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.

FBR empowered to impose fee, service charges under Customs laws

KARACHI: Federal Board of Revenue (FBR) has been empowered to impose service charges and date of determination of rate of import duty under Customs Act 1969.

The Finance Bill 2019 has proposed delegation of powers from federal government to the FBR, which included: levy of fee and service charges; date of determination of rate of import duty; date of determination of rate of duty for clearance through the Customs Computerized System; and date for determination of rate of duty on goods exported.

The bill proposed delegation powers to FBR under Section 18D, 30, 30A and 31 of Customs Act, 1969.

Presently Section 18D of Customs Act, 1969 states:

18D. Levy of fee and service charges.- The Federal Government may, by notification in the official Gazette, subject to such conditions, limitations or restrictions as it may deem fit to impose, levy fee and service charges for examination, scanning, inspections, sealing and desealing, valuation check or in respect of any other service or control mechanism provided by any formation under the control of the Board, including ventures of public-private partnership, at such rates as may be specified in the notification.

Presently Section 30 of Customs Act, 1969 states:

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 Federal Government 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.

Presently Section 30A of Customs Act, 1969 states:

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 Federal Government 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.

Presently Section 31 of Customs Act, 1969 states:

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 Federal Government 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.

June 16, 2019
Commissioners IR empowered to conduct audit of taxpayers every year

KARACHI: Commissioners of Inland Revenue have been empowered to conduct audit of a registered taxpayer every year after removal of restriction through Finance Bill 2019.

Through Finance Act, 2018 a restriction was imposed on offices of the Federal Board of Revenue (FBR) under which they would conduct audit of taxpayers once in every three years.

However, the Finance Bill 2019 proposed to delete the proviso which was introduced through Finance Act last year.

Experts at EY Ford Rhodes Chartered Accountants said that certain taxpayers challenged the audit proceedings under Section 25 where sales tax audit had already been conducted during any of the last three years on the premise that the amendment introduced through the Finance Act, 2018 was procedural change in law and was applicable retrospectively.

Recently, the Honorable Lahore High Court has adjudged the matter in favor of the taxpayer. It appears that the proposed deletion of the third proviso to Section 25 will neutralize the judgment of the Honorable Lahore High Court.

June 15, 2019
Finance Bill 2019: Law prohibits FBR officials from taking action against amnesty declarants

ISLAMABAD – The Federal Board of Revenue (FBR) has formally restricted its officials from initiating any proceedings against individuals who availed the Tax Amnesty Scheme under the Assets Declaration Act, 2019.
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June 15, 2019
Customs initiates examining exporters to check under-invoicing, mis-declaration

KARACHI: Pakistan Customs has initiated examination of exporters’ profiles to check mis-declaration and under-invoicing for plugging revenue leakages.

A statement said on Friday that the chairman of Federal Board of Revenue (FBR) Shabbar Zaidi had directed to identify the extent of mis-invoicing in export declarations in order to ascertain the suspected items or sectors and destinations for such mis-declaration, and to categorize exporters on the basis of risk profiling by segregating compliant exporters from those engaged in mis-invoicing.

The Customs Operations wing has tasked the Director General Customs Valuation to submit a report in this regard.

It has been further directed to develop a risk based system to intercept this trend without compromising export facilitation. Punitive action shall be taken against unscrupulous exporters under the proposed Section 32 C of the Customs Act, 1969 and the allied laws.

This initiative has arisen in the backdrop of reports indicating mis-invoicing in exports, which includes under-invoicing resulting in loss of remittance of forex and over-invoicing used to transfer excessive funds abroad.

Under-invoicing could be used also possibly as a mechanism for trade-based money laundering. One of the suspected methods used in under-invoicing in exports is through the medium of via port cargo.

Export cargoes are mis-declared by under-invoicing the values of export commodities, and shipped to a via port wherein new declaration with actual values are re-shipped for a final destination.

As a consequence, lesser amount of foreign exchange is remitted to Pakistan and a major portion of export proceeds is retained in the other country.

June 14, 2019
World Bank approves $518 million for Pakistan’s efforts to raise domestic revenue

ISLAMABAD: The World Bank on Friday approved a package of $518 million for two projects in support of Pakistan’s ambitious efforts to raise revenue and reduce compliance cost with a goal of providing better services to the people.

The $400 million Pakistan Raises Revenue Project will support the Federal Board of Revenue’s (FBR) focus to create a sustainable increase in Pakistan’s domestic tax revenue. The project will assist in simplifying the tax regime and strengthening tax and customs administration. It will also support the FBR with technology and digital infrastructure and technical skills. This will enable more effective use of taxpayer information and more targeted compliance. The Government has set improving tax revenue with low compliance costs as a high priority.

“Revenue mobilization plays an essential role in Pakistan’s fiscal sustainability,” said Muhammad Waheed, Task Team Leader of the Project. “The project will target raising the tax-to-GDP ratio to 17 percent by financial year 2023-2024 and widening the tax net from the current 1.2 million to at least 3.5 million active taxpayers.”

Pakistan’s revenue performance has improved significantly from tax policy measures in recent years, rising from 9.5 percent of GDP in financial year 2011-2012 to 12.9 percent in financial year 2017-2018. This is still lower than the level needed by developing countries, of at least 15 percent of GDP, to fund basic government functions and provide services to people.

“Creating fiscal space through revenue mobilization is critical to reduce the country’s budget deficit, enabling people of Pakistan to benefit from better public investments and services,” said Illango Patchamuthu, World Bank Country Director for Pakistan.

The $118 million Khyber Pakhtunkhwa Revenue Mobilization and Public Resource Management Project will support the Government of Khyber Pakhtunkhwa to increase its capacity for revenue collection and the management of the province’s resources. The project is anchored in the provincial government’s Public Financial Management Strategy (2017-2020) and will strengthen the government’s Public Financial Management system.

While the government of Khyber Pakhtunkhwa has made progress in revenue mobilization and management of public finances, its revenues remain low. Enhancing the tax revenue could increase its capacity to provide better services to residents. It will also reduce its dependence on federal transfers, which accounted for 86 percent of provincial revenue in the financial year 2016-2017.

“Mobilizing domestic revenue is crucial to improving human development outcomes in Khyber Pakhtunkhwa,” said Raymond Muhula, Task Team Leader of the Project. “This project will support the government’s priority to increase its own source revenue and to better manage its resources.”

June 14, 2019
FBR asks police to provide agreements of rented properties

KARACHI: Federal Board of Revenue (FBR) has issued notices to police stations to acquire information about rented residential and commercial properties located in Karachi.

The notices have been sent to Station House Officers (SHOs) under Section 176 of the Income Tax Ordinance, 2001 to provide the information of rented houses and commercial premises.

The FBR asked the SHOs to provide information of rented agreements including address of premises, rental agreement and type of properties such as commercial or residential, according to a copy of notice made available to PkRevenue.com.

The notices have been sent by Broadening of Tax Base (BTB) Wing of Regional Tax Office (RTO)-II Karachi stating that in terms of Section 176 of the Income Tax Ordinance, 2001, the SHOs are required to furnish such information as may be required by the commissioner Inland Revenue or an authorized person relevant to any tax leviable under the Ordinance.

It further said that as per Section 3 of the Sindh Information of Temporary Residents Act, 2015, the property dealer, landlord and tenant, shall, within 48 hours from the time of delivery of possession of the rented property premises to the tenant, provide information about the tenant to the policy through the fastest means of communication.

The RTO-II asked police to provide required information by June 17, 2019. The tax office also warned of imposing penalty for non-compliance.

June 13, 2019
FBR warns of harsh action against undeclared assets from July 01

ISLAMABAD: Federal Board of Revenue (FBR) on Thursday warned people of harsh action for possessing undeclared assets from July 01, 2019.

The revenue body said that those people having undeclared cash, assets and expenditures should declare by availing tax amnesty scheme.

FBR reiterates that the closing date for Assets Declaration Scheme is 30th June, 2019.

Therefore, it is advised to the persons intending to avail this scheme to ensure that the following reliable data relating to undeclared and undisclosed assets and expenditure is available with FBR:

a) Data of industrial and commercial gas and electricity consumers from various DISCOs and gas distribution companies has been procured to identify the persons who are chargeable to tax but have not been paying their due taxes.

b) That there is complete cooperation between the banks and the FBR on the availability of data relating to withholding taxes and other relevant information especially related to non-filers.

c) That FBR in collaboration with NADRA is providing access to the concerned persons (confidentially) for the transactions undertaken in the past in order to let the people know the transactions undertaken by them. This data will be available through secure channels from NADRA on demand subject to certain fee.

d) That it is planned that bearer certificates such as bearer prize bonds will be converted into registered prize bonds over a period of time as specified by the State Bank of Pakistan in coming months.

e) FBR is in contact with the land record authorities and relevant District Collectors with regard to shops and establishments for identifying the business establishments within their respective areas.

f) That administrative setup is being placed for operation of the Benami Law and it is expected to be fully operational from July 1, 2019.

In the light of the aforesaid points, it is advised that the concessions and benefits laid down in the Scheme be availed.

Furthermore in the Finance Bill 2019 it has been further reassured that no proceedings will be initiated against persons who declare their assets under the Assets Declaration Scheme and complete confidentiality shall be maintained with respect to assets declared in the scheme.

June 13, 2019
Consumers allowed 5pc cash back of sales tax paid on retail purchases

ISLAMABAD: Consumers have been allowed to get five percent cash back on the total amount of sales tax charged against purchases from retail outlets.

Through Finance Bill, 2019 a major change has been introduced to Sales Tax Act, 1990 in order to widening the sales tax base and prevent sales tax evasion.

The Finance Bill 2019 proposed:

“Provided that the customers of a Tier-1 retailer shall be entitled to receive a cash back of up to five percent of the tax involved, from such date in the manner and to the extent, as may be prescribed by the Board.”

The Sales Tax Act, 1990 defines Tier-1 retailers as:

(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; and

(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;”

The FBR explained the amended regime for retailers that to rationalize tax on retailers and to capture its full potential and document its sales, following proposals are made:−

(i) Turnover tax option may be withdrawn.

(ii) For tier-1 retailer, it may be made mandatory to integrate their points of sales (POSs) with FBR’s Computerized System so that the sales are reported in real time.

(iii) Retail shops having an area in excess of 1000 square feet may be included in Tier-1.

(iv) In order to encourage customers to demand invoices from retailers, enabling provisions are proposed to be inserted in section 3 whereby FBR may allow cash back of up to 5% of the sales tax charged on invoices to the customers.

June 13, 2019
FBR estimates additional revenue of Rs2 billion through changes in super tax

ISLAMABAD: Federal Board of Revenue (FBR) has estimated additional revenue of Rs2 billion through proposed changes in law related to super tax.

The changes have been introduced to Section 4B of Income Tax Ordinance, 2001 through Finance Bill 2019.

The FBR in explanation to the Finance Bill said that presently brought forward depreciation and business losses are excluded while computing income for calculating liability of super tax.

However, such losses are not excluded in the case of banking, insurance, oil and mineral exploration companies.

In order to ensure similar tax treatment, brought forward business and depreciation losses have been excluded from income computed to calculate super tax in the case of the abovementioned sectors.

FBR sources said that Large Taxpayers Unit (LTU) Karachi had submitted its proposals related to super tax with estimated revenue generation of Rs2 billion.

The LTU Karachi in its proposals said that the proposed amendment would bring uniform chargeability of super tax to all taxpayers including taxpayers falling within the purview of Fourth, Fifth, Seventh and Eighth Schedules of Income Tax Ordinance, 2001.

Fourth Schedule mainly deals with Insurance companies.

Fifth Schedule is related to exploration and production companies.

Seventh Schedule is about banking companies.

While Eighth Schedule covers capital gains and National Clearing Company Pakistan Limited (NCCPL).

June 13, 2019
Duty exemption on foreign bandwidth services withdrawn

The Federal Board of Revenue (FBR) has announced the withdrawal of duty exemption on foreign bandwidth services provided by telecom operators.
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June 13, 2019