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.

NBP provides online exchange rate facility to Pakistan Customs

KARACHI: The Federal Board of Revenue (FBR) is receiving real time exchange rate from National Bank of Pakistan (NBP) for determination of customs valuation.

FBR has decided to electronically link customs automated system WeBOC with the Treasury and Capital Markets Group of the National Bank of Pakistan so that the daily exchange rate of major currencies are uploaded into WeBOC directly as soon as the same are notified.

Settlement of payments for Pakistan’s International Trade, like other countries, is done in international currencies. Value of imported goods is converted to Pak Rupees, using latest exchange rate of major currencies notified by the Treasury of the National Bank of Pakistan.

As per current procedure, Exchange rate for various currencies is procured from Treasury and Capital Markets Group office of National Bank of Pakistan by Pakistan Customs on daily basis either manually or by downloading the same from National Bank of Pakistan website.

It is then fed manually into the Customs automated system WeBOC for utilization in assessment of value of imports for calculating duties and taxes.

In order to further enhance the efficiency of this operation, FBR has decided to electronically link customs automated system WeBOC with the Treasury and Capital Markets Group of the National Bank of Pakistan so that the daily exchange rate of major currencies are uploaded into WeBOC directly as soon as the same are notified.

Necessary instructions have been issued to Director (Reforms & Automation), Karachi for development and deployment of required module in close consultation with National Bank of Pakistan on top priority basis. It is expected that this reform initiative will improve the efficiency and transparency of the process, and will also preclude any possibility of errors/omission.

May 23, 2019
Demonetizing high denomination currency notes recommended to eliminate avenues for untaxed funds

KARACHI: The foreign investors and multinational companies have suggested the government to demonetize high denomination currency notes to eliminate parking lots for untaxed funds.

The Overseas Investors Chamber of Commerce and Industry (OICCI) in its tax proposals for budget 2019/2020 suggested measures to eliminate legally permissible ‘parking lots’ for untaxed funds.

The OICCI – representative body of foreign investors in Pakistan and multinational companies – suggested that defective mode and manner of valuation of immovable properties should be addressed. “Registration of sale and purchase of real estate should only be on fair market value at the time of the transaction,” it suggested and said necessary information on market value of real estate can be easily obtained.

It further suggested that sale of all kinds of bearer securities, prize bonds, and other such items should be stopped.

Appropriate restrictions should be imposed on the hoarding of foreign currencies.

“High denomination currency notes should be demonetized.”

The OICCI also suggested introduction of books of account and cash registers.

The Federal Board of Revenue (FBR) does not have any proper shop-wise record of approximately 35 million SMEs, which are mostly sole proprietorship or partnerships, despite the fact that jurisdictions within the tax offices are location centric, especially for small and medium sized businesses.

It should be made mandatory for all businesses to maintain books of account and taxes should be levied on ‘net income’ basis only.

Registration of all retail outlets and electronic cash registers should be made mandatory without any turnover thresholds, which gives rise to tax evasion.

The installation of these registers should be inspected regularly by tax inspectors.

The FBR should engage with representatives of small manufacturers, wholesalers and retailers and ensure their buy-in for introduction of these documentation measures so that the previous back-tracking on these actions is not repeated.

The book keeping requirements /outline be regularly upgraded considering the best practices learnt from other neighboring countries in the region with similar business infra-structure.

May 23, 2019
FBR recommended tax exemption to inter-corporate dividend

KARACHI: Federal Board of Revenue (FBR) has been suggested to allow tax exemption to inter-corporate dividend for promoting group formation and consolidation and strengthen the overall corporate structure in Pakistan.

Pakistan Tax Bar Association (PTBA) – the umbrella of tax bars in the country – in its tax proposals for budget 2019/2020, said that through Finance Supplementary (Second Amendment) Act, 2019 a new clause in Part I of the Second Schedule of Income Tax Ordinance, 2001 was inserted, which with effect from 01 July 2019 exempts dividend income derived by a company, if the recipient has availed group relief under section 59B, computed according to the following formula:-

A x B/C; Where,

A is the amount of dividend;

B is the shareholding of the company receiving the dividend in the company distributing the dividends; and

C is the total ordinary share capital of the company distributing the dividend.

The PTBA said that pursuant to the provisions of clause (103A) of Part I of the Second Schedule, any income derived from inter-corporate dividend was exempt for group companies entitled to group taxation under section 59AA or group relief under section 59B.

The Finance Act, 2015 then added a condition, that such exemption would only be available if the consolidated return of the group had been filed. Subsequently, the Finance Act, 2016, excluded entities entitled to group relief under section 59B from the exemption entirely.

The above amendments created significant difficulties for corporate and industrial groups by adding multiple layers of taxation on dividends issued by group entities.

This resulted in corporate structures becoming inefficient due to multiple taxation of the same income, on mere distribution within the group, even though no value addition was taking place. This also led to substantial litigation from various groups.

Although, to cater the above problem an exemption has been introduced via the Second Supplementary Act, 2019, it is imperative to note that the newly inserted clause provides a relief only in the circumstances where the recipient of the dividend has availed group relief, i.e. loss has actually been surrendered between the two entities and even then, only to the extent of the shareholding that the parent entity has in its subsidiary. In effect, this means that:-

— since the provisions of section 59B require listing within a specified period, the relief would not be available to private groups unless they are willing to list;

— the relief would be available only to the entities actually surrendering or receiving the losses, and not all companies within the entire corporate structure;

— based on a literal interpretation, the holding company (i.e. the entity receiving the dividend) may not be able to claim the exemption if the losses under group relief are transferred from one subsidiary to another (i.e. between sister concerns);

— since a company cannot surrender its losses for more than three years, this is not an indefinite relief; and

— the benefit may practically be availed only in specific cases since a company, both receiving dividends and availing group relief in the same year, is normally only possible in structures where a holding company has several subsidiaries.

Overall, this has significantly watered-down relief compared to the demands of the corporate sector, the benefit of which may likely be availed in very few cases that may comply with all the conditions.

It is therefore recommended to exempt inter corporate dividends as it was used to be prior to the amendments brought about by the Finance Act, 2016.

May 23, 2019
FBR advised to restore tax credit to sales tax registered persons

KARACHI: Federal Board of Revenue (FBR) has been proposed to restore tax credit to sales tax registered persons for documentation of the economy.

In its tax proposals for budget 2019/2020, the Pakistan Tax Bar Association (PTBA) said that the provisions of this section were applicable in case of sales made to the sales tax registered tax registered person.

The tax credit of 3 percent of tax payable was available to the seller for sales being made to the registered persons, however to promote documentation and registration with tax authorities it was suggested that this incentives should also be made available on purchases from registered persons as well.

“The government abolished this incentive available to the sellers instead of extending this credit to the purchasers as well,” the PTBA said.

It recommended that the application of above tax credit of making 90 percent sales to sales tax registered persons be restored and also be extended to persons making 90 percent of purchases from persons registered under the Sales Tax Act, 1990.

This change would enhance the number of sales tax registered person and documentation of the economy, the PTBA added.

May 23, 2019
FBR issues Urdu version of Tax Amnesty Scheme – 2019

ISLAMABAD: Federal Board of Revenue (FBR) on Wednesday issued Urdu version of presidential ordinance for Tax Amnesty Scheme – 2019.

The FBR said that the Urdu translated version had been issued for the facilitation of people to understand the scheme and participate/avail proactively.

However, the FBR said that the translated version can not be referred anywhere and English version will be treated as authentic document.

May 22, 2019
FBR chairman warns unregistered industrial, commercial consumers of penal action

ISLAMABAD: Syed Muhammad Shabbar Zaidi, Chairman, Federal Board of Revenue (FBR) Wednesday warned industrial and commercial consumers of gas and electricity to get registered with sales tax authorities, otherwise penal action will be initiated from July 01, 2019.

Addressing a press conference, he said that currently there were around 341,174 industrial electricity connection and 7000 industrial gas connections, however compared to this the sales tax registration of industry was just 38,937, which he said was a huge gap.

“It is my request to all industrial consumers to take advantage of the scheme before June 30 and may be it (the scheme) do not remain in the same shape after July 1st,” so the people using industrial utility connections should take advantage, the Chairman added.

He said that there were possibilities that these industrial consumer connections might include some connections that come under cotton industry under law, however, added that there was dire need to check this huge difference.

“It would be our desire that under the special clause placed in Asset Declaration Scheme, the industries falling in the category pay two percent to clear past liabilities,” the chairman added.

He said that after July 1st, the FBR would make necessary legislation to get these industries and manufacturers registered and would also take actions.

He urged the industrialists and manufacturers to take advantage of the Asset Declaration Scheme and clear their past sales tax liabilities by paying just two percent tax till June 30, 2019 or the law would take its due course after the expiry of the data.

“A special clause has been included in the Asset Declaration Scheme, which was not included in it earlier, which is that if anybody is having sales tax liability he or she may clear these by paying just two percent tax,” the Chairman FBR, Muhammad Shabbar Zaidi said while addressing a press conference at FBR house here.

He urged the media to sensitize people on the issue so that those avoiding to clear their past sales tax liabilities might realize this gap and get registered with FBR by taking advantage of the Asset Declaration Scheme.

He said that the FBR would try its best to make it voluntary and do not indulge in harassment, as it wanted to create environment for the businesses.

To a question, the FBR Chairman said that there were around 3.1 million commercial consumers, however added that the strategy on how to get the unregistered consumers to get registered with FBR would be shared with media.

To another questions, the Chairman FBR said that there were over one lack companies registered with the Securities and Exchange Commission of Pakistan (SECP), however just 50,000 were filing their returns.

He said that it was high time for those having industrial connections to get registered with FBR and take benefit of the Tax Declaration Scheme.

It is pertinent to mention here that the government last week had announced Asset Declaration Scheme, providing one more opportunity to all Pakistani citizens to declare and legalize undisclosed assets inside and outside the country by paying just four percent taxes on all assets other than real estate.

The scheme would be applicable till June 30, and all Pakistan citizens, other than those holding public offices or their dependents, would be able to take benefit from it.

The basic purpose of the scheme was to document economy and make the dead assets functional to promote economy by encouraging businessmen to participate in the legal economy.

May 22, 2019
FBR suggested reducing income tax rate for banks

KARACHI: Federal Board of Revenue (FBR) has been advised to reduce income tax rates for banking companies in line with general corporate tax rates.

The Overseas Investors Chamber of Commerce and Industry (OICCI) in its tax proposals for budget 2019/2020, said that the banking sector tax rates have not been reduced in line with the general corporate tax rates.

Furthermore, Finance Supplementary (Second Amendment) Bill 2019, proposed to again amend the First Schedule to the Income Tax Ordinance 2001, whereby, Super Tax of 4 percent is applicable on banks from tax year 2018 to tax year 2021.

The banks, in compliance with the prevailing taxation regime have already closed the tax year 2018 (accounting year 2017) and income tax returns have already been duly filed/assessed.

As a result of the proposed abovementioned retrospective application from tax year 2018 (accounting year 2017), banks would now have to effectively pay super tax for two years or 8 percent instead of 4 percent in tax year 2019 i.e. 4 percent already paid in advance for tax year 2019 along with retrospective charge of 4 percent now being proposed for tax year 2018.

The OICCI suggested that the tax rates of the banking sector should be aligned with other sectors.

It is recommended, application of super tax on tax year 2018 should be removed to avoid the double charge of super tax in tax year 2019.

Furthermore, it is requested that the same overall relief on super tax, granted to other industries, is also provided to the banking sector as well.

May 21, 2019
FBR issues draft rules to implement tax amnesty scheme 2019

ISLAMABAD: Federal Board of Revenue (FBR) on Monday notified draft rules to implement tax amnesty scheme 2019. The FBR invited comments or objections on the rules by May 22, 2019.

According to the draft rules, the FBR notified following conditions for making declaration for foreign and domestic declaration:

(1) For the purpose of incorporation of undisclosed assets and undisclosed expenditure declared under the Ordinance (asset declaration):

(a) where income tax return for tax year 2018 has not been filed, the declarant shall, along with the declaration or such date as extended by the board [FBR], file

(i) income tax return for the tax year 2018; and

(ii) wealth statement or financial statement, as the case may be as on June 30, 2018.

(b) Where income return for tax year 2018 has been filed under the provisions of the Income Tax Ordinance, 2001, the declarant shall, along with the declaration or such date as extended by the board, revise –

(i) income tax return and financial statement filed for tax year 2018, if declarant is a company; or

(ii) wealth statement, if the declarant is an individual or an association of persons.

(2) Where as person declares undisclosed sales in terms of Section 3, he shall declare the undisclosed sales subject to the Sales Tax Act, 1990 and the Federal Excise Act, 2005 from July 2014 to June 2018, in the first sales tax and federal excise return, due after the declaration.

(3) For the purpose of section 3 and 4 of the ordinance, in case of payment of tax of foreign assets –

(a) the value of such assets shall be declared in respective foreign currency on Board’s website portal;

(b) tax shall be paid in foreign currency as per procedure specified by the State Bank of Pakistan at the rate specified under the Ordinance; and

(c) in case of tax payment after June 30, 2019 liability of tax and default surcharge shall be paid in foreign currency as per procedure specified by the SBP and will be calculated in Pak Rupee at an exchange rate prevailing on the date of payment.

(4) For the purpose of clause (d) of Section 8 of the Ordinance, in case of foreign assets not being repatriated into Pakistan, if such assets represent cash or any other bearer assets, the same or its proceeds shall be deposited and retained in a foreign bank account of the declarant till June 30, 2019 and bank statement as evidence thereof, shall be provided by July 30, 2019 or such date as extended by the Board.

(5) Payment of tax for original demand:

For the purpose of sub-section (4) of Section 6 of the Ordinance, default surcharge and penalty shall not apply if, –

(a) tax determined by an officer of Inland Revenue in the original order, is paid up to June 30, 2019;

(b) such original order or an appellate order passed against such original order has not yet attained finality.

Explanation: An original order passed by and officer of Inland Revenue or an appellate order passed by an appellate authority shall be taken to be final if no right of appeal has been provided against such orders or no appeal has been filed within the time limit prescribed under the applicable laws against such orders.

(6) Payment of tax under other laws:

For the purpose of Section 4, 12 and 16 of the Ordinance, where the declarant has paid tax under the Ordinance, no tax shall be payable by the declarant under the Income Tax Ordinance, 2001, the Sales Tax Act, 1990 and Federal Excise Act, 2005 in respect of such undisclosed assets, undisclosed expenditure or undisclosed sales.

(7) Revision of declaration:

Any person who having filed a declaration hereinafter referred to as the ‘original declaration’ discovers any omission, mistakes, computational error or wrong statement therein may file revised declaration within the due date specified in Section 3 of the Ordinance subject to the condition that the value of assets and the tax paid thereon shall not be decreased.

May 20, 2019
Additional advance tax proposed on all type of motor vehicles to discourage premium

The Overseas Chamber of Commerce and Industry (OICCI), representing foreign investors and multinational companies in Pakistan, has proposed the imposition of an additional advance tax of Rs100,000 on all types of motor vehicles sold before registration.
(more…)

May 20, 2019
FBR advised to stop treating taxpayers unfairly

KARACHI: Federal Board of Revenue (FBR) has been urged to stop unfair treatment of compliant taxpayers. The taxpayers should be rewarded instead of harassing them for being compliant.

Institute of Chartered Accountants of Pakistan (ICAP) in its tax proposals for budget 2019/2020, said that at present, existing tax payers are confronted with complex laws and unfair treatment by FBR’s personnel and are also threatened at times.

Taxpayers expect to obtain some form of benefit, e.g. health benefits, free education etc. while on the other hand, non-filers continue with their businesses facing no repercussions paying little or no amount of tax.

“This coupled with the harassment by tax system leads to existing tax payers feeling mistreated.”

The ICAP recommended:

As per section 182A, a person filing his/her return of income after the due date remains non-filer for the entire next year.

In order to encourage filing of returns, persons filing returns late should not be discouraged and should be brought in Active Taxpayers List (ATL).

Penalty provisions are already there to address delayed filings.

Active taxpayers list should be updated simultaneously with the filling of return of income.

Some mechanism should be developed to stop all types of unfair treatment with existing taxpayers be it attachment of bank accounts for substantially fictitious demands or asking for absurd details and reconciliations which are too voluminous and not possible to prepare within a reasonable timeframe e.g. explanation of each and every credit entry in the bank statements or reconciling sales and purchases as per sales tax and customs records with accounts.

A person, whose case is selected for audit under the provision of tax laws, should not be subject to monitoring of withholding taxes and other assessment proceedings as same information/details/explanations are asked again and again for different proceeding creating hassle for the filer/registered person.

Filers should be given priority treatment at various infrastructural facilities e.g., at NADRA, schools, excise and taxation when registering motor vehicles, courts of law, banks, hospitals, airports etc.

Top 50/100 tax payers are given blue passports till the time they remain in the list of top 50/100.

Incentives for compliant tax payers and professionals (Doctors, Engineers, Lawyers, Chartered Accountants, reduction in tax rates, tax education through media – pubic private partnership.

A tax filer with over 20 years of tax payment history should be treated with respect & certain tax rebates should be allowed to them including on utility bills.

Likewise a person who has been a genuine taxpayer for 20 years who is over 70 years should be exempted from tax deductions.

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