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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.

  • KTBA seeks FBR clarification on tax ordinance

    KTBA seeks FBR clarification on tax ordinance

    KARACHI: Karachi Tax Bar Association (KTBA) on Monday urged Federal Board of Revenue (FBR) to issue necessary clarification related to issues in recently promulgated tax ordinance.

    The KTBA sent a letter to Syed Shabbar Zaidi, Chairman, FBR and pointed out anomalies in the Tax Laws (Second Amendment) Ordinance, 2019 for clarification.

    The KTBA highlighted that Sub-section 4 has been added to section 73 of Sales Tax Act, 1990, under which sales to an unregistered person by a registered manufacture cannot be made for more than Rs10 million in a month and Rs100 million in a year, failing which input tax will be disallowed proportionately.

    Considering the implication of the phrase of unregistered person [i.e. singular term] used in drafting of the law, instead of the phrase unregistered persons [plural term], it implies that the restriction is applicable on sales to a single unregistered person instead of cumulative sales to all unregistered person(s).

    In order to ensure that intent of law is not suffered by any legal infirmity due to any unintended or inadvertent drafting, the clarification must be issued in this respect on urgent note, it added.

    It further pointed out that in addition to the above, it should also be clarified as to whether the all unregistered person will be effected or only those unregistered person who actually were required to be registered in Sale Tax but didn’t ?

    In the event, the law is intended to cover all unregistered persons, without any discrimination, certain serious ramification would follow because of the fact that Manufacturers won’t be able to make sale to various Government/other authorities, armed forces hospitals, Universities, Charities & EPZ entities, which by law, are not required to be registered at all, in the first place.

    The KTBA said that it is important to define the category of unregistered person who should not suffer due to any adverse implication of the law. Hence, a clarification is necessitated in this context.

    The tax bar further highlighted the amendments introduced related to business license.
    Through the Tax Laws (Second Amendment) Ordinance, 2019, various penalties have been prescribed for person who has not obtained business license, while the procedure to obtain business license has not been prescribed as yet.

    It is not possible to get a Business License either for any person or for any tax commissioner to issue one.

    An unnumbered and undated draft SRO was issued by the FBR in July 2019, whereby Draft rules 83A to 83E were proposed in the Income Tax Rules, 2002 for the purpose, which were not finalized yet.

  • Procedure for conducting audit of transfer pricing cases unveiled

    Procedure for conducting audit of transfer pricing cases unveiled

    KARACHI: The Director General of International Tax Operations has been empowered to select and conduct transfer pricing audit of cases under section 230E of Income Tax Ordinance 2001.

    Federal Board of Revenue (FBR) in explanation to Tax Laws (Second Amendment) Ordinance, 2019 said that previously, there was no provision which specified the procedure to be adopted for conducting transfer pricing audit of taxpayers.

    It has now been specified that transfer pricing audit of cases selected by the Director General of International Tax Operations shall be conducted as per procedure laid down in 177 of the Ordinance.

    Moreover, the right to conduct transfer pricing audit under section 230E of the Ordinance shall not prejudice the right of the Commissioner to determine transfer price at arms length in transactions between associates while conducting audit under section 177 or 214C of the Ordinance or whilst making amendment under section 122 of the Ordinance.

    Tax experts at PwC A F Ferguson Chartered Accountants said that Section 230E was introduced in the Income Tax Ordinance, 2001 through the Finance Act, 2017 for establishing a separate Directorate for conducting transfer pricing audit of taxpayers.

    Through the Finance Supplementary (Second Amendment) Act, 2019, Section 230E was substituted so as to establish Directorate General of International Tax.

    However, no specific procedure or mechanism for transfer pricing audit was prescribed in the said section which was causing ambiguity amongst the field officers and taxpayers.

    Through the Second Amendment Ordinance, necessary amendment has been made in Section 230E to prescribe that transfer pricing audit is to be conducted as per the procedure laid down in section 177 and other provisions of the Ordinance.

    This way, the ambiguity relating to the transfer pricing audit procedure has now been removed, the experts said.

  • Traders associations nominate representatives to determine turnover for tax registration

    Traders associations nominate representatives to determine turnover for tax registration

    ISLAMABAD: Traders associations has nominated their representatives for determination of business turnover for mandatory tax registration.

    FBR spokesman said that traders associations had assured of income tax registration of medium and large size retailers.

    The spokesman said that the FBR had agreed to genuine demands of small traders and necessary amendments had been introduced through Tax Laws (Second Amendment) Ordinance, 2019.

    According to the FBR the condition of CNIC (Computerized National Identity Card) had become part of the law and it was genuine demand of traders to reduce the minimum income tax.

    The traders were demanding to reduce the minimum tax because it was high considering their returns and it was the reason the traders were reluctant to declare their details.

    In order to ensure filing declaration by the retailers the minimum tax rate has been rationalized, the spokesman said. Further to provide ease in doing business the traders have been excluded from collecting withholding tax.

    The spokesman said that traders associations had assured to cooperate with the FBR for bringing medium and large size retailers into the tax net.

    In this regard the traders associations had nominated their representatives to determine the turnover of traders for mandatory tax registration.

    The traders associations also assured to cooperate with the FBR to resolve audit related issues. The spokesman said that the FBR wanted to better working relations with the trade community for betterment of the economy.

  • Automatic issuance of exemption certificate granted

    Automatic issuance of exemption certificate granted

    KARACHI: The Federal Board of Revenue (FBR) allowed automated issuance of exemption certificate in case commissioner delays in approval.

    Tax experts at PwC A F Ferguson Chartered Accountants said Clause (72B) contained in Part IV of the Second Schedule to the ITO 2001 allows a taxpayer to obtain a withholding exemption certificate from the concerned Commissioner Inland Revenue so as to avoid tax collection at import stage.

    Due to procedural issues, hardships were being faced by taxpayer in getting such withholding exemption certificates renewed, which are generally issued for 6-months validity although tax liability for the entire year as prescribed is discharged.

    To facilitate the taxpayers, the relevant clause has now been amended to provide for automatic approval of application filed on FBR’s IRIS portal for renewal of the certificate in case no action is taken by the Commissioner by the expiry of prescribed time period.

    The concerned Commissioner has, however, been empowered to cancel or modify any such certificate automatically issued on IRIS but any such cancellation or modification may be made after granting the taxpayer an opportunity of being heard and for reasons to be recorded by the Commissioner in writing.

  • Traders given tax incentives

    Traders given tax incentives

    KARACHI: Federal Board of Revenue (FBR) has allowed tax concession to traders to bring them into tax net.

    The tax concessions have been granted through Tax Laws (Second Amendment) Ordinance, 2019.

    Tax experts at PwC A F Ferguson Chartered Accountants said that pursuant to the agreement between representatives of federal government and trade bodies on October 30, 2019; certain concessions have been allowed to traders through the Second Amendment Ordinance.

    The term ‘trader’ has been defined to mean an individual engaged in business of buying and selling of goods in the same state, including a retailer and a wholesaler but excluding a distributor.

    The concessions provided to traders are as under:

    (i)The general rate of minimum tax payable (under section 113 of the Income Tax Ordinance 2001) has been reduced from 1.5 percent to 0.5 percent for tax year 2020 for traders having turnover up to Rs100 million.

    However, for traders who have filed income tax returns for tax year 2018, the tax liability for tax years 2019 and 2020 should not be less than the tax liability for tax year 2018, to become eligible for reduced rate of minimum tax of 0.5 percent.

    (ii)Individual having turnover of Rs. 50 million or more in any of the preceding tax years is liable to deduct tax under section 153 while making payments against supply of goods, services and contracts.

    Through the Second Amendment Ordinance, traders being individuals having turnover up to Rs100 million have been exempted from deducting tax under section 153 while making payment against supply of goods, services and contracts.

    The board is expected to clarify the year with respect to which turnover of Rs100 million will be calculated by the trader.

  • Taxpayers’ declarations to be checked for money laundering

    Taxpayers’ declarations to be checked for money laundering

    ISLAMABAD: Financial Monitoring Unit (FMU) has been allowed to obtain information of taxpayers from tax authorities to check income tax returns and other declarations for money laundering and terror financing.

    The FMU has been granted access to taxpayers’ data through amendment introduced to Section 216 of the Income Tax Ordinance, 2001. The amendment has been brought through Tax Laws (Second Amendment) Ordinance, 2001.

    Under Section 216 of the Income Tax Ordinance, 2001, public servants are barred from disclosing any information relating to income tax filings, evidences or proceedings of any taxpayer.

    Certain exceptions to this general prohibition are also contained in the said section whereby information may be disclosed to specified persons, organizations or authorities.

    By way of an amendment made through the Second Amendment Ordinance, Financial Monitoring Unit (FMU) established under the Anti-Money Laundering Act, 2010 has been included in the list of such exceptions which do not fall within the ambit of confidentiality clause contained in Section 216, tax experts at PwC A F Ferguson Chartered Accountants said.

    This amendment is intended to enable FMU to better implement anti-money laundering procedures by directly obtaining necessary information from public servants.

  • FBR empowered for closure of automatic audit selection

    FBR empowered for closure of automatic audit selection

    ISLAMABAD: Federal Board of Revenue (FBR) has been empowered to conclude cases which were automatic selected for audit.

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  • Procedure for making correction in cash payment receipt issued

    Procedure for making correction in cash payment receipt issued

    ISLAMABAD: Federal Board of Revenue (FBR) has notified procedure for making correction in computerized payment receipt (CPR).

    The FBR issued a circular on Friday stating that the electronic procedure for correction of CPR had been updated in IRIS software and following e-procedure would be followed for the correction of CPR of income tax, sales tax and federal excise duty.

    The FBR said that the scope of changes would be restricted to the following ares:

    a. Change of name, address, National Tax Number (NTN)/Computerized National Identity Card (CNIC).

    b. Change in tax year/tax period

    c. change in payment code/payment section.

    The FBR said that online application for the changes should be submitted through Iris software. An applicant is required to provide documents, included: copy of CPR; in case of mistake made by withholding agent, letter from withholding agent and affidavit from the taxpayer on stamp paper that amendment may be made in CPR; for correction of NTN/CNIC in CPR, affidavit from the person on whose name the payment has been deposited mistakenly.

    The FBR said that the chief commissioner shall designate an officer in his office for such purpose. In case, where scope of correction falls in different territorial jurisdiction, the chief commissioner to who such application has been made shall forward such application electronically to the chief commissioner where such CPR was recorded incorrectly.

    Change in CPR will only take place in the system of FBR for all accounting purpose and the taxpayer will be entitled to take such credit accordingly.

  • Withholding agent condition withdrawn on individuals with turnover up to Rs100 million

    Withholding agent condition withdrawn on individuals with turnover up to Rs100 million

    ISLAMABAD: Federal Board of Revenue (FBR) has withdrawn the condition on individuals to act as withholding agent in case the business turnover is up to Rs100 million.

    The government through Tax Laws (Second Amendment) Ordinance, 2019 introduced major change to Income Tax Ordinance, 2001.

    Under section 153 of the Ordinance, individuals having turnover of Rs50 Million or above in any of the preceding Tax Years are obliged to act as withholding tax agents whilst making payments for supply of goods, rendering of services or for execution of contracts.

    “Henceforth traders, being individuals and having turnover up to Rs100 million shall not be required to act as a withholding agent under section 153 of the Ordinance,” according to the FBR.

    Tax experts explained that individual having turnover of Rs50 million or more in any of the preceding tax years is liable to deduct tax under section 153 while making payments against supply of goods, services and contracts.

    Through the Second Amendment Ordinance, traders being individuals having turnover up to Rs100 million have been exempted from deducting tax under section 153 while making payment against supply of goods, services and contracts.

    However, the FBR may clarify the year with respect to which turnover of Rs100 million will be calculated by the trader.

  • Exemption on electricity bills for commercial, industrial consumers withdrawn

    Exemption on electricity bills for commercial, industrial consumers withdrawn

    ISLAMABAD: Federal Board of Revenue (FBR) has withdrawn the exemption of advance income tax on electricity bills to industrial and commercial consumers.

    The exemption has been withdrawn through Tax Laws (Second Amendment) Ordinance, 2019.

    The FBR said that in terms of clause (66) of Part-IV of the Income Tax Ordinance, 2001 exemption from collection of advance tax under section 235 of the Ordinance on the electricity bills of commercial and industrial consumers was available to the five export oriented sectors who fulfill the twin conditions of falling under the zero rated regime of sales tax and being registered in sales tax as exporters or manufacturers.

    The zero rating regime for the five export–oriented sectors has now been abolished, therefore, consequent amendment in clause (66) of Part-IV of the Second Schedule has been made to remove the legal anomaly.