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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.

  • FBR exempts capital gain tax on sale of immovable properties

    FBR exempts capital gain tax on sale of immovable properties

    KARACHI: Federal Board of Revenue (FBR) has exempted capital gain tax on sale of immovable property under Tax Laws (Amendment) Ordinance, 2020.

    A new clause (114AA) has been inserted in Part I of the Second Schedule to the Ordinance, whereby exemption from tax on capital gains has been provided to a resident individual on sale of constructed residential property (a house having land area up to 500 square yards and a flat having an area up to 4000 square feet) used only for personal accommodation by the said individual, his spouse or dependents and for which any of the utility bills are issued in the name of such individual.

    The exemption shall not apply if it has been previously availed by such persons.

    No amendment has been, however, made in section 236C of the Ordinance, which implies that sale of the above properties will remain subject to collection of advance tax at 1% of sale consideration, unless the seller obtains an exemption certificate from the Commissioner.

    As per current provisions, capital gains on disposal of constructed property whose holding period exceeds four years is zero rated. Furthermore, in case such property is sold within one year of holding period, the amount of advance tax collected under section 236C at 1 percent of sale consideration is treated as minimum tax. It, therefore, appears that the purpose of this amendment is to provide an exemption from tax on capital gains on disposal of such constructed properties, which are held for less than four years.

  • FBR issues procedure for sealing of transit cargo destined for India

    FBR issues procedure for sealing of transit cargo destined for India

    KARACHI: Federal Board of Revenue (FBR) has issued procedure for sealing of transit trade cargo containers at Torkham-Peshawar and Chaman-Quetta, destined for Wahga border station for India.

    Following procedure to be adopted under Customs General Order (CGO) No. 03 of 2020 under Pakistan Customs Container Security System (PCCSS) Procedure for sealing and desealing of transshipment, safe transportation, transit and export cargo.

    (a) NON-CONTAINERIZED CARGO:

    FIRST PORTION:

    (i) After the goods, loaded in high wall Transport Unit (1st Transport Unit) of Afghanistan been processed as per rules by Torkham/Chaman Customers, the Transport Unit will be secured and covered in proper tarpaulin. The PCCSS staff Focal point (Entry) will enter the required data and apply the wire punch plomb seal or a wire seal. The container will be allowed to proceed to Peshawar/Quetta Dry Port under escort. The escort officer of Customs will carry he convoy note to Peshawar/Quetta Dry Port.

    (ii) On arrival at Customs Dryport Quetta/Peshawar, the 1st Transport Unit will be moved to the Focal Point Exit. The escort officer of customs will hand over the convoy note to the PCCSS officer.

    (iii) The PCCSS will enter the exact time and date of the arrival. In case the Transport Unit reaches within time, the PCCSS officer will inspect the truck and security of tarpaulin ad the registration number of the 1st Transport Unit and check the PCCSS wire punch plomb seal.

    (iv) After satisfying himself that the seal and container are intact and not tampered, the PCCSS officer will generate discharge note which will be given to the Customs escort officer along with the convoy note.

    (v) If the seal or container etc. is not found intact or there are reasons to doubt the integrity of cargo or seal, a discrepancy report will be filled out on the computer. The concerned PCCSS focal point will also report the matter to the Directorate of Transit Trade having jurisdiction for initiating necessary action under the law.

    (vi) The Focal Point Exit Peshawar staff will cut and collect the used plomb seals and keep in a safe disposal box. The Incharge FP (Exit) will make arrangements for the proper disposal, recycling of the plomb seals.

    (vii) The escort will return the convoy note to the Customs at Border Crossing Point.

    SECOND PORTION:

    (i) The goods will be loaded on the Pakistani trucks, hereinafter called the Second Transport Unit and released in the same as done at Border Crossing Point, with wire punch plomb seal or new wire seal by the Focal Point Entry staff at Peshawar/Quetta.

    (ii) On arrival at Wahga border station, the Second Transport Unit will be moved to the Focal Point Exit and the escort officer of Customs will hand over the convoy note to the PCCSS officer.

    (iii) The PCCSS officer will enter the exact time and date of the arrival. In case the Transport Unit reaches within time, the PCCSS officer will inspect the truck and security of the tarpaulin cover, check the registration number of the Second Transport Unit and the PCCSS wire punch plomb seal.

    (iv) After satisfying himself that the seal and container are intact and not tampered, the PCCSS- officer will generate discharge note which will be given to the Customs escort officer alongwith the convoy note.

    (v) If the seal or container etc. is not found intact or there are reasons to doubt the integrity of cargo or seal, a discrepancy report will be filled out on the computer. The concerned PCCSS focal point will also report the matter to the Directorate of Transit Trade having jurisdiction of initiating necessary action under the law.

    (vi) The Focal Point Exit Wahga staff will cut and collect the used plomb seals and keep in a safe disposal box. The In charge FP (Exit) will make arrangements for the proper disposal, recycling of the plomb seals.

  • Think tank discusses viability of reducing GST to five percent

    Think tank discusses viability of reducing GST to five percent

    ISLAMABAD: The second meeting of think tank on Saturday discussed the viability of reducing General Sales Tax (GST) from existing 17 percent to five percent on consumer goods to kick start consumer spending.

    Advisor to the Prime Minister on Finance and Revenue Dr. Abdul Hafeez Sheikh chaired the 2nd meeting of the Thinktank, recently constituted under the directions of Prime Minister, to deliberate on the Covid-19 related economic downturn and mitigation of ensuing risks.

    The forum discussed the need and scope for bailout package for large businesses and exporters apart from gauging the viability of reduction of GST on consumer goods, from 17 percent to 5 percent, to kick-start consumer spending for next two years.

    The constraints of FBR amid high revenue targets in a shrinking economy were highlighted by Finance Secretary. Decision in this regard would be made after detailed consultations.

    The forum has been mandated to provide platform for collective thinking on the emerging situation resulting from the Covid-19 related medical crisis and its spillover to economy.

    Its other members include Shaukat Tareen, Dr. Ishrat Husain, Dr. Ijaz Nabi, Sultan Ali Allana, Arif Habib, Dr. Waqar Masood. Advisor to PM on Commerce and Finance Secretary are also part of it.

    After extensive deliberations on emerging themes, the forum identified key areas for policy interventions, including monetary affairs and banking sector, fiscal matters and public finances, social safety nets, SMEs and large businesses, commodity prices, public health challenges and role of private sector and NGOs.

    Advisor to PM on Finance apprised the forum about developments at G-20 forum regarding debt relief package. There is potential for USD 1.8 billion debt deferment for one year under this, whereas proceeds worth USD 1.4 billion under IMF have already been received.

    Participants highlighted the need for further downward revision in policy rate coupled with passing on the benefits of slashed oil prices in global market to public. The focus of the deliberations remained on strengthening of aggregate demand and supply of the economy, with emphasis on lower income groups and small firms.

    Need for further liquidity for banks was discussed as strong and vibrant banking sector is essential to boost economy under such strong recessionary headwinds. Ways to further encourage remittances, agriculture financing and timely lifting of crops and vegetables from small farmers were analyzed.

    The progress of ongoing cash disbursements under Ehsas program were shared. The need for gathering reliable data on recently laid-off works and timely cash transfers to the most vulnerable were emphasized.

    Economists within the Think-tank stressed for the need of designing PSDP to facilitate labor intensive projects apart form crafting robust agriculture financing plans. The need for public private partnerships was elaborated to create fiscal space within public sector through these off-balance sheet financing arrangements which encourage private sector participation in public sector initiatives.

    Professionals within group stressed for the need of oil price hedging, power sector debt securitization and creation of fiscal space through rescheduling of foreign and domestic debts. The need for designing lending programs for housing sector participants came under consideration including facilitation of end-users. The massive scope for mortgage backed financing in Pakistan was also highlighted.

    Advisor to PM on Finance and Revenue took lead in picking most urgent themes for proper policy deliberations and decisions.

    He shared that Prime Minster of Pakistan may participate in the next session to give boost to the work of this Forum which has been constituted to provide intellectual and professional insights to the Ministry in designing and implementing incentives for economy in pragmatic fashion.

    Advisor decided that interventions with highest, medium and low impacts would be sorted out and aligned on the basis of short, medium and long term time horizons so that most essential tasks are pushed on priority basis, with proper funding and execution arrangements.

    It was also decided that international think-tanks will be engaged for cross-leaning for select policy making players in Pakistan so that robust interventions are designed to bring relief to economy and most deserving segments of public.

  • Tax liability for 2020 to be discharged with return for builders, developers

    Tax liability for 2020 to be discharged with return for builders, developers

    KARACHI: Builders and developers are required to discharge tax liability for tax year 2020 with the tax return. Commenting on Tax Laws (Amendment) Ordinance, 2020, tax experts at PwC A Ferguson said that the annual tax liability for a project is to be computed by dividing the total liability of the project under the regime by the estimated life of the project in years (which shall not exceed 2.5 years).

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  • FBR issues procedure for safe transportation of ISAF cargo

    FBR issues procedure for safe transportation of ISAF cargo

    ISLAMABAD: Federal Board of Revenue (FBR) has issued procedure for movement of International Security Assistant Force (ISAF) cargo under Pakistan Customs Container Security System (PCCSS).

    The FBR through a notification dated April 17, 2020 said that the procedure as followed for the transshipment cargo shall be applicable for sealing and de-sealing of ISAF cargo with the following modification:

    (i) The containers will be sealed with customs machine readable seal at Karachi by PCCSS after representative of ISAF has inspected, verified and confirmed that the Bill of Lading (B/L) seal/ other seal are intact. Sealing will be done in presence of authorized agent.

    (ii) The routes shall be specified by the PCCSS, and any different route or time taken en route will be informed to incharge PCCSS by the ISAF representative.

    (iii) The private companies authorized by the FBR to carry ISAF cargo in addition to National Logistic Cell (NLC) will have their transport units registered with PCCSS and the Directorate of Transit Trade, Karachi, or as specifically allowed by Incharge PCCSS on, a case to case basis.

    (iv) The unloading from Pakistani Transport Unit and loading on Afghan Transport Unit/authorized units will be done at Peshawar/Quetta dry port. In case unloading is done at the respective terminals of the private carriers, the Incharge PCCSS FP Peshawar/Quetta will coordinate with the FP, carriers and ISAF officials and depute PCCSS staff of these terminals for checking of seals. Officials of ISAF/American Consulate will check their own seals and may affix another seal of their own for their checking at Beghrem Base.

    (v) The PCCSS FP Peshawar/Quetta will check the Customs seal as well as other seals and unless a discrepancy is noted, allow the change of transport after noting the number of Second Transport of the Form A. The staff on return to PCCSS Focal Point will enter the verification of the seal in the computer.

    (vi) The PCCSS seals will be removed at Focal Point Exit Torkham/Chaman, scanned by the bar code reader and stored in the disposal receptacle.

    (vii) Returning containers from Afghanistan will be sealed at Torkham/Chaman only if not empty, as per procedure adopted for ISAF at Karachi for container bound for Afghanistan. Empty containers will not be sealed.

    Goods not to be sealed: All containerized cargo which is transshipped, in transit or for export is to be sealed. However, in case of large machinery and awkward loads wherein the seals cannot be applied, the decision will be taken by Incharge Focal Point based on the level of risk in transshipment of such cargo. The Incharge Focal Points will also decided if photographs are to be taken and sent to Incharge PCCSS. In such case the Form A will not carry a seal number, but will mention reasons for not sealing the cargo and whether a photograph of the load/cargo has been sent by e-mail.

  • Filing return mandatory for builders, developers under incentive scheme

    Filing return mandatory for builders, developers under incentive scheme

    KARACHI: The filing of income tax return and wealth statement has been made mandatory for builders and developers under new ordinance to provide incentives to construction industry.

    According to Tax Laws (Amendment) Ordinance, 2020, builders and developers under the special tax regime are also required to electronically file annual tax returns (including wealth statements, wherever applicable) to be accompanied by evidence of tax payment.

    Such a tax return will be considered as an assessment order issued under section 120 of the Ordinance, according to commentary on the ordinance issued by PWC A F Ferguson.

    Tax liability for tax year 2020 is required to be discharged with the tax return.

    It further said that a tax return or declaration of a builder or developer is considered void if it is based on misrepresentation or on suppression of facts and all the provisions of the Ordinance will apply unless such misrepresentation is due to a bona fide mistake.

    No action is to be taken without providing an opportunity of being heard and without prior approval of Federal Board of Revenue (FBR).

  • SECP highlights difficulties in present tax regime

    SECP highlights difficulties in present tax regime

    ISLAMABAD: Securities and Exchange Commission of Pakistan (SECP) has highlighted difficulties faced by corporate sector due to prevailing tax regime.

    The SECP chairman called upon the chairperson of Federal Board of Revenue (FBR) on Wednesday to discuss a number of taxation policy reforms that are essential for the development of Pakistan’s capital markets, corporate sector, non-banking finance industry, REIT and insurance sector.

    While presenting the proposals, the SECP chair highlighted key issues and challenges being faced by the SECP regulated sectors due to prevailing taxation regime.

    He emphasized that growth and development of the formal economy was largely dependent on providing a level playing field where individuals and businesses were encouraged to participate through regulated and documented sectors of the economy.

    The FBR chairperson while discussing the proposals agreed that documentation of the economy was a key priority of the government.

    Development of the formal economy through fiscal incentives and removal of taxation anomalies could ultimately increase the country’s overall revenue generation capacity.

    It was agreed that the SECP and FBR would meet again, within a fortnight, to take the discussions forward.

  • FBR asks taxpayers to provide IBAN for direct refund payment transfer

    FBR asks taxpayers to provide IBAN for direct refund payment transfer

    ISLAMABAD: Federal Board of Revenue (FBR) on Wednesday asked taxpayers to provide IBAN of their bank accounts for receiving refund payment through online system.

    FBR spokesman said that the tax body had devised a centralized system of online payment of Sales Tax, FED and Income Tax refunds directly in the bank account of the taxpayers.

    For this purpose, FBR has requested the taxpayers to update their IRIS profile.

    In the given bank account details area in the system, IBAN detail row is added wherein taxpayers are required to add their complete Bank’s IBAN number of same Bank Account whose details are already available in IRIS profile to receive Sales Tax, FED and Income Tax refund cheques.

    FBR has advised the taxpayers to do the needful as soon as possible to avail electronic transfer facility.

    Likewise, FBR has also required from the exporters to update their WEBOC profile and provide IBAN of the same Bank Account whose details are already available in WEBOC profile of the exporters to receive Custom Duty Drawback.

    FBR has required the information to be provided as soon as possible to avail electronic transfer facility for Customs Duty Drawback payments.

  • New fixed tax regime for builders and developers

    New fixed tax regime for builders and developers

    KARACHI: The government has launched the incentive package for construction industry and introduced a fixed tax regime for builders and developers.

    The Federal Board of Revenue (FBR) issued Tax Laws (Amendment) Ordinance, 2020, which was promulgated through presidential order to amend Income Tax Ordinance, 2001 in order to provide tax incentives.

    According to commentary on the new ordinance issued by PWC A F Ferguson Chartered Accountants a new provision section 100D has been introduced in the Income Tax Ordinance, 2001, prescribing a scheduler based fixed tax regime for Builders and Developers on the basis of project area in respect of their income from sale of building or sale of plots, for tax year 2020 and onwards.

    Necessary rules to that effect have been enacted by way of insertion of Eleventh Schedule to the Ordinance.

    Similar to other scheduler based taxation provisions, all other provisions of the Ordinance (including recovery of tax not paid and matters connected therewith) not specifically covered under section 100D and Eleventh Schedule will remain applicable on Builders and Developers.

    A similar fixed tax regime for builders and developers whereby tax was payable on the basis of area was also introduced though Finance Act, 2016 by way of sections 7C and 7D of the Ordinance, which was subsequently restricted through Finance Act, 2017 to only such Projects, which were initiated and approved during tax year 2017.

    As such, builders and developers not covered by sections 7C and 7D were required to pay tax on net income basis.

    The provisions of section 100D read with Eleventh Schedule to the Ordinance are applicable to all Builders and Developers, who opts for such taxation and are registered with the Federal Board of Revenue (FBR) on a Project-by-Project basis (hereinafter referred to as ‘eligible project/project’ as the context so requires).

    For the eligible projects, the builder or developer will pay tax on the income from the sale of buildings or sale of plots, as the case may be, in respect of:

    (a) a new project to be completed by September 30, 2022; or

    (b) an incomplete existing project to be completed by September 30, 2022.

    However, income, profits and gains earned up to tax year 2019 from incomplete existing projects will remain subject to the provisions of the Ordinance before the commencement of the Amendment Ordinance.

    Any income of the builder or developer other than income subject to special tax regime of the Eleventh Schedule shall be subject to tax as per normal provisions of the Ordinance.

    Computation of income and annual tax payable thereon at the fixed rates under the regime is to be made on a Project-by-Project basis as Final Tax.

    Such income, being subject to final tax regime, shall not be chargeable to tax under any head of income in computing the taxable income.

    No deduction for any expenditure, deductible allowance or set-off of any loss will be allowed. Tax credits are also not allowed against tax payable except for tax collected from the builder or developer under section 236K of the Ordinance after the commencement of the Amendment Ordinance on purchase of immovable property utilized in eligible projects. No refund of any taxes suffered is allowed.

  • Illicit money given amnesty through package to construction industry

    Illicit money given amnesty through package to construction industry

    ISLAMABAD: The government has given an amnesty to illicit money in case of investment made into to construction industry as no question of money to be asked under Income Tax Ordinance, 2001.

    Federal Board of Revenue (FBR) on Monday issued the Tax Laws (Amendment) Ordinance No.1 of 2020 after the approval from the president.

    The ordinance says that it was being promulgated, “whereas, the COVID-19 pandemic has created a worldwide crisis due to which industries, businesses, offices, service has been shut down in Pakistan and economic activity is at a standstill.”

    “And whereas, in order to protect and revive the economy of Pakistan, it is essential and critical to give incentives for revival of the construction industry with certain conditions as provided for in this ordinance.”

    Amendment has been made to Income Tax Ordinance, 2001 under which Section 111 shall not apply to the first purchaser of a building or a unit and capital investment made in a new project in the form of money or land.

    Section 111 of the Ordinance deals with concealed or undeclared money whereas harsh penalties under the ordinance have been outlined for undeclared money.

    According to the sub-Section 3 of Tax Laws (Amendment) Ordinance No.1 of 2020, the provisions of Section 111 shall not apply to capital investment made in a new project in the form of money or land, subject to 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;

    (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 persons shall be single object (builder or developer) company or association of persons registered under the Companies Act, 2017 or the Partnership Act, 1932, as the case may be, after the date of commencement of the Tax Laws (Amendment) Ordinance, 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, on o 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;

    (c) a person making an investment under the ordinance shall submit a prescribed form on IRIS web portal;

    (d) a person making an investment shall be wholly utilized in 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 developer

    (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, 2020; and

    (C) at least 50 percent of the roads have been laid up to sub-grade level as certified by the approving authority or NESPAK.

    The sub-Section 4 of the latest ordinance said that 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 or 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 of 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.

    The sub-Section 5 of the latest ordinance said that sub-Section (3) or (4) apply, the value or price of land or building, as the case may be, shall be 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.

    Sub-Section 6 of the ordinance stated that Sub-Section (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 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 the 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 the ordinance.