ISLAMABAD: Federal Board of Revenue (FBR) has said that after amendments made to sales tax and federal excise laws various authorities and organizations have been made duty bound to allow real-time access to tax authorities for preventing tax evasion.
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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.
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CNIC made mandatory for recipient of services
ISLAMABAD: Federal Board of Revenue (FBR) has said that buyer’s CNIC (Computerized National Identity Card) detail is now mandatory on the invoice issued by seller for providing service in order avail credit.
The FBR in its explanation of Sales Tax and Federal Excise through Circular No. 01 of 2020, stated the word “services” has been added along with goods to enlarge the scope of disallowance of input tax on account of non-mentioning of CNIC of the buyer by the seller on the invoice as required under section 23 of the 1990 Act.
Resultantly, input tax claimed against goods as well as services shall be disallowed on pro rata basis if supplies have been made to persons without obtaining their CNIC/ NTN subject to the conditions mentioned in the law.
The measure is expected to optimally broaden the sales tax base.
The FBR explained that Following two changes have been made in subsection (7) of Section 3: The expression “by the buyers” has been omitted and after the word “persons” the expression “being purchaser of goods or services” has been added”.
The first change is only clarificatory/consequential, however, the second change enlarges the scope of sales tax withholding by including purchase of services in the ambit of sales tax withholding regime.
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FBR updates withholding tax rate on payment for goods, services
ISLAMABAD: Federal Board of Revenue (FBR) has updated withholding tax rates on payments for goods and services during tax year 2021.
The FBR updated withholding tax card 2020-2021 after incorporating amendments made to Income Tax Ordinance, 2001 through Finance Act, 2020.
Under Section 153 of Income Tax Ordinance, 2001 every prescribed person shall collect withholding tax from resident person; Resident Person; and Permanent Establishment in Pakistan of a Non-Resident at the time the amount is actually paid for goods & services
Under Section 153(1)(a) the tax rate for sale of rice, cotton seed oil and edible oil shall be 1.5 percent of the gross amount and the tax rate shall be increased by 100 percent in case persons are not on the Active Taxpayers List (ATL).
The tax rate for supply made by distributors of fast moving consumer goods:
In case of company 2 percent of gross amount
Other than company the tax rate shall be 2.5 percent of gross amount
The tax rate shall be increased by 100 percent in case persons are not on the ATL.
Tax rate for supply made to Utility Stores Corporation of Pakistan:
Persons (other than company) 1.5 percent of gross amount and the tax rate shall be increased by 100 percent in case persons are not on the ATL.
Provided that the payment shall be made only in respect of supply of tea, spices, salt, dry milk, sugar, pulses wheat flour and ghee for the period commencing from the 7th day of April, 2020 and ending on 30th day of September, 2020
Provided that this clause shall not be applicable to supply of tea, spices, salt and dry milk which are sold under a brand name.
Provided further that this clause shall not be applicable where rate of tax under clause (a) of sub-section (1) of section 153 is less than 1.5% of the gross amount of payment under any provisions of the ordinance
For sale of any other goods:
In case of a company the tax rate shall be 4 percent of the gross amount.
Other than company the tax rate shall be 4.5 percent of the gross amount
The tax rate shall be increased by 100 percent in case persons are not on the ATL.
The FBR said that in case of goods:
No deduction of tax where payment is less than Rs. 75,000/- in aggregate during a financial year [S.153(1)(a)]
The tax shall be minimum tax for all except in the following cases where it shall not be minimum tax on sale or supply of goods, by:
(i) a company being manufacturers of such goods or
(ii) Public company listed on registered Stock Exchange in Pakistan.
Under Section 153(1)(b)
Ever prescribed person shall collect withholding tax from resident person; Resident Person; and Permanent Establishment in Pakistan of a Non-Resident at the time the amount is actually paid
i. Transport services, freight forwarding services, air cargo services, courier services, man power outsourcing services, hotel services, security guard services, software development services, IT Services and IT enabled services as defined in clause (133) of Part I of the Second Schedule, tracking services, advertising services (other than by print or electronic media), share registrar services, engineering services, car rental services, building maintenance services, services rendered by Pakistan Stock Exchange Ltd. & Pakistan Mercantile Exchange Ltd. , inspection, certification, testing & training services.;
The tax rate shall be 3 percent of the gross amount and the rate shall be 6 percent in case persons not on the ATL.
ii. In case of rendering or providing of services other than as mentioned at (i) above;
a) In case of company 8 percent of the gross amount
b) In any other case 10 percent of the gross amount
c) In respect of persons making payment to electronic & print media for advertising services 1.5 percent of the gross amount
The tax rate shall be increased by 100 percent in case persons are not on the ATL.
The FBR said that in case of services:
No deduction of tax where payment is less than Rs. 30,000/- in aggregate during a financial year [S.153(1)(b)]
The tax shall be minimum tax.
Under Section 153(1)(c)
Every prescribed person shall collect / deduct withholding tax from resident person; Resident Person; and Permanent Establishment in Pakistan of a Non-Resident at the time the amount is actually paid.
Execution of Contracts
i) In case of sportsperson 10 percent
ii) In the case of companies : 7 percent
iii) In the case of persons other than companies 7.5 percent
The tax rate shall be increased by 100 percent in case persons not on the ATL.
Minimum Tax for all whereas it will remain adjustable where payments are received on account of execution of contracts by Public Company listed on registered Stock Exchange in Pakistan
Under Section 153(2)
Every exporter/export house shall collect/deduct withholding tax from resident person; Resident Person; and Permanent Establishment in Pakistan of a Non-Resident at the time of making the payment.
Every Exporter or Export House shall deduct Tax on payments in respect of services of stitching, dying, printing etc. received/provided.
1 percent of the gross amount and the rate shall be increased by 100 percent in case persons not on the ATL.
The tax shall be minimum tax.
Under Section 153B
Every person paying an amount of royalty, in full or in part including by way of advance shall collect/deduct withholding tax from resident person at the time of making gross payment of royalty, in full or in part including by way of advance (including Federal Excise Duty and provincial sales tax, if any)
Tax to be deducted on payment of royalty to resident person at 15 percent of the gross amount payable (including FED & Provincial Sales Tax, if any).
The tax rate shall be increased by 100 percent in case persons not on the ATL.
The tax withheld shall be adjustable.
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Indemnity bond to be made mandatory for international transshipment facility
ISLAMABAD: Federal Board of Revenue (FBR) on Wednesday issued draft rules to make indemnity bond mandatory for shipping lines intending to use facility of international transshipment cargo within Pakistani sea ports.
The FBR issued draft rules through SRO 685(I)/2020 to amend Customs Rules, 2001.
According to the draft rules, shipping lines intending to use the facility of international transshipment would require to furnish an indemnity bond for an amount equal to the approximate value of goods expected to be imported in thirty days as security to ensure exit of goods outside the country within 30 days from the berthing of inward vessel.
The FBR said that the indemnity bond would be forfeited apart from other consequential penal action under the Customs laws, if the shipping line misuses the facilitation of international transshipment.
If goods still remain on the port after the expiry date including extended time allowed under the law, the shipping line would be responsible to remove the goods immediately unless the delay was attributed to the port authorities, the FBR added.
According the draft rules the shipping lines would also liable to submit complete details of Import General Manifest (IGM).
The shipping lines would require providing details, such as: port of loading; name of transshipment port of Pakistan; port of destination (final port of discharge at foreign destination); bill of lading number; name of foreign exporter; name of foreign importer; weight; seal number; and container number.
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FBR updates withholding tax rates on payment to non-residents
ISLAMABAD: Federal Board of Revenue (FBR) has updated withholding tax rates on payment made to non-residents for tax year 2021 under Section 152 of Income Tax Ordinance, 2001.
The FBR updated withholding tax card 2020-2021 (up to June 30, 2020) after incorporating amendments made through Finance Act, 2020.
According to the withholding tax rates:
Under Section 152(1), every person shall deduct tax while making payments for royalties and fee for technical payments to non-resident.
The withholding tax rate shall be 15 percent of the gross amount and it shall be increased by 100 percent in case the person is not on the Active Taxpayers List (ATL).
Every person paying royalty or fee for technical services to a non-resident shall withholding tax on payment to non-resident person at the time the royalty or fee for technical services is actually paid
The tax shall be minimum tax as per section 6 read with section 8.
Under section 152(1A), the tax will be deducted from a non-resident person on the execution of;
a) Contract or sub-contract under a construction, assembly or installation project in Pakistan including a contract for the supply of supervisory activities relating to such project.
b) Any other contract for construction or services rendered relating there to.
c) Contract for advertisement services rendered by TV Satellite Channels.
The tax rate shall be 7 percent of the gross amount
The tax shall be collected by every person from non-resident person at the time the amount is actually paid.
The tax shall be minimum tax on the income of non-resident person arising from a contract.
Under Section 152(1AA), the tax will be deducted from non-resident on any payment of insurance premium or re-insurance to a non-resident person.
The tax shall be 5 percent of gross amount and 10 percent for persons not appearing in ATL.
The tax shall be collected by every person making the payments to non-resident person at the time the amount is actually paid.
The tax shall be minimum tax.
Under Section 152 (1AAA) tax will be deducted on payments for advertisement services from non-resident person relaying from outside Pakistan.
The tax rate shall be 10 percent of the gross amount.
The tax shall be collected by every person making payment to non-resident at the time the amount is actually paid.
The tax shall be minimum tax.
Under Section 152(1C), the tax shall be deducted on remittance outside Pakistan, of fee for off-shore digital services, chargeable to tax u/s 6, to a non-resident person on behalf of any resident or a permanent establishment of a non-resident in Pakistan.
The tax rate shall be 5 percent of the gross amount.
The tax shall be collected by banking company or financial institution from non- resident at the time the amount is actually paid.
Under Section 152(2) tax deduction on payment to non-resident, not otherwise specified.
The tax rate shall be 20 percent of the gross amount and the rate shall be 40 percent for persons not appearing on the ATL.
The tax shall be collected by every person making payments to non-resident person at the time the amount is actually paid.
The withholding tax shall be adjustable.
Under Section 152(2), as per clause 5AA of Part-II of the Second Schedule, the rate of tax to be deducted under sub-section (2) of section 152, in respect of payments to an individual, on account of profit on debt earned from a debt instrument, whether conventional or shariah compliant, issue by the Federal Government under the Public Debt Act, 1944 and purchased exclusively through a bank account maintained abroad, a non-resident Rupee account repatriable (NRAR) or a foreign currency account maintained with a banking company in Pakistan.
The tax rate shall be 10 percent of the gross amount and the tax rate shall be increased by 100 percent in case person is not on the ATL.
The tax shall be collected by every person responsible for making payment to a non-resident person at the time of payment.
The tax shall be final.
Under Section 152(2A), every prescribed person making payment to a Permanent Establishment of Non- Resident.
For:
(a) Sale of goods
(i) In case of a company the tax rate shall be 4 percent of the gross amount.
(ii) Other than company cases the tax rate shall be 4.5 percent of the gross amount.
(b) (i) In the cases of transport services, freight forwarding services, air cargo services, courier services, man power outsourcing services, hotel services, security guard services, software development services, IT Services and IT enabled services as defined in clause (133) of Part I of the Second Schedule, tracking services, advertising services (other than by print or electronic media), share registrar services, engineering services, car rental services, building maintenance services, services rendered by Pakistan Stock Exchange Ltd. & Pakistan Mercantile Exchange Ltd., inspection and certification, testing & training services.
The tax rate shall be 3 percent and the tax rate shall be increased by 100 percent in case persons are not on the ATL.
(ii) in case of a company the tax rate shall be 8 percent and it shall be 16 percent for persons not on the ATL.
(iii) Other than company cases the tax rate shall be 10 percent and the rate shall be increased by 100 percent in case persons are not on the ATL.
(c) Execution of a contract other than a contract for sale of goods or providing/ rendering of services.
(i) In case of sports persons the tax rate shall be 10 percent and it shall be 20 percent for persons not on the ATL.
(ii) Other than sports persons the tax rate shall be 7 percent and it shall be 14 percent in case persons are not on the ATL.
The tax shall be collected by every prescribed person from non-resident at the time amount is paid.
The tax shall be minimum tax for S.152(2A)(b) and the provisions of sub clauses (i), (ii) and (iii) of clause (b) of sub section (3) and sub-section (4A) of section 153 shall mutatis mutandis apply 152(2B)
Provided that tax deductible under clause (a) of sub-section (2A) shall not be minimum tax where payments are received for sale of goods by a company being a manufacturer of such goods.
Section 152A: Payment for Foreign Produced Commercials
Tax to be deducted from non-resident while making payments for foreign produced commercial for advertisement on any television channel or any other media.
The tax rate shall be 20 percent of the gross amount and it shall be 40 percent if persons are not on the ATL.
The tax shall be collected by every person responsible for making payment to a non-resident person at the time of payment. The tax shall be final.
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Rates of withholding tax on profit on debt updated for tax year 2021
ISLAMABAD: Federal Board of Revenue (FBR) has updated withholding tax rates on profit on debt to be prevailed during Tax Year 2021. The FBR issued withholding tax card 2020/2021 after incorporating changes made through Finance Act, 2020.
The rates of withholding tax on profit on debt under Section 151 of Income Tax Ordinance, 2001 to be collected by person making payment of profit/yield from recipients of (profit on debt) at the time the yield (profit on debt) is credited to the account of the recipient or is actually paid, whichever is earlier.
According to the tax card:
Section 151(1)(a) Yield or profit (profit on debt) on account, deposits or a certificate under the National Saving Schemes or Post Office Saving Account
Up to Rs500,000 the tax rate shall be 10 percent of the gross yield/profit paid
Exceeding Rs500,000 the tax rate shall be 15 percent of the gross yield/profit paid and 30 percent if the person is not on the Active Taxpayers list (ATL).
The FBR said that it shall be minimum tax on the profits on debt arising to a taxpayer, except where-(a) Taxpayer is a company; or (b) Profit on debt is taxable u/s 7B.
Under Section 151(1)(b) banking company or financial institution shall collect the withholding tax from recipient of profit on debt at the time the profit on debt is credited to the account of the recipient or is actually paid, whichever is earlier.
The tax rate shall be 10 percent of the gross yield / profit on debt on payment of up to Rs500,000.
On amount exceeding Rs500,000 the tax rate shall be 15 percent of the gross yield / profit on debt and it shall be increased by 100 percent in case person is not on the ATL.
The FBR said that the tax shall be minimum tax on the profits on debt arising to a taxpayer, except where- (a) taxpayer is a company; or (b) profit on debt is taxable u/s 7B.
Under Section 151(1)(c) the federal/provincial government/local authorities shall collect tax on profit on securities, other than those mentioned in Section 151(1)(a), issued by federal/provincial government or a local government from recipient of (profit on debt) at the time the profit on debt is credited to the account of the recipient or is actually paid, whichever is earlier.
The tax rate shall be 10 percent of the gross yield/profit paid on amount up to Rs500,000.
On amount exceeding Rs500,000 the tax rate shall be 15 percent of the gross yield/profit paid, the tax rate shall be increased by 100 percent in case person is not on the ATL.
The FBR said that the tax shall be minimum tax on the profits on debt arising to a taxpayer, except where-(a) taxpayer is a company; or (b) profit on debt is taxable u/s 7B.
Under Section 151(1)(d) banking company, a financial institution, a company or finance society shall collect withholding tax on profit on bonds , certificates, debentures, securities or instruments of any kind (other than loan agreements between borrowers and banking companies or development financial institutions) from recipient of profit on debt at the time the profit on debt is credited to the account of the recipient or is actually paid, whichever is earlier.
The tax rate shall be 10 percent of the gross yield/profit paid on amount up to Rs500,000.
On amount exceeding Rs500,000 the tax rate shall be 15 percent of the gross yield/profit paid, the tax rate shall be increased by 100 percent in case person is not on the ATL.
The FBR said that the tax shall be minimum tax on the profits on debt arising to a taxpayer, except where-(a) taxpayer is a company; or (b) profit on debt is taxable u/s 7B.
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FBR directs BS-19, BS-20 officers to submit performance reports
ISLAMABAD: Federal Board of Revenue (FBR) has directed officers of BS-19 and BS-20 to complete their performance evaluation reports (PERs) for the consideration of promotion to next grade in the upcoming central selection board (CSB).
The FBR in a circular issued on Monday said that the Establishment Division had informed that a meeting of CSB for consideration of promotion of officers from BS-20 to BS-21 and BS-19 to BS-20 post, was scheduled to be held shortly.
It has been observed that PERs of the officers of IRS/PCS as per list given, who are in promotion zone, have not yet been received despite reminders.
“All officers as per above list are requested to get complete their PERs urgently without further delay,” the FBR said.
The FBR issued list of 13 IRS officers of BS-20 and 34 IRS officers of BS-19 who failed to submit their PERs.
Further, the FBR said that 13 PCS officers of BS-20 and 22 PCS officers of BS-19 had failed to provide their PERs.
It is pertinent to mention that the incomplete PERs of government officials may put them under forced retirement as envisaged in Government Servants (Directory Retirement from Service) Rules, 2020.
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FBR exempts sales tax on import of oxygen gas, cylinders
ISLAMABAD: Federal Board of Revenue (FBR) on Monday granted sales tax exemption on import of oxygen gas and cylinders (for oxygen gas) for a period of three months.
The FBR issued SRO 649(I)/2020 dated August 03, 2020 to exempt the sales tax from June 23, 2020 on import of the following:
01. Oxygen gas under PCT 2804.4000
02. Cylinders (for oxygen gas) under PCT 7311.0090
03. Cryogenic tanks (for oxygen gas) under PCT 7311.0030
The FBR said that the said exemption shall apply in respect of the letters of credit opened or goods declaration forms filed on or after June 23, 2020.
Previously the FBR issued SRO 593(I)/2020 and exempted the import of oxygen gas and oxygen gas cylinders from customs duty for three months effective from June 23, 2020.
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Withholding tax rates on dividend income updated for tax year 2021
ISLAMABAD: Federal Board of Revenue (FBR) has updated withholding tax card for dividend income to be applicable during Tax Year 2021 (2020-2021).
The FBR issued the withholding tax card 2020-2021 (updated up to June 30, 2020) after incorporating amendments made to Income Tax Ordinance, 2001 through Finance Act, 2020.
Under Section 150 of Income Tax Ordinance, 2001, every person paying dividend shall collect/deduct withholding tax at prescribed rates from recipient of dividend at the time the dividend is actually paid.
The tax shall be final under section 5 read with section 8 of the Income Tax Ordinance, 2001.
According to the updated withholding tax card:
Tax shall be deducted on the gross amount of dividend paid:
(a) In the case of dividend paid by Independent Power Purchasers (IPPs) whereas such dividend is a pass through item under an Implementation Agreement or Power Purchase Agreement or Energy Purchase Agreement and is required to be reimbursed by Central Power Purchasing Agency (CPPA-G) or its predecessor or successor entity:
The tax rate shall be 7.5 percent and 15 percent for persons not appearing on Active Taxpayers List (ATL).
(b) In mutual funds and cases other than mentioned at (a) above and (ba) below
The tax rate shall be 15 percent and 30 percent for persons not appearing on the ATL.
(ba) In case of person receiving dividend from a company where no tax is payable by such company, due to exemption of income or carry forward of business losses under Part-VIII of Chapter-III or claim of tax credits under Part-X of Chapter-III.
The tax rate shall be 25 percent and the rate shall be increased by 100 percent in case the person is not on the ATL.
Return on Investment in Sukuk under Section 150A
Special Purpose Vehicle, Company shall collect / deduct withholding tax at prescribed rates from Sukuk holders on payment of gross amount of return on investment at the time of actual payment
The tax shall be final under section 5AA read with section 8 of the Income Tax Ordinance, 2001.
On Payment of return on investment in Sukuks:
a) In case the Sukuk- holder is a company the tax rate shall be 25 percent and it shall be increased by 100 percent in case persons are not on the ATL.
b) In case the Sukuk – holder is an individual or an association of person, if the return on investment is more than one million, the tax rate shall be 12.5 percent and the rate shall be doubled in case persons not appearing on the ATL.
c) In case the Sukuk – holder is an individual and an association of person, if the return on investment is less than one million, the tax rate shall be 10 percent and will be doubled in case person is not on the ATL.
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FBR updates withholding tax card for salary income
ISLAMABAD: Federal Board of Revenue (FBR) has issued updated withholding tax card for salary income to be prevailed during Tax Year 2021 (2020-2021).
The FBR issued the withholding tax card 2020-2021 (updated up to June 30, 2020) after incorporating amendment made to Income Tax Ordinance, 2001 through Finance Act, 2020.
According to the withholding tax card, every person responsible for paying salary to an employee shall deduct tax from the amount paid under Section 149 of Income Tax Ordinance, 2001 as per given rates:
Salary slabs Tax Rates on salary slabs 01. Where taxable income does not exceeds Rs600,000 0 percent 02. Where taxable income exceeds Rs600,000 but does not exceed Rs1,200,000 5 percent of the amount exceeding Rs600,000 03. Where taxable income exceeds Rs1,200,000 but does not exceeds Rs1,800,000 Rs30,000 plus 10 percent of the amount exceeding Rs1,200,000 04. Where taxable income exceeds Rs1,800,000 but does not exceed Rs2,500,000 Rs90,000 plus 15 percent of the amount exceeding Rs1,800,000 05. Where taxable income exceeds Rs2,500,000 but does not exceed Rs3,500,000 Rs195,000 plus 17.5 percent of the amount exceeding Rs2,500,000 06. where taxable income exceeds Rs3,500,000 but does not exceed Rs5,000,000 Rs370,000 plus 20 percent of the amount exceeding Rs3,500,000 07. Where taxable income exceeds Rs5,000,000 but does not exceed Rs8,000,000 Rs670,000 plus 22.5 percent of the amount exceeding Rs5,000,000 08. where taxable income exceeds Rs8,000,000 but does not exceeds Rs12,000,000 Rs1,345,000 plus 25 percent of the amount exceeding Rs8,000,000 09. Where taxable income exceeds Rs12,000,000 but does not exceed Rs30,000,000 Rs2,345,000 plus 27.5 percent of the amount exceeding Rs12,000,000 10. Where taxable income exceeds Rs30,000,000 but does not exceed Rs50,000,000 Rs7,295,000 plus 30 percent of the amount exceeding Rs30,000,000 11. Where taxable income exceeds Rs50,000,000 but does not exceed Rs75,000,000 Rs13,295,000 plus 32.5 percent of the amount exceeding Rs50,000,000 12. Where taxable income exceeds Rs75,000,000 Rs21,420,000 plus 35 percent of the amount exceeding Rs75,000,000 The FBR further said that under Section 149(3) of the Ordinance, every person responsible for making payment for directorship fee for fee for attending board meeting or such fee by whatever name called shall deduct 20 percent of the gross amount paid.