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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.

  • Tenth Schedule enforces income tax return filing

    Tenth Schedule enforces income tax return filing

    KARACHI: The Tenth Schedule introduced to Income Tax Ordinance, 2001 has proved its importance as it compelled people for filing their income tax returns.

    The importance of this schedule can be proved as return filing witnessed record high of 2.71 million for tax year 2018. This schedule will remain productive for tax year 2019 and onward for forcing people making financial transactions to file their returns.

    “The newly introduced Tenth Schedule, which envisages the entire path to be adopted by the Inland Revenue Department to enforce the persons who make financial transactions yet choose not to file their returns of income,” officials of Federal Board of Revenue (FBR) said.

    They said that prior to Finance Act, 2019, a concept of non-filer existed in the Ordinance whereby higher tax rates of withholding were prescribed for persons who were non-filers. Such non-filers could claim adjustment of the higher tax collected at the time of filing of income tax returns.

    “The aim was to compel the non-filers to file their returns of income. However, it was observed that the non-filers, even though subjected to higher withholding rates, still had a propensity not to file their returns.”

    This proved detrimental to the exercise of expansion or tax base. This was due to the absence of an explicit provision specifying a standard procedure for action against such persons.

    Through the Finance Act, 2019, the concept of Non-Filers was done away with and a new concept regarding persons not appearing in the active taxpayers’ list was introduced. The officials said that this concept was a major paradigm shift from the erstwhile non-filer higher tax regime in that it not only penalized those persons not appearing in the ATL but also introduced an effective mechanism for enforcing returns from such persons.

    In this regard, a new section 100BA has been introduced which provides that collection or deduction of advance income tax, computation of income and tax payable thereon should be determined in accordance with the rules in the newly introduced the Tenth Schedule.

    Under this schedule persons whose names are not appearing in the ATL will be subjected to hundred percent increased rate of tax.

  • FBR allows filing Annexure H for July 2019 to claim sales tax refund

    FBR allows filing Annexure H for July 2019 to claim sales tax refund

    ISLAMABAD: Federal Board of Revenue (FBR) has allowed filing of statement containing stock position for July 2019 to taxpayers for claiming sales tax refunds.

    In an official memorandum issued on Thursday, the FBR condoned the time limit for filing of Annexure – H for the tax period July 2019 up to January 15, 2020.

    Annexure-H is a statement for providing stock position by taxpayers along with monthly sales tax return.

    The FBR from July 01, 2019 introduced expeditious payment of sales tax refunds within 72 hours subject to the true filing of Annexure – H.

    Recently, Karachi Tax Bar Association (KTBA) highlighted this issue and urged the tax authorities to resolve for facilitating exporters and manufacturers.

    The KTBA pointed out that as per the amendments made in Sales Tax Rules, 2006 vide SRO no. 918(I)/2019 dated August 7, 2019, mechanism for expeditious processing of refund claim has been devised only for manufacturers-cum- exporters.

    As per the Rules, refund will be treated as having been filed only after filing of Annexure H of the Sales Tax return, for which deadline of 120 days has been prescribed in the Rules and the same can be extended for a period of 60 days on the basis of approval from the Commissioner.

    However, the rules are silent about the mechanism for processing of Sales Tax refunds incase Annexure H has not been filed by manufacturer-cum-exporter for any reason. Considering the legal and legitimate right of the taxpayer to claim adjustment / refund of the input tax, either of the following two option be considered by the FBR for facilitation of exporters:

    Allow filing of Annexure H without any time limit [present time limit of 4 months be abolished and taxpayer be allowed to claim refund as and when required] ii. Incase present limit of 4 months cannot be abolished, registered persons be allowed atleast to alternatively file refund on annual basis after the end of the tax year.

    Apart from the above, Annexure H is only being allowed to be filed to taxpayers who have filed the said Annexure from sales tax returns of July 2019 and onwards. Instead of claiming refund, some taxpayers have reported sales tax carried forward balance in their sales tax returns from July 2019 onwards. In case they now intend to file Annexure H from the current month,

    FBR’s online portal does not allow such taxpayers to enter opening balance of inventory / raw materials as the said field in blocked for editing. This limitation should be removed and taxpayers should be allowed to file Annexure H for any specific month, for which they intend to claim refund. From apparent mechanism being followed by the system, it appears that those taxpayers who have not filed Annexure H for the month of July 2019 will never be allowed to file Annexure H for any subsequent month. This apparent anomaly should be resolved at earliest.

  • Irrecoverable loans to be allowed tax concession

    Irrecoverable loans to be allowed tax concession

    KARACHI: Federal Board of Revenue (FBR) shall allow reduction in tax liability against bed debts where loans are irrecoverable, officials said.

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  • FBR deploys IR officers at 20 sugar mills for monitoring of production, supplies

    FBR deploys IR officers at 20 sugar mills for monitoring of production, supplies

    ISLAMABAD: Federal Board of Revenue (FBR) has deployed officers of Inland Revenue at 20 sugar mills to monitor production and supply for checking tax evasion.

    The IR officers have been deployed at the premises of sugar mills under Section 40B of Sales Tax Act, 1990 for the monitoring of stock, production and supply.

    Sources told PkRevenue.com that Large Taxpayers Unit (LTU) Karachi had requested the FBR to allow monitoring of sugar mills as huge tax evasion was detected in the past.

    Recently, the FBR conducted analysis of sugar production of the last year which revealed huge tax evasion by sugar mills.

    The outcome of analysis showed that FBR and the Cane Commissioner of three provinces had a difference of 641,000 metric tons which showed that the sugar mills were under reporting their stock in order to evade tax payments.

    It is also identified that the local supplies during the tax period of July 2019 fell by 255 percent due to enhancement in tax rate from eight percent in June 2019 to 17 percent in July 2019.

    The analysis further revealed that the stock holding last year ending June 2018 was 3,147,000 metric tons where as closing stock of the year ending on June 2019 was only 2,230,778 metric tons, which showed 29 percent decline.

    It is also pointed out that sugar manufacturers had declared high quantity of supplies during June 2019 to evade sales tax as the tax rate was to increase in July 2019.

    The FBR analysis revealed that the sugarcane was the biggest raw material of sugar industry.

    The undocumented/under-documented nature of this agriculture sector poses a great challenge to accurately gauge the quantity of sugarcane produced and supplied to a particular mill.

    Considering the above facts the FBR allowed deployment of IR officers at the sugar mills.

    It is worth mentioning that the FBR Chairman through an official memorandum barred the tax offices for invoking Section 40B of the Sales Tax Act, 1990 without prior permission of the board or Member IR Operations.

    Following is the list of sugar mills where IR officers have been deployed:

    01. M/s. Darya Khan Sugar Mills Limited.

    02. M/s. Popular Sugar Mills Limited.

    03. M/s. Deharki Sugar Mill Limited.

    04. M/s. Adam Sugar Mill Limited.

    05. M/s. Baba Farid Sugar Mill Limited.

    06. M/s. Digri Sugar Mill Limited.

    07. M/s. Mirpurkhas Sugar Mill Limited.

    08. M/s. Faran Sugar Mills Limited.

    09. M/s. Mehran Sugar Mills Limited.

    10. M/s. Dewan Sugar Mills Limited.

    11. M/s. Al-Abbas Sugar Mills Limited.

    12. M/s. Ansari Sugar Mills Limited.

    13. M/s. Bawany Sugar Mills Limited.

    14. M/s. Larr Sugar Mills Limited.

    15. M/s. New Dadu Sugar Mills Limited.

    16. M/s. Rani Sugar Mills (Pvt) Limited

    17. M/s. Al-Noor Sugar Mills Limited

    18. M/s. Tando Allahyar Sugar Mills Limited

    19. M/s. Habib Sugar Mills Limited

    20. M/s. Sindabadgar Sugar Mills Limited

  • Pakistan, China agree to expedite customs clearance through green corridor

    Pakistan, China agree to expedite customs clearance through green corridor

    ISLAMABAD: Pakistan and Chinese customs authorities have agreed to expedite clearance of agriculture products under proposed green corridor at Sost-Khunjarab Border.

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  • Tax exemption available on ‘profit on debt’ if security issued outside Pakistan

    Tax exemption available on ‘profit on debt’ if security issued outside Pakistan

    KARACHI: Tax exemption is available to profit on debt where security issued outside Pakistan for raising loan.

    Officials in Federal Board of Revenue (FBR) on Wednesday said that tax exemption is available on profit on debt in certain conditions.

    According to Income Tax Ordinance, 2001, any profit received by a non-resident person on a security issued by a resident person shall be exempt from tax under this Ordinance where—

    (a) the persons are not associates;

    (b) the security was widely issued by the resident person outside Pakistan for the purposes of raising a loan outside Pakistan for use in a business carried on by the person in Pakistan;

    (c) the profit was paid outside Pakistan; and

    (d) the security is approved by the FBR for the purposes of this section.

    The income tax exemption is also available to any scholarship granted to a person to meet the cost of the person’s education shall be exempt from tax under this Ordinance, other than where the scholarship is paid directly or indirectly by an associate.

    Any income received by a spouse as support payment under an agreement to live apart] shall be exempt from tax under the Ordinance.

    The officials said income tax exemption is also available to the income derived by the federal government, provincial government, and local government.

    The income of the Federal Government shall be exempt from tax under the Ordinance.

    The income of a Provincial Government or a Local Government in Pakistan shall be exempt from tax under this Ordinance, other than income chargeable under the head “Income from Business” derived by a Provincial Government or Local Government from a business carried on outside its jurisdictional area.

    Any payment received by the Federal Government, a Provincial Government or a Local Government shall not be liable to any collection or deduction of advance tax.

    Exemption under this section shall not be available in the case of corporation, company, a regulatory authority, a development authority, other body or institution established by or under a Federal law or a Provincial law or an existing law or a corporation, company, a regulatory authority, a development authority or other body or institution set up, owned and controlled, either directly or indirectly, by the Federal Government or a Provincial Government, regardless of the ultimate destination of such income as laid down in Article 165A of the Constitution of the Islamic Republic of Pakistan:

    Provided that the income from sale of spectrum licenses and renewal thereof by Pakistan Telecommunication Authority on behalf of the Federal Government after the first day of March 2014 shall be treated as income of the Federal Government and not of the Pakistan Telecommunication Authority.

  • Ministry’s approval must for liquor import for diplomatic bonded warehouse

    Ministry’s approval must for liquor import for diplomatic bonded warehouse

    KARACHI: The Import permission from Ministry of Commerce is necessary for the import of liquor for a diplomatic bonded warehouse.

    “A Muslim cannot import or deal in liquor in the diplomatic bonded warehouse,” according to explanation issued by Federal Board of Revenue (FBR) regarding Diplomatic Bonded Warehouse.

    “Liquor is allowed to Diplomats against the Exemption Certificates issued by the Ministry of Foreign Affairs.”

    Liquor can be purchased by diplomats according to the quantities mentioned in the exemption certificates issued by the Ministry of Foreign Affairs, it said.

    Privileged persons can purchase liquor according to the quota provided in the Model Rules and CGO.15/96 which is as under :-

    According to CGO.15/96, the Import / purchase of alcoholic beverage is restricted to US$ 200/= per family per month by expatriate employees of foreign or local companies, loan funded projects or media personnel.

    According to the Model Rules dated 15-04-1963 for customs concessions to privileged personnel arriving under various foreign aid programmes or projects, Import / purchase of liquor can be made as per following quota.

    The FBR said that Diplomatic Bonded Warehouse is the warehouse licensed under section 13 of the Customs Act, 1969 for warehousing the dutiable goods Imported exclusively for diplomats / privileged persons.

    A Bonded Warehouse License is issued under the provisions of section 13 of Customs Act,1969.

    However, in case of Diplomatic Bonded Warehouse, the licenses were issued with the prior approval of the Federal Board of Revenue (FBR).

    As provided under sub-section(2) of section 13 of the Customs Act,1969, an application for the grant of license shall be made in the prescribed form Annex-B along with following documents :-

    Map of the proposed area.

    Article and Memorandum of Association in case of company and copy of partnership deed in case of partnership firm.

    Certificate from a scheduled bank showing soundness of financial position.

    Income Tax Registration Certificate.

    Details of Directors and authorized persons.

    Certificate of Membership of Chamber of Commerce and Industry.

    Lease / Tenancy Agreement.

    Copies of National identity Card(s) & Character Certificate(s).

    Comprehensive Insurance Policy from an approved Insurance Company.

    Survey Certificate issued by the approved surveyor.

    Besides the requirements mentioned above, all other conditions required under the Customs Act,1969 or any other law for the time being in force shall also be fulfilled.

    The permission for Import of liquor is, however, granted to non-Muslims only.

    The diplomatic bonded warehouses are dealing in Import of goods Imported exclusively for the use of diplomats, foreign missions and privileged persons. As such, all such goods / items which are used by the diplomats, foreign missions and privileged persons can be imported.

    The goods are not imported against L/C. The Importer (holding diplomatic bonded warehouse license) Import goods on contract basis and store the same in his warehouse. Subsequently goods are sold to diplomats / privileged persons according to their requirement and exemption certificates issued by the Ministry of Foreign Affairs.

    The purchase will be made strictly according to the quota fixed by the Ministry of Foreign Affairs and quantities mentioned in the exemption certificate.

    Quota is allotted and purchases are authorized by the Ministry of Foreign Affairs.
    The strength of the diplomatic community in the country which benefits from the warehouses is maintained by the Ministry of Foreign Affairs.

    The licensee of a bonded warehouse cannot open its sub-office in other cities. Periodical stock taking is conducted.

    The audit is also carried out by the staff of the Director General, Revenue Receipt Audit on quarterly basis.

    Moreover, insurance policy is obtained from the bonders covering all risks including pilferage etc.

    Besides there are specific provisions in Chapter-XI and Chapter-XVIII of the Customs Act,1969.

    In case of detection of any pilferage or misuse of the facility, penal action under the relevant clauses of sub-section (1) of section 156 of the Customs Act,1969 can also be initiated.

    On first arrival in Pakistan a privileged person shall be allowed to import free of duty and taxes foodstuff and other consumable stores including liquors and tobacco up to C&F value of US$ 200/- under chapter III of SRO 450(i)/01.

    During the period of his assignment he shall be allowed to Import free of duty and taxes foodstuff and consumable stores including liquor and tobacco up to C&F value of US$ 150/- per month but the value of liquor will not exceed US $50/- per month.

  • FBR discusses Customs internship program at NUST, LUMS

    FBR discusses Customs internship program at NUST, LUMS

    ISLAMABAD: Federal Board of Revenue (FBR) is in discussion with top universities to launch ‘Customs internship program’ for the youth of the country.

    In this regard, Syed Shabbar Zaidi, Chairman FBR held a meeting with Heads of Departments of National University of Science and Technology (NUST) and Lahore University of Management Sciences (LUMS) to discuss the launch of “Customs Internship Program” for the youth of Pakistan in June 2020.

    Earlier the program had been got approved and Chairman had directed its expeditious implementation.

    As informed by Dr. Jawwad Uwais Agha, Member Customs Operations, through this program two hundred BS/MS level students of top universities of Pakistan like LUMS, NUST, IBA and GIK in areas of Law, Public Financial Management, Economics, Finance, Public Policy and Information Technology would get an opportunity to work in the field units of Pakistan Customs for a 10-12 weeks’ internship program.

    A stipend of Rs 12,000 / month will be offered in this regard.A special internship program for 200 High School students will also be launched simultaneously with a stipend of Rs 4000-8000 for a 2-6 weeks internship program.

    FBR chairman lauded the efforts of Pakistan Customs in launching this innovative initiative which will create awareness about International and Domestic Economy and Public sector functioning and elaborated that the program will increase opportunities of employability and enhance confidence and ability of youth.

    The representatives from NUST and LUMS appreciated the initiative taken by Pakistan Customs and ensured their complete cooperation in this regard.

  • FBR to take strict action against individuals, companies fail to file annual returns

    FBR to take strict action against individuals, companies fail to file annual returns

    ISLAMABAD: Federal Board of Revenue (FBR) may take strict action against persons failed to file their annual returns for tax year 2019, besides imposing penal amount for late filing.

    Sources in FBR on Tuesday said that individuals and corporate entities (having special tax year) have six more days to file their returns in order to avoid strict action and paying late filing amount.

    The last date for filing income tax returns for tax year 2019 is December 16, 2016. The FBR granted third extension for filing returns on November 29, 2019.

    The actual date for filing income tax returns for tax year 2019 was September 30, 2019 for salaried persons, business individuals, Association of Persons (AOPs) and corporate entities having special tax years.

    The sources said that under Income Tax Ordinance, 2001 the defaulting taxpayers would face imprisonment up to three years.

    However, persons or companies filing tax returns after the due date will be liable to pay penalty amount to ensure their names on the Active Taxpayers List (ATL).

    The sources said that the income tax return filing for tax year 2018 had reached to a record high of 2.71 million by week ended November 30, 2019.

    They said that a large number of people were still filing their returns for tax year 2018 in order to appear on ATL 2018, which would remain in vogue till February 29, 2020.

    The new ATL for tax year 2019 will be published by the FBR on March 01, 2020.

    The sources said that the appearance the name on ATL had become important after the introduction of 10th Schedule to the Income Tax Ordinance, 2001 through Finance Act, 2019.

    They said that those persons having filed their returns but not on the ATL or those persons failed to file their returns are subject to 100 percent higher withholding tax rates.

  • FBR issues draft rules for business license scheme

    FBR issues draft rules for business license scheme

    ISLAMABAD: Federal Board of Revenue (FBR) has issued draft rules for business license scheme, which will be mandatory for every person engaged in any business, profession or vocation.

    Under Section 181D of Income Tax Ordinance, 2001, which is the new section introduced through Finance Act, 2019.

    The following are the draft rules for business license scheme:

    83A. The rules in this Chapter apply for the purposes of business license scheme.

    83B. Definitions.— in these rules, unless there is anything repugnant to the subject or context,—

    (a) “applicant” means a person who files application for issuance of business license;

    (b) “Iris” means the application software on the web portal of Federal Board of Revenue for the purposes including application for business license;

    (c) “service provider” means any person whose services to provide electronic data entry into Iris or any other web based application software, bio-metric verification and delivering the print out of the business license to the applicant for the purposes of these rules, has been hired by the Federal Board of Revenue.

    83C. Application for and issuance of business license

    (1) Subject to sub-rule (4), any person engaged in any business, profession or vocation, shall apply to the Federal Board of Revenue for issuance of business license in the Form specified in the schedule.

    (2) Where the applicant is having a cell phone number, issued by any mobile phone company and is having access to the internet facility, he shall file application form on the Iris or any software application developed by Federal Board of Revenue for the purposes of these rules. The system generated business license issued to the applicant shall be emailed to the applicant.

    (3) Where the applicant is not having any cell phone number issued by any mobile phone company or not having access to internet facility, he shall provide the particulars to the service provider or the personnel in a Kiosk established by a Regional Tax Office, for online filing of the form, and the service provider or the personnel in the Kiosk, as the case may be, shall—

    (i) verify particulars of the form filled in;

    (ii) complete bio-metric verification of the applicant; and

    (iii) give system generated print out of the business license to the applicant;

    (4) Where a person’s name is appearing in the active taxpayers’ list, he shall be treated to have filed application and the system generated business license shall be emailed to his email address registered in Iris.

    83D. Display of the business license

    (1) Every person who has been issued a business license under these rules, shall display the said license at every place of business of the person.

    83E. No liability on holding a business license

    Where a person has been issued a business license, he shall not be liable to payment of any tax on account of holding a business license unless such person is otherwise liable to payment of tax under any other provisions of the Income Tax Ordinance, 2001.