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.

How taxpayers fail in filing returns by due date, KTBA questions FBR

KARACHI: A body of tax practitioners has questioned Federal Board of Revenue (FBR) that how taxpayers fail to file returns for tax year 2019 on September 30, 2019 when the tax authorities extend the date ahead of cutoff time.

The Karachi Tax Bar Association (KTBA) in a letter to FBR chairman referring the Circular No. 14 of 2019 dated September 30, 2019 whereby the due date for filing the returns of income had been extended till October 31, 2019 in respect of Individuals and AOPs, and Companies following Special Tax Year.

“At the outset, regarding the construction of the above mentioned Circular, it is pertinent that it was communicated to the taxpayers around 9:30 pm on September 30, 2019 whereas the deadline was up to 12:00 am.

“The extension has purportedly been announced on account of alleged ‘failure of the taxpayers’ to file the returns of income by the due date of September 30, 2019 as the Circular states that the taxpayers (Individuals, AOPs and Companies) “failed to file their income tax returns/ statements.”

On behalf of its members, the bar takes serious exception to the use of this uncalled for statement for, the said extension was necessitated due to the FBR’s failure to timely issue the final forms of returns of income.

Even after issuance of SRO 979(I)/2019 on 02 September 2019, it took couple of more days for the FBR to upload these forms on IRIS and after the same having been uploaded, were carrying certain system issues/ technical glitches as well as interpretational matters.

These were duly intimated by the Bar vide its letter dated 20 September 2019.

The tax bar is of the view that instead of blaming the taxpayers who “could not file” the income tax returns by September 30, 2019 on account of the above discussed reasons, the Board acknowledging the same would have allowed the taxpayers without blaming them, due time of ninety days to file the income tax returns.

As regards the extension allowed to the companies, it is tainted with an unprecedented condition of payment of 95 percent of admitted income tax liability by September 30, 2019.

“This condition of payment of 95 percent tax liability is completely unheard and couldn’t be found to have existed anywhere under any provision of the Income Tax Ordinance, 2001 including the very section 214A under which the aforesaid Circular has been issued.”

Besides the debate of any legality, what needs to be emphasized here remain that had there been any patent or latent intention of the Board to extend the due date only for those Companies which would have paid 95 percent of their income tax liability, the same should have been communicated clearly well before the last date of filing to provide necessary time to them to deposit the income tax demanded at the eleventh hour.

What however, has been witnessed that the above Circular, with this irrational condition, was issued at the eleventh hour and came as a surprise, when the extended banking hours had already been lapsed.

It was therefore, impossible for anyone to fulfill the condition even if they were forced too. Thought it was reported in the news media that the FBR had issued a Circular letter on this topic of payment of 95 percent income tax before availing extension in time, however the said Circular letter was never made public.

Besides the above pandemonium, what needs emphasis here is that legal and permissible time period for filing the return of income in terms of section 118 of the Ordinance has not been allowed to Companies for, the final SRO for Companies was issued on September 06, 2019 allowing only twenty four (24) days to them for filing the return of income.

It is, therefore, a strange condition in the first place and that too without any legal footing hence it would be all just and bona fide that the due number of days, which are ninety (90) from the issuance date of the final forms of return of income are allowed to the taxpayers including Companies without any pre-condition levied upon.

October 8, 2019
List of consumer items for 17 percent sales tax on retail price
KARACHI: The Federal Board of Revenue (FBR) has issued list of consumer items on which sales tax at the rate of 17 percent is chargeable on the basis of printed retail price.

The FBR issued Sales Tax Act, 1990 updated till June 30, 2019 incorporating amendments brought through Finance Act, 2019.

The FBR explained that taxable supplies and import of goods specified in the Third Schedule shall be charged to tax at the rate of seventeen percent of the retail price or in case such supplies or imports are also specified in the Eighth Schedule, at the rates specified therein and the retail price thereof, along with the amount of sales tax shall be legibly, prominently and indelibly printed or embossed by the manufacturer, or the importer, in case of imported goods, on each article, packet, container, package, cover or label, as the case may be.

Following is Third Schedule to Sales Tax in which consumer items are mentioned for collection of sales tax on the basis of printed retail price:
- Fruit juices and vegetable juices.
- Ice Cream.
- Aerated waters or beverages.
- Syrups and squashes.
- Cigarettes.
- Toilet soap
- Detergents
- Shampoo
- Toothpaste
- Shaving cream
- Perfumery and cosmetics.
- Tea
- Powder drinks
- Milky drinks
- Toilet paper and tissue paper
- Spices sold in retail packing bearing brand names and trade marks
- Shoe polish and shoe cream
- Fertilizers
- Cement sold in retail packing
- Mineral/bottled water
- Household electrical goods, including air conditioners, refrigerators, deep freezers, televisions, recorders and players, electric bulbs, tube-lights, electric fans, electric irons, washing machines and telephone sets.
- Household gas appliances, including cooking range, ovens, geysers and gas heaters.
- Foam or spring mattresses and other foam products for household use.
- Paints, distempers, enamels, pigments, colours, varnishes, gums, resins, dyes, glazes, thinners, blacks, cellulose lacquers and polishes sold in retail packing
- Lubricating oils, brake fluids, transmission fluid, and other vehicular fluids sold in retail packing.
- Storage batteries excluding those sold to
- Automotive manufacturers or assemblers
- Tyres and tubes excluding those sold to automotive manufacturers or assemblers
- Motorcycles
- Auto rickshaws
- Biscuits in retail packing with brand name
- Tiles
- Auto-parts, in retail packing, excluding those sold to automotive manufacturers or assemblers.
October 8, 2019
No income tax on employee share schemes

KARACHI: Federal Board of Revenue (FBR) has said that the value of a right or option to acquire shares under an employee share scheme granted to an employee shall not be chargeable to tax.

The FBR issued Income Tax Ordinance, 2001 up to June 30, 2019 under which it explained the taxability on employee share scheme through Section 14 of the Ordinance.

Section 14: Employee share schemes

Sub-Section (1): The value of a right or option to acquire shares under an employee share scheme granted to an employee shall not be chargeable to tax.

Sub-Section (2): Subject to sub-section (3), where, in a tax year, an employee is issued with shares under an employee share scheme including as a result of the exercise of an option or right to acquire the shares, the amount chargeable to tax to the employee under the head “Salary” for that year shall include the fair market value of the shares determined at the date of issue, as reduced by any consideration given by the employee for the shares including any amount given as consideration for the grant of a right or option to acquire the shares.

Sub-Section (3): Where shares issued to an employee under an employee share scheme are subject to a restriction on the transfer of the shares —

(a) no amount shall be chargeable to tax to the employee under the head “Salary” until the earlier of —

(i) the time the employee has a free right to transfer the shares; or

(ii) the time the employee disposes of the shares; and

(b) the amount chargeable to tax to the employee shall be the fair market value of the shares at the time the employee has a free right to transfer the shares or disposes of the shares, as the case may be, as reduced by any consideration given by the employee for the shares including any amount given as consideration for the grant of a right or option to acquire the shares.

Sub-Section (4): For purposes of this Ordinance, where sub-section (2) or (3) applies, the cost of the shares to the employee shall be the sum of —

(a) the consideration, if any, given by the employee for the shares;

(b) the consideration, if any, given by the employee for the grant of any right or option to acquire the shares; and

(c) the amount chargeable to tax under the head “Salary” under those sub-sections.

Sub-Section (5): Where, in a tax year, an employee disposes of a right or option to acquire shares under an employee share scheme, the amount chargeable to tax to the employee under the head “Salary” for that year shall include the amount of any gain made on the disposal computed in accordance with the following formula, namely:—

A—B

where —

A is the consideration received for the disposal of the right or option; and

B is the employee’s cost in respect of the right or option.

Sub-Section (6): In this sub-section, “employee share scheme” means any agreement or arrangement under which a company may issue shares in the company to —

(a) an employee of the company or an employee of an associated company; or

(b) the trustee of a trust and under the trust deed the trustee may transfer the shares to an employee of the company or an employee of an associated company.

October 7, 2019
Bashirullah Khan given anti-benami initiative charge

ISLAMABAD: Federal Board of Revenue (FBR) on Monday assigned additional charge of Director General Anti-Benami Initiative to Dr. Bashirullah Khan, a BS-21 officer of Inland Revenue Service (IRS).

The FBR notified posting and transfers of following officers of IRS:

01. Dr. Bashirullah Khan (Inland Revenue Service/BS-21) who is currently posted as Chief Commissioner-IR, Regional Tax Office, Rawalpindi has been assigned the additional charge of the post of Director General, Anti-Benami Initiative, Islamabad in addition to his own duties, relieving Asim Ahmed (IRS/BS-21) presently posted as DG, I&I-IR, Islamabad.

02. Hassan Zulfiqar (Inland Revenue Service/BS-20) has been transferred and posted as Commissioner Inland Revenue Inland Revenue (Appeals-I), Islamabad from the post of Commissioner-IR, Benami Zone-I, Islamabad.

03. Khalid Khan (Inland Revenue Service/BS-20) has been transferred and posted as Commissioner Inland Revenue (Zone-V) Regional Tax Office II, Lahore from the post of Commissioner-IR, Benami Zone-II, Lahore.

04. Muhammad Faisal Mushtaq Dar (Inland Revenue Service/BS-20) has been transferred and posted as Commissioner Inland Revenue Benami Zone-I, Islamabad from the post of Commissioner-IR, Inland Revenue (Appeals-I), Islamabad.

05. Amir Abbas Khan (Inland Revenue Service/BS-19) has been transferred and posted as Commissioner Inland Revenue (OPS) Benami Zone-II, Lahore from the post of Commissioner-IR, (OPS) (West Zone) Regional Tax Office, Islamabad

The FBR said that the officers who are drawing performance allowance prior to issuance of this notification shall continue to draw this allowance on the new place of posting.

October 7, 2019
Date of determination of import duty rate under Customs laws

KARACHI: Federal Board of Revenue (FBR) has explained determination of rate of import duty under Customs Act, 1969.

The FBR issued Customs Act, 1969 updated till June 30, 2019 incorporating changes brought through Finance Act, 2019. Section 30 of the Act explained date of determination of rate of import duty.

Section 30: Date of determination of rate of import duty

The rate of duty applicable to any imported goods shall be the rate of duty in force;

(a) in the case of goods cleared for home consumption under section 79, on the date on which a goods declaration is manifested under that section; and

(b) in the case of goods cleared from a warehouse under section 104, on the date on which a goods declaration for clearance of such goods is manifested under that section:

Provided that, where a goods declaration has been manifested in advance of the arrival of the conveyance by which the goods have been imported, the relevant date for the purposes of this section shall be the date on which the manifest of the conveyance is delivered at the port of first entry:

Provided further that, in respect of goods for the clearance of which a goods declaration for clearance has been manifested under section 104, and the duty is not paid within seven days of the goods declaration being manifested, the rate of duty applicable shall be the rate of duty on the date on which the duty is actually paid:

Provided further that in case of the goods illegally removed from the warehouse, the rate of duty shall be the rate prevalent either on the date of in-bonding or detection of case or date of payment of the duty and taxes, whichever is higher:

Provided further that in case of exercising option for redemption of fine in lieu of confiscation of the goods seized during anti-smuggling operations, the rate of duty shall be the rate prevalent either on the date of seizure or date of payment of duty and taxes, whichever is higher:

Provided further that the Board, with approval of the Federal Minister-in-charge may, by notification in the official Gazette, for any goods or class of goods, specify any other date for the determination of rate of duty.

Explanation:- For the purpose of this section “manifested” means that when a machine number is allocated to goods declaration and is registered in Customs record.

Section 30A: Date of determination of rate of duty for clearance through the Customs Computerized System

Subject to the provisions of section 155A, the rate of duty applicable to any imported or exported goods if cleared through the Customs Computerized System, shall be the rate of duty in force on;-

(a) the date of payment of duty;

(b) in case the goods are not chargeable to duty, the date on which the goods declaration is filed with Customs.

Provided that where a goods declaration has been filed in advance of the arrival of the conveyance by which the goods have been imported, the relevant date for the purposes of this section shall be the date on which the manifest of the conveyance is filed at the customs-station of first entry:

Provided further that the Board, with approval of the Federal Minister-in-charge may, by notification in the official Gazette, specify any other date for the determination of rate of duty in respect of any goods or class of goods.

Section 31: Date for determination of rate of duty on goods exported

The rate and amount of duty applicable to any goods exported shall be the rate and amount chargeable at the time of the delivery of the goods declaration under section 131:

Provided that where the export of any goods is permitted without a goods declaration or in anticipation of the delivery of such a declaration, the rate and amount of duty applicable shall be the rate and amount chargeable on the date on which loading of the goods on the outgoing conveyance commences:

Provided further that the Board, with approval of the Federal Minister-in-charge may, by notification in the official Gazette, for any goods or class of goods, specify any other date for determination of the rate of duty.

Section 31A. Effective rate of duty

(1) Notwithstanding anything contained in any other law for the time being in force or any decision of any Court, for the purposes of section 30, 30A and 31, the rate of duty applicable to any goods shall include any amount of duty imposed under section 18,18A and 18C and the amount of duty that may have become payable in consequence of the withdrawal of the whole or any part of the exemption or concession from duty whether before or after the conclusion of a contract or agreement for the sale of such goods or opening of a letter of credit in respect thereof.

(2) For the purpose of determining the value of any imported or exported goods, the rate of exchange at which any foreign currency is to be converted into Pakistan currency shall be the rate of exchange in force on the date immediately preceding the relevant date referred to in sections 30, 30A or 31.

October 7, 2019

FBR issues salary tax card for Tax Year 2020

KARACHI: Federal Board of Revenue (FBR) has issued salary tax card for tax year 2020 after incorporating changes brought through Finance Act, 2019 to Income Tax Ordinance, 2001.

The FBR issued Income Tax Ordinance, 2001 updated till June 30, 2019 under which tax rates for salary persons would be applicable from July 01, 2019 to June 30, 2020

The FBR said that there the income of an individual chargeable under the head “salary” exceeds seventy-five per cent of his taxable income, the rates of tax to be applied shall be as set out in the following table, namely:

S. No.	Taxable income	Rate of tax
(1)	(2)	(3)
1.	Where taxable income does not exceed Rs. 600,000	0%
2.	Where taxable income exceeds Rs. 600,000 but does not exceed Rs. 1,200,000	5% of the amount exceeding Rs. 600,000
3.	Where taxable income exceeds Rs. 1,200,000 but does not exceed Rs. 1,800,000	Rs. 30,000 plus 10% of the amount exceeding Rs. 1,200,000
4.	Where taxable income exceeds Rs. 1,800,000 but does not exceed Rs. 2,500,000	Rs. 90,000 plus 15% of the amount exceeding Rs. 1,800,000
5.	Where taxable income exceeds Rs.2,500,000 but does not exceed Rs. 3,500,000	Rs. 195,000 plus 17.5% of the amount exceeding Rs. 2,500,000
6.	Where taxable income exceeds Rs. 3,500,000 but does not exceed Rs. 5,000,000	Rs. 370,000 plus 20% of the amount exceeding Rs. 3,500,000
7.	Where taxable income exceeds Rs. 5,000,000 but does not exceeds Rs. 8,000,000	Rs. 670,000 plus 22.5% of the amount exceeding Rs. 5,000,000
8.	Where taxable income exceeds Rs. 8,000,000 but does not exceeds Rs. 12,000,000	Rs. 1,345,000 plus 25% of the amount exceeding Rs. 8,000,000
9.	Where taxable income exceeds Rs. 12,000,000 but does not exceeds Rs. 30,000,000	Rs. 2,345,000 plus 27.5% of the amount exceeding Rs. 12,000,000
10.	Where taxable income exceeds Rs. 30,000,000 but does not exceeds Rs. 50,000,000	Rs. 7,295,000 plus 30% of the amount exceeding Rs. 30,000,000
11.	Where taxable income exceeds Rs. 50,000,000 but does not exceeds Rs. 75,000,000	Rs. 13,295,000 plus 32.5% of the amount exceeding Rs. 50,000,000
12.	Where taxable income exceeds Rs. 75,000,000	Rs. 21,420,000 plus 35% of the amount exceeding Rs. 75,000,000]

October 6, 2019

FBR to implement real-time sales invoicing system from November 01

KARACHI: Federal Board of Revenue (FBR) has decided to implement online invoice system with shopping store chains across the country from November 01, 2019.

The point of sale invoicing system is an online real-time system for documentation of sales tax connects the computerized sales system for large retail stores i.e. Tier-1 retailers to FBR’s system through internet.

According to FBR the Tier-1 retailers are:

(a) a retailer operating as a unit of a national or international chain of stores;

(b) a retailer operating in an air-conditioned shopping mall, plaza or centre, excluding kiosks;

(c) a retailer whose cumulative electricity bill during the immediately preceding twelve consecutive months exceeds Rupees six hundred thousand; 8[ ]

(d) a wholesaler-cum-retailer, engaged in bulk import and supply of consumer goods on wholesale basis to the retailers as well as on retail basis to the general body of the consumers”; and
(e) a retailer, whose shop measures one thousand square feet in area or more.”;

The FBR said that retailers do not need to purchase any new machines to get linked with this system. “They can get linked by simply downloading an application in their existing machines,” the FBR said.

The revenue body further said that a barcode or QR code automatically gets printed on the invoice generated through a sale by the retailer.

Customers can verify the sales tax payment through the Tax Asaan Application.

The FBR further said that the system helps retailers in automatic preparation of sales tax returns and thereby reducing their expenditure.

The revenue body said that adopting the POS Invoicing System will end periodic inspections by FBR officials. The FBR further said that the system had been running successfully for over a year at 3,824 outlets of 70 famous top textile and leather brands.

The FBR said that from November 01, 2019 the system will be implemented for restaurants in Islamabad and all shopping store chains across the country.

October 6, 2019
FBR explains salary tax to be chargeable for Tax Year 2020

KARACHI: Federal Board of Revenue (FBR) has explained the treatment of salary tax to be applicable during Tax Year 2020.

The FBR issued Income Tax Ordinance, 2001 updated till June 30, 2019 and explained the taxability on salary received by an employee.

Under Section 12 of the Income Tax Ordinance, 2001 the salary chargeable to tax as:

Section 12: Salary

Sub-Section (1): Any salary received by an employee in a tax year, other than salary that is exempt from tax under this Ordinance, shall be chargeable to tax in that year under the head “Salary”.

Sub-Section (2): Salary means any amount received by an employee from any employment, whether of a revenue or capital nature, including —

(a) any pay, wages or other remuneration provided to an employee, including leave pay, payment in lieu of leave, overtime payment, bonus, commission, fees, gratuity or work condition supplements (such as for unpleasant or dangerous working conditions);

(b) any perquisite, whether convertible to money or not;

(c) the amount of any allowance provided by an employer to an employee including a cost of living, subsistence, rent, utilities, education, entertainment or travel allowance, but shall not include any allowance solely expended in the performance of the employee’s duties of employment;

(d) the amount of any expenditure incurred by an employee that is paid or reimbursed by the employer, other than expenditure incurred on behalf of the employer in the performance of the employee’s duties of employment;

(e) the amount of any profits in lieu of, or in addition to, salary or wages, including any amount received —

(i) as consideration for a person’s agreement to enter into an employment relationship;

(ii) as consideration for an employee’s agreement to any conditions of employment or any changes to the employee’s conditions of employment;

(iii) on termination of employment, whether paid voluntarily or under an agreement, including any compensation for redundancy or loss of employment and golden handshake payments;

(iv) from a provident or other fund, to the extent to which the amount is not a repayment of contributions made by the employee to the fund in respect of which the employee was not entitled to a deduction; and

(v) as consideration for an employee’s agreement to a restrictive covenant in respect of any past, present or prospective employment;

(f) any pension or annuity, or any supplement to a pension or annuity; and

(g) any amount chargeable to tax as “Salary” under section 14.

Sub-Section (3): Where an employer agrees to pay the tax chargeable on an employee’s salary, the amount of the employee’s income chargeable under the head “Salary” shall be grossed up by the amount of tax payable by the employer.

Sub-Section (4): No deduction shall be allowed for any expenditure incurred by an employee in deriving amounts chargeable to tax under the head “Salary”.

Sub-Section (5): For the purposes of this Ordinance, an amount or perquisite shall be treated as received by an employee from any employment regardless of whether the amount or perquisite is paid or provided —

(a) by the employee’s employer, an associate of the employer, or by a third party under an arrangement with the employer or an associate of the employer;

(b) by a past employer or a prospective employer; or

(c) to the employee or to an associate of the employee or to a third party under an agreement with the employee or an associate of the employee.

Sub-Section (6): An employee who has received an amount referred to in sub-clause (iii) of clause (e) of sub-section (2) in a tax year may, by notice in writing to the Commissioner, elect for the amount to be taxed at the rate computed in accordance with the following formula, namely: —

A/B%

where —

A is the total tax paid or payable by the employee on the employee’s total taxable income for the three preceding tax years; and

B is the employee’s total taxable income for the three preceding tax years.

Sub-Section (7): Where —

(a) any amount chargeable under the head “Salary” is paid to an employee in arrears; and

(b) as a result the employee is chargeable at higher rates of tax than would have been applicable if the amount had been paid to the employee in the tax year in which the services were rendered, the employee may, by notice in writing to the Commissioner, elect for the amount to be taxed at the rates of tax that would have been applicable if the salary had been paid to the employee in the tax year in which the services were rendered.

Sub –Section (8) An election under sub-section (6) or (7) shall be made by the due date for furnishing the employee’s return of income or employer certificate, as the case may be, for the tax year in which the amount was received or by such later date as the Commissioner may allow.

October 5, 2019
FBR notifies major reshuffle in Pakistan Customs Service; 35 officers transferred

ISLAMABAD: Federal Board of Revenue (FBR) on Friday in a major reshuffle transferred and posted 35 officers of Pakistan Customs Service (PCS) from BS-17 to BS-21 with immediate effect and until further orders.
(more…)

October 5, 2019
FBR warns sellers against using CNICs of employees to fulfill condition

ISLAMABAD: Federal Board of Revenue (FBR) has warned sellers against using CNIC/NTN of their employees to fulfill condition in case supplies made to unregistered persons.

The FBR on Friday issued Sales Tax General Order (STGO) No. 106/2019 regarding definition / rules for CNIC/ good faith for sales tax.

Keeping in view the problems reported by the registered persons is ensuring proper identity of the buyer to fulfil the requirement of reporting NTN/NIC of the buyer in terms of section 23 of the Sales Tax Act, 1990, it is directed that the NIC/NTN of the buyer with respect to taxable supplies to an unregistered person shall be deemed to have been reported in good faith by the supplier provided that:

(a) The tax invoice complies with the requirements of section 23(b) of the Act.
(b) Payment made by or on behalf of the unregistered purchaser of the amount of the tax invoice, inclusive of sales tax and applicable further tax, is deposited into the supplier’s declared business bank account.
(c) The NIC provided by the purchaser is found authenticated by the National Data and Registration Authority (NADRA).
(d) The NIC/NTN provided is not of the employee of the seller or of his associates as defined under the Income Tax Ordinance, 2001.

The issuance of a show cause notice to a registered person being a seller on account of any matter arising out of the NIC provided by a purchaser shall not be made without the prior approval of the Member (IR-Operations), FBR after providing an opportunity of being heard.

October 4, 2019