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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.

  • Cash paid for housing unit above Rs2 million required to be reported under AML/CFT: FBR

    Cash paid for housing unit above Rs2 million required to be reported under AML/CFT: FBR

    ISLAMABAD: Every cash transaction for sale and purchase of a housing unit of above Rs2 million is required to be reported under anti-money laundering (AML) / Counter Financing of Terrorism (CFT) to comply with conditions of Financial Action Task Force (FATF), the Federal Board of Revenue (FBR) said on Monday.

    The FBR issued guidelines to provide guidance to real estate agents (REAs) in implementing and complying with requirement in AML/CFT regime.

    The FBR said that currency transaction report (CTR) is required to be submitted when a developer receives cash or bearer negotiable instruments Rs2 million and above for selling real estate e.g. developer sells directly to buyer and receives direct cash payments.

    Similarly, a developer pays with cash or bearer negotiable instruments Rs2 million and above for buying real estate e.g. property developer or builder pays for purchase of real estate for development.

    Likewise, a broker receives or pays in case Rs2 million and above to be used subsequently in the purchase of real estate e.g. broker is a buyer’s agent who receives cash to be used subsequently to pay deposit/ or a settlement (either receipt or subsequent use may meet the CTR threshold).

    However, real estate agent would not be required to file any CTR if all financial transactions are via wire transfers. If REA pays cash to sales staff as remuneration over the threshold, or to a supplier, or purchase of an asset such as a motor vehicle, it would not be subject to CTR filing. They would not be considered as buying and selling real estate.

    The FBR said that the reason REAs are subject to the FATF standards and AML/CFT measures is because the real estate sector provides attractive assets for persons to launder funds from criminal activities given the large sums involved. “There are many example of criminals or corrupt officials using funds acquired from illegal activities to purchase real estate. REAs and their salespersons help customers to transact real properties and this could involve or facilitate the movement of large amounts of funds, sometimes across international boundaries. Real estate may also be involved with the financing of terrorism as terrorist groups may buy or sell real estate.”

    Pakistan’s AML/CFT regulatory regime is strongly informed by the international AML/CFT standards promulgated by the FATF. The FATF is an international task force established in 1989 to develop international standards to combat ML, TF and the financing of proliferation (PF). The FATF published a revised set of 40 Recommendations on AML/CFT measures in 2012, which are being continuously updated.

    Pakistan is currently under the FATF International Cooperation Review Process (ICRG) “Jurisdictions under Increased Monitoring” or “Grey list” process. Pakistan has committed to working with the FATF to address strategic deficiencies to counter ML and TF. Pakistan has also committed to improving its broader compliance with the FATF standards as part of its membership with the APG.

    There is a definition of a REA under both the AMLA and AML/CFT regulations, as extracted below:

    – AMLA, Section 2.Definitions (xii) (a)

    (a) real estate agents, including builders and real estate developers, when performing the prescribed activities in the prescribed circumstances and manner;

    -FBR AML/CFT Regulations for DNFBPs in Section 2.Definitions (n):

    (n) “Real Estate Agent” includes builders, real estate developers and property brokers and dealers when execute a purchase and sale of a real property, participate in a real estate transaction capacity and are exercising professional transactional activity for undertaking real property transfer;

    While the FBR AML/CFT Regulations for DNFBPs identifies four categories of REAs, in reality, your business could include all four with different business lines, or your real estate agency business is just brokerage.

  • PTBA demands 90-day date extension for taxpayers’ profile update

    PTBA demands 90-day date extension for taxpayers’ profile update

    ISLAMABAD: Pakistan Tax Bar Association (PTBA) has demanded the Federal Board of Revenue (FBR) to extend the last date for taxpayers’ profile update at least for 90 days as system glitches creating hurdles in making compliance.

    The PTBA on Monday sent a letter to FBR chairman Muhammad Javed Ghani highlighting issues related to updating the profiles of the taxpayers up till December 31, 2020 in compliance of the provisions of Section 114A of the Income Tax Ordinance, 2001 inserted through Finance Act, 2020.

    The Section has made it compulsory for the taxpayers to update their profile electronically containing various information such as bank account, utilities etc. Furthermore, failure to file the prescribed form will also trigger the penal provisions as well as exclusion of the taxpayers from ATL list.

    The PTBA highlighted that there are several issues which needs to be addressed in this cumbersome and time consuming process of updating profile of around 2.5 million taxpayers across the country.

    The apex tax bar pointed out that the in the prescribed format for updating profile, the date can be put into it but there is no option for submission or is it just need to be entered into the said form? Hence, needs clarification in this regard.

    “Whether the salaried individuals are also required to update their profile as there is no provision under Section 114A of the Ordinance, ibid requiring them to do so? Furthermore, the persons applying for registrations under section 181 are also required update their profiles. Will the same apply for the salaried individuals apply for registration under Section 181?”

    The PTBA also pointed out that the tab/icon for the profile update is also appearing in the portals of the e-intermediary however, it does not work to update the profiles of the taxpayers appearing the portal of such e-intermediaries. The said issue needs to be rectified as most of the taxpayers rely on their representatives to do the e-filing work in this regard.

    The necessary amendments needs to be made into IRIS system to allow the taxpayers to update their profile at the time of registration as the said updating is time consuming, cumbersome process as well as duplication of the information put through form 181.

    Keeping in view the glitches, shortfall, issues the member has been requested to issue directions to the concerned IT department in order to do the needful in this regard as early as possible.

    Furthermore, till such time these issues are resolved by the relevant IT department, the time line for updating the profile under the provisions of the Section 114A of the Ordinance, ibid may kindly be extended for further reasonable time (preferably 90 days).

  • KTBA urges FBR to issue form for updating taxpayers’ profile

    KTBA urges FBR to issue form for updating taxpayers’ profile

    KARACHI: Tax practitioners have urged the Federal Board of Revenue (FBR) to issue form for updating taxpayers’ profile and provide suitable time for making compliance.

    In a letter sent to Member Inland Revenue (Operations) FBR, the KTBA said that the last date for updating taxpayers’ profile is December 31, 2020 but the prescribed form is still not issued.

    Although, the FBR issued draft rules for updating profile through SRO1341(I)/2020 on December 16, 2020 but the finalized format is still awaited, said KTBA President Muhammad Zeeshan Merchant.

    The KTBA president said that the prescribed form as mentioned in clause (a) of sub-section (2) of Section 114A of the Income Tax Ordinance, 2001 has still not been issued and or made available on IRIS.

    “It was, though, discussed in our meeting at length and also agreed by your goodself that when the information sought under section 114A of the Ordinance is already available on IRIS in the registration form under Section 181 of the Ordinance, this new form would simply be a repetitive and arduous exercise in the presence of the information already available on IRIS (in the form under section 181), the KTBA president told the Member.

    In addition to above, Merchant said that it was also discussed that as and when the form is prescribed, the timelines available under the Ordinance would suitably be extended/amended accordingly and at least 90 days time would be given from the date of the form is prescribed. “It is needless to say that for the form to be prescribed and uploaded on IRIS, has first to be issued in draft form for public seeking comments and objection, if any, and after that only the said form can be legally prescribed or notified.”

    Considering the issue, the KTBA requested the Member to immediately take urgent measures to prescribe the said form as soon as possible and also provide/allow proper time available under the law which is minimum for 90 days which is not only the right of the taxpayers but at present also genuinely needed as the delay is not part of the taxpayers.

  • Banks directed to collect advance tax from non-ATL persons

    Banks directed to collect advance tax from non-ATL persons

    ISLAMABAD: Federal Board of Revenue (FBR) has directed banks to collect advance income tax on non-cash banking transactions from persons non-appearing on the Active Taxpayers List (ATL).

    Sources said that financial institutions are required to collection advance tax at 0.6 percent on the transactions of above Rs50,000 non-cash banking transactions.

    The government introduced the withholding tax provision through Finance Act, 2015 and a new Section 236P was inserted to Income Tax Ordinance, 2001. Under this provision 0.6 percent withholding tax was imposed only on non-filers of income tax returns on aggregate transactions of Rs50,000 per day.

    The provision was aimed at increasing burden on person not filing income tax returns.

    The government faced opposition from various quarters after the introduction of Section 236P. Therefore, the government reduced the tax rate to 0.3 percent in the same fiscal year of its launch. The reduced rate increased to 0.4 percent in March 2017 and finally this rate made part of the statute through Finance Act, 2018.

    However, the present government through Finance Supplementary (Amendment) Act, 2018 in October 2018 restored the tax rate to 0.6 percent in order to made transactions costlier for non-compliant taxpayers.

    Through Finance Act, 2019 a new Tenth Schedule was introduced to the Ordinance, under which withholding tax would be collected form persons not appearing on the ATL.

    Previously, the income tax return filing was mandatory for appearing on the ATL. But in the latest arrangement a person will only be appear on the ATL if he files annual return by due date.

    However, after paying late filing fine a person can enroll his name to the ATL.

    The FBR sources said that the levy of advance tax on non-cash banking transactions that is only applicable on those persons not appearing on the ATL, had helped the FBR to receive all time high number of returns of 3 million for the tax year 2019 by December 21, 2020.

  • Non-filers may face concealment of income charges

    Non-filers may face concealment of income charges

    ISLAMABAD: Federal Board of Revenue (FBR) may invoke provisions of Tenth Schedule of Income Tax Ordinance, 2001 under which non-filers of income tax returns for tax year 2020 may face charges of concealment of income.

    Rule 3 of the Tenth Schedule of Income Tax Ordinance, 2001, explained:

    (1) Where for a tax year person’s tax has been collected or deducted in accordance with rule 1 and the person fails to file return of income for that tax year within the due date provided in section 118 or as extended by the Board, the Commissioner shall notwithstanding anything contained in sub-sections (3) and (4) of section 114, within sixty days of the due date provided in section 118 or as extended by the Federal Board of Revenue (FBR) make a provisional assessment of the taxable income of the person and issue a provisional assessment order specifying the taxable income assessed and tax due thereon.

    (2) In making the provisional assessment under sub-rule (1), the Commissioner shall impute taxable income on the amount of tax deducted or collected under rule 1 by treating the imputed income as concealed income for the purposes of clause (d) of sub-section (1) of section 111:

    Provided that the provision of section 111 shall be applicable on unexplained income, asset or expenditure in excess of imputed income treated as concealed income under this rule.

    Explanation.- For the removal of doubt it is clarified that the imputable income so calculated or concealed income so determined shall not absolve the person so assessed, from requirement of filing of wealth statement under sub-section (1) of section 116, the nature and source of amounts subject to deduction or collection of tax under section 111, section of audit under section 177 or 214C or subsequent amendment of assessment as provided in rule 8 and all the provisions of the Ordinance shall apply.

    The last date for filing income tax return for tax year 2020 was expired on December 08, 2020 and a large number of taxpayers have failed to comply with the mandatory requirement of filing annual return.

    At present the applicable ATL is of tax year 2019 and will remain applicable till February 28, 2021. The ATL for tax year 2020 will be issued on March 01, 2021 and will applicable till February 28, 2022.

    The FBR has received record 3 million returns for tax year 2019 and making all efforts to further increase the number for the tax year 2020.

    According to rule 01 of the Tenth Schedule the tax rate of withholding is 100 percent higher for persons having taxable income but not on the ATL.

  • FBR starts processing income tax refunds of tax year 2020

    FBR starts processing income tax refunds of tax year 2020

    ISLAMABAD: Federal Board of Revenue (FBR) has started processing income tax refunds for the tax year 2020 and issued instructions in this regard.

    The FBR issued a notification to all the chief commissioners of tax offices stating that payment of refunds or adjustment of refund have identical financial impact for the exchequer and therefore, both warrant equal focus and application of mind so that no undue and undetermined refund is either paid out or adjusted to/by the taxpayers.

    The FBR said that in this connection, the data of income tax refund applications had been obtained from field formations/PRAL for tax year 2020, and examined.

    “The data transpire that out of the total refund claims of Rs74.313 billion in the tax year 2020, 6,073 applications covering an amount of Rs4.254 billion have been lodged,” the FBR said.

    The FBR told the chief commissioners that current year’s refund liability should be paid out of the current year’s revenue stream and that no due refund should be withheld.

    It would also help us ward off unnecessary complaints against us for delayed processing of refund applications and/or non-payment of refund to the taxpayers.

    Therefore, the tax offices are advised to dispose of all applications lodged under section 170 of the Income Tax Ordinance, 2001 by January 31, 2021.

  • IR offices to observe extended working hours on December 31

    IR offices to observe extended working hours on December 31

    The Federal Board of Revenue (FBR) announced on Thursday that the offices of Inland Revenue will extend their working hours on December 31, 2020, until midnight.

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  • FBR approves concession on electricity, gas supply to manufacturers

    FBR approves concession on electricity, gas supply to manufacturers

    The Federal Board of Revenue (FBR) has given its approval for a concessionary regime on the supply of electricity and gas to manufacturing units. The decision, announced in a notification issued on Wednesday, is set to benefit manufacturers and exporters who have been availing the zero-rating of sales tax under the rescinded SRO 1125(I)/2011 dated December 31, 2011.

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  • Benami assets worth Rs7.4 billion detected; 78 percent contributed by Karachi Zone

    Benami assets worth Rs7.4 billion detected; 78 percent contributed by Karachi Zone

    ISLAMABAD: The Anti-Benami Zones established by the Federal Board of Revenue (FBR) have successfully detected benami assets totaling Rs7.4 billion, following thorough investigations in Karachi, Islamabad, and Lahore.

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  • FBR develops e-module for settlement of assessment cases

    FBR develops e-module for settlement of assessment cases

    ISLAMABAD: The IT Wing of Federal Board of Revenue (FBR) has developed e-module for settlement of assessment cases under Section 122D of Income Tax Ordinance, 2001.

    In an office memo issued to chief commissioners Inland Revenue (CCIR) of Large Tax Offices (LTOs), Medium Tax Office (MTO), Corporate Tax Offices (CTOs) and Regional Tax Offices (RTOs), the FBR said that e-module of agreed assessment under Section 122D of Income Tax Ordinance, 2001 is available in IRIS.

    The FBR said that the option to avail the opportunity of agreed assessment is visible to taxpayers, who have been issued show cause notices under Section 122(9) of the Ordinance.

    The FBR directed the CCIRs to sensitize unit officers about the e-module and also aware legal fraternity and taxpayers about this addition in IRIS.

    The FBR further directed the CCIRs to provide information in respect of taxpayers, who opted for agreed assessment by 5th of every month along with details of number of cases applied, number of cases finalized and demand created in settlement cases.

    The CCIRs have also been directed to form assessment oversight committees at their tax offices and send details to the FBR by January 05, 2021.

    The Section 122D of the Ordinance has been introduced through Finance Act, 2020. Prior to the Finance Act, 2020 there was no mechanism under the Ordinance for negotiated settlement of tax disputes before finalization of an assessment/amended assessment.

    In order to facilitate taxpayers, reduce burden on the formal appeal system and effecting speedy recoveries, a new section 122D enabling agreed assessment has been inserted through the Finance Act, 2020.

    If a taxpayer intends to settle his case on or after receipt of a notice for amendment of assessment under section 122(9) of the Ordinance, he shall have the option of filing an offer of settlement in the prescribed form before the Assessment Oversight Committee for resolution of his dispute.

    In addition, the taxpayer shall also be obliged to file a reply in response to notice for amendment of assessment under section 122(9) of the Ordinance before the concerned Commissioner.

    The Assessment Oversight Committee shall comprise the Chief Commissioner Inland Revenue, the Commissioner Inland Revenue and the Additional Commissioner Inland Revenue having jurisdiction over the taxpayer.

    The Committee shall examine the offer of settlement and may also call for the record of the case. Moreover, the Committee shall have the mandate to accept or modify the offer of settlement of the taxpayer through consensus after affording the taxpayer an opportunity of being heard.

    In case, the Committee’s decision is acceptable to the taxpayer, the taxpayer shall be obliged to deposit the amount of tax payable, including penalty and default surcharge, in accordance with the decision of the committee pursuant to which the Commissioner shall amend the assessment in accordance with the decision of the committee.

    Moreover, in such instances, the taxpayer shall forego his right to file appeal against such amended assessment.

    In case, the Committee is unable to arrive at a consensus in respect of the offer of settlement or the taxpayer is not satisfied with the decision of the Committee, the concerned commissioner shall decide the case on the basis of reply filed by the taxpayer in response to notice of amendment issued under section 122(9) of the Ordinance.

    Cases involving concealment of income or interpretation of question(s) of law having effect on other cases have been ousted from the purview of the agreed assessments under section 1220 of the Ordinance.