during the current fiscal year after posting negative growth of 0.4 percent in FY2019.

The overall FBR tax collection grew by 10.8 percent to Rs3,300.6 billion during July-April, FY2020 against Rs 2,980.0 billion in the comparable period last year.

Within the total, the domestic component of tax revenue collected by the FBR grew by 14.7 percent to stand at Rs 2,777.7 billion in first ten months of the current fiscal year against Rs 2,421.1 billion in the comparable period last year.

“The rise in tax collection is attributed to various policy initiatives implemented at the start of FY2020 such as charging sales tax on more items at the retail price under 3rd Schedule, reinstatement of taxes on telecom services and an upward revision of tax rates on various salary slabs.

“In addition, an upward revision in the federal excise duty (FED) rates and the abolishment of the zero-rating regime on five export-oriented sectors provided further impetus to FBR tax collection.”

Direct Taxes

The net collection of direct taxes has registered a growth of 14.1 percent during the first ten months of FY2020. The net collection has increased from Rs 1,071.7 billion to Rs 1,223.2 billion.

The bulk of the tax revenues of direct taxes is realized from income tax. The major contributors of income tax are withholding tax, voluntary payments and collection on demand.

Indirect Taxes

The gross and net collections of indirect taxes have witnessed a growth of 11.4 percent and 8.9 percent respectively. It is accounted for 62.9 percent of the total FBR tax revenues.

Sales Tax

Within indirect taxes, net collection of sales tax increased by 15.7 percent. The gross and net sales tax collection during July-April, FY2020 has been Rs 1,424.8 billion and Rs 1,348.4 billion respectively, showing a growth of 20.1 percent and 15.7 percent respectively.

In fact, around 55.0 percent of total sales tax was contributed by a sales tax on import during July-April, FY2020, while the rest was contributed by the domestic sector.

Federal Excise Duty

The collection of federal excise duties (FED) during July-April, FY2020 has recorded 12.0 percent growth. The net collection has stood at Rs 206.1 billion during July-April, FY2020 as against Rs 184.0 billion during the same period last year.

The major revenue spinners of FED are cigarettes, cement, services and beverages.

Customs Duty

Customs duty has registered a negative growth of 6.8 percent and 6.5 percent in gross andnet revenues respectively.

The net collection has decreased from Rs 558.9 billion duringJuly-April, FY2019 to Rs 522.8 billion during July-April, FY2020.

The major revenuespinners of customs duty have been vehicles, mineral fuels, iron and steel, electricalmachinery, plastic, edible fruits etc.

Impact of COVID-19 on FBR Tax Collection

COVID-19 pandemic has casted a significant impact on revenue collection efforts of FBR.

During the first eight months of FY2020, FBR recorded total revenue collection of Rs 2,738 billion with a growth rate of 17.5 percent over last fiscal year. FBR was able to achieve 91.4 percent of its (first revised) target for the period.

However, after the outbreak of COVID-19 pandemic, an average negative growth rate of 13.4 percent was recorded during March 2020 and April 2020 as compared to last year as well as compared to the projected collection.

The situation is likely to exacerbate further during the month of May and slight recovery is expected in the last month of the financial year because of usual lumped government spending.

Assessment of the full impact of COVID-19 on FBR’s tax collection merits analysis of the various expected and projected revenue figures prior to the time of crisis emergence.

FBR’s target which stood at Rs 4,807 billion was revised downwards to Rs 3,908 billion keeping in view the economic slowdown consequent to the pandemic.

The aforementioned revision had thus forecasted a revenue loss of Rs 899 billion. Nevertheless, the actual shortfall is expected to be higher than what has been projected.

The Federal Government has recently announced an incentive package for the construction sector, fulfilling the longstanding demand of builders and developers for fixed income tax and declaration of the construction sector as an industry.

The package would not only revive the construction industry but also serve as a catalyst to enhance business activity in forty different economic sectors. Furthermore, FBR is also striving for simplification of laws and procedures to reduce the cost of doing business and lower administrative burden.

The total impact of COVID-19 pandemic is yet to be determined. The dynamic and challenging nature of the crisis necessitates an equally dynamic and vigorous strategy that is capable of being evolved in response to the demands made on it.

June 12, 2020
FBR reconstitutes licensing committee for tracking transit, transshipment cargo

ISLAMABAD: Federal Board of Revenue (FBR) has re-constituted committee for grant of license for tracking transit and transshipment cargo.

The FBR on Wednesday issued SRO 542(I)/2020 dated June 08, 2020 to amend Tracking and Monitoring of Cargo Rules, 2012.

The reconstitution of committee shall comprise of Director General of Transit Trade (Chairman), Director Transit Trade (I-IQs), Karachi, Director Transit Trade (Peshawar), Director Transit Trade (Quetta), Director Reforms and Automation (Karachi), Collectors of Customs (Enforcement and Compliance, Karachi), (Appraisement and Facilitation, Port Muhammad Bin Qasim, Karachi), (Appraisement and Facilitation-East, Karachi), (Appraisement and Facilitation-West), Karachi, and Director of Intelligence and Investigation, FBR, Karachi or any other authority designated by the FBR Headquarter.

As per amendment the project director shall be Director (HQs), Directorate General of Transit Trade. Previously, the project director was Collector, Model Collectorate of Customs (Preventive).

In another amendment, Director Transit Trade (HQs), Karachi shall be the convener of the Licensing Committee and its headquarters shall be located in Directorate General of Transit Trade, Karachi. The Director Transit Trade (HQs), Karachi shall provide secretarial and other allied support required for functioning of the Licensing Committee.

A new rule introduced through the amendment that any function enumerated in these rules including mounting and un-mounting of tracking devices in the designated areas, whereof, the staff of the Directorate General of Transit Trade is not posted, shall be performed by the staff of the respective Enforcement and Compliance or Composite Customs Collectorate of jurisdiction.

June 11, 2020
FBR bans use of information system till budget announcement

ISLAMABAD: Federal Board of Revenue (FBR) has put a ban on using information system from June 11, 2020 till announcement of budget 2020/2021, which is schedule for June 12, 2020.

In an office order, the FBR said that due to budget announcement on June 12, 2020 restrictions on the access of servers/information system running at FBR Headquarters will come in force on June 11, 2020 from 8:00am till the end of budget speech.

The FBR said that message and engagement features will be disabled and would not be accessible for the internal users of the FBR house.

Users located in the FBR house premises would only be limited in routing/marking their correspondence in the Wings located within FBR House. However, external users such as RTOs/LTUs/Customs collectorates would be able to mark their correspondence to the internal users/Wings of the FBR.

The FBR said that access to the system for correction of disposition list, online application of leave and other facilities will be completely banned for field formations.

However, FBR’s e-Portal/server will remain accessible for authorized users outside FBR headquarter premises but no one within FBR HQ will be allowed to access FBR e-portal during budget exercise.

STARR and Sales Tax systems/services will remain inaccessible for FBR HQ users, however, authorized users/outside FBR HQ premises will be allowed to access the system/servers.

While the local network of PRAL HQ and FBR HQ will remain operational individually, transfer to any files/documents from FBR HQ network to PRA HQ network vice versa will be banned.

Internet services in FBR HQ will remain unavailable in FBR HQ till conclusion of budget speech.

June 10, 2020
FBR withdraws order to examine taxpayers’ information

ISLAMABAD: Federal Board of Revenue (FBR) has withdrawn the order to examine persons’ information for identifying potential taxpayers and tax evasion.

The FBR on Wednesday issued an order to withdraw the establishment of Tax Information Processing Unit (TIPU) in Inland Revenue (IR) – Operation Wing, FBR.

The FBR constituted TIPU for utilization of information available at multiple databases of the tax authorities on May 29, 2020.

The TIPU was aimed at enhancing revenues, through efficient utilization power of IT for overall system improvement.

“There is an emerging need for transforming existing raw data, available in multiple databases of the FBR, into meaningful insights, through which actionable steps may be suggested to field formation with regard to untapped revenue potential and potential leakages,” the previous order said.

To realize the true potential of IT system, developed over years, it is imperative to engage a cross-functional team of professionals, available in FBR, who may perform following tasks, before generating meaningful insights from the datasets available in its IT systems: data mining; statistical analysis; data analytics; and MIS Reporting.

The insights gained through data analysis may potentially generate actionable data which IR Operations Wing may convey to field offices, so that untapped revenue potential may be realized and potential leakages may be checked.

The FBR said that in view of foregoing a cross functional TIPU had been established in IR Operations Wing, FBR manned by FBR’s regular workforce and temporary hiring of IT-experts, on need basis.

The following officers are designated as domain team of the defunct TIPU, under the supervision of Member IR Operatoins:

a. Tariq Hussain Shaikh, Chief (IR&I)-Coordinator

b. Ms. Rezwana Siddiqui, Chief (IR-Analysis)

c. Zulfiqar Ali Gopang (S.S. IT)

d. Naveed Afgan (Dy. Dir/Secy MIS)

e. Syed Asif Jamil (AD/S.S

f. Imran Ullah (AD-Audit)

The FBR said that the TIPU was to be operated IT experts, who would be hired on market-based salaries. The IT experts would design and develop IT modules, for data analytics.

June 10, 2020
FBR suggested to reduce customs duty to 5 percent on steel products

The Karachi Chamber of Commerce and Industry (KCCI) has proposed a significant reduction in customs duty on steel products in its budget proposals for 2020/2021.
(more…)

June 9, 2020
FBR pays homage to officials die of COVID-19

ISLAMABAD: Federal Board of Revenue (FBR) has paid homage to officials who died of coronavirus in the line of duty.

The FBR in a statement on Monday paid homage to all its employees who died in the line of duty due to outbreak of Covid-19 and heartily condoled with their bereaved families.

FBR appreciates the services of these martyrs and call them real heroes who preferred to sacrifice their lives while performing their national duties even on national holidays and weekends.

The martyred employees include Islah-ud-Din of Regional Tax Office, Quetta, Naeem Iqbal of Directorate of Internal Audit Faisalabad, Khawar Mansoor of Regional Tax Office Faisalabad, Mirza Shahab Baig of Large Taxpayers Unit-II Karachi and Muhammad Arif of FBR (HQ), Islamabad.

FBR resolves not only to stay with the families of these heroes in these saddest moments and beyond but also to continue its all possible efforts in generating much needed revenue.

June 9, 2020
CNIC should be made mandatory for purchase of moveable, immovable properties

KARACHI: Federal Board of Revenue (FBR) has been proposed to make computerized national identity card (CNIC) mandatory for purchase of movable and immovable properties for bringing potential taxpayers into the tax net.

A presentation made on behalf of Pakistan Tax Bar Association (PTBA) for submission of proposals for budget 2020/2021, it is highlighted that Pakistan has a lower tax-to-GDP ratio as compared to regional and other countries, which is causing serious disparity between various sectors of the Economy.

All the segments of the society are not contributing their due share of tax on their income in accordance with their contribution in the GDP.

The number of Active Taxpayers are substantially low, as such broadening of tax base at fast pace is the needed.

For broadening the tax base and to improve the tax to GDP ratio following recommendations are made:-

FBR should extract information from withholding statements, details of government supplies and maintain a database of above third party information. Conduct the data mining and data analysis to generate complete profile for cross verification of data of the existing taxpayers as well as discovery of new taxpayers;

CNIC/NICOP/Passport should be made mandatory for purchase of any moveable or immovable properties, assets and major expenditure;

Relevant organizations, departments, institutions including utility companies, banks, NADRA and information obtained related to offshore transactions should submit prescribed information on quarterly basis to the FBR.

Exemption under Section 111(4) of the Income Tax Ordinance, 2001 may be allowed only to the foreign remittance brought into Pakistan through proper banking channel for investment for Balancing, Modernization and Replacement (BMR) of existing industrial undertakings or for making fresh investment in industrial undertakings;

Effective enforcement should be ensured for compliance of filing of Return of Income under section 114 of the Ordinance, 2001;

Atleast for five years jurisdiction (other than LTUs, CRTOs) should be made and fixed on territorial basis to avoid slippages of potential taxpayers.

June 7, 2020
COVID-19 claims four more taxmen as IR offices open on Saturdays

KARACHI: Four more officials of Inland Revenue have died of COVID-19 as field offices of Federal Board of Revenue (FBR) were remained opened on Saturday.

The offices of Federal Board of Revenue (FBR) were remained opened on Saturday as four more officials of Inland Revenue died of coronavirus, sources said.

The officers were posted at Large Taxpayers Unit (LTU) – II Karachi and Corporate Regional Tax Office (CRTO). These officers were included Masood Anwar, Riffat Kamal, Mirza Shahab Baig and Khawaja Muhammad.

Earlier, three officials of RTO Quetta and RTO Faisalabad reportedly had also died of the infection.

The sources said that score of cases had been tested positive in various RTOs and LTUs across the country in recent days.

Latest statistics updated on Saturday reported that the cases of COVID-19 increased to 93,983 out of which 1,935 deaths were reported.

The sources said that during 10 -15 days the cases had been reported at more faster pace in the FBR.

However, despite the fact the FBR had decided to open the IR offices on Saturdays.

A notification issued by the FBR a day earlier stated that the IR offices would observe normal working day on Saturdays from June 06 to June 30, 2020.

The decision to open the offices was taken to achieve Rs415.5 billion during June 2020 in order the meet the revenue collection target of around Rs3,933 billion for the current fiscal year.

June 7, 2020