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 makes mandatory purchase of immovable property through banking channel

ISLAMABAD: Federal Board of Revenue (FBR) has made mandatory the purchase of immovable property of fair market value above Rs5 million through banking channel.

The FBR issued explanation to the Finance Act, 2019 on Tuesday regarding purchase of assets through banking channel under Section 75A of Income Tax Ordinance, 2001.

The FBR said that a new section 75A has been introduced in the Ordinance which requires that no person shall purchase immovable property having fair market value greater than Rs.5,000,000 or any other asset having fair market value more than Rs.1,000,000 otherwise than by a crossed cheque drawn on a bank or through crossed demand draft or crossed pay order or any other crossed banking instrument showing transfer of amount from one bank account to another bank account.

Fair market value of immovable property shall be the value notified by the Board under sub-section (4) of section 68 or the value fixed by provincial authority for the purpose of stamp duty, whichever is higher.

In case the transaction is not through banking channel as specified above,-

(a) such person cannot claim deductions mentioned in sections 22,23,24 & 25 on such assets. Hence, no deduction for depreciation, initial allowance, intangibles and pre-commencement expenditure shall be allowable for assets purchased otherwise than through banking channel as specified above;

(b) the amount of purchased through cash which was required to paid through banking channel as stated above, shall not be treated as cost as per section 76 for computation of any gain in sale of such asset.
Further, any person purchasing immovable property having fair market value greater than five million through cash or bearer cheque shall pay a penalty of 5% of the value of property determined by the Board under sub-section (4) of section 68 or the value determined by the provincial authority for the purposes of stamp duty, whichever is higher.

The above provisions of law are illustrated through the following examples.

Example 1

Mr A is deriving income from business and has declared taxable income as under.

Sale: 100,000,000.

Cost of sales: 70,000,000.

Breakup of cost of sale

Initial depreciation on machinery: 10,000,000.

Normal depreciation of machinery: 6,000,000.

Salaries: 40,000,000.

Fuel and utilities: 14,000,000.

Gross profit: 30,000,000.

Admin & distribution expenses: 10,000,000

Taxable income: 20,000,000

Mr. A had bought machinery of Rs40 million for the year through cash. As per section 75A, business deduction under section 22 & 23 pertaining to initial depreciation of Rs10,000,000 and normal depreciation of Rs6,000,000 shall not be admissible. Hence, Rs16,000,000 will be added in taxable income resulting in taxable income of Rs36,000,000.

Mr. A subsequently sells the machinery after three years at Rs12,000,000. For the purpose of computing gain, the cost of the asset has to be deducted from the sale price but in this case, the machinery was purchased through cash, hence, the cash amount cannot be treated as cost. Resultantly, Rs12,000,000 will be treated as gain chargeable to tax under the head “income from business”.

Example 2.

Mr. B derives income from salary only. He has purchased immovable property through cash and the FBR value of the property is Rs8,000,000 but the DC value of property for the purpose of stamp duty is Rs6,000,000. As per serial No. 21 of section 182, penalty at 5 percent of FBR value of property of DC value, whichever is higher, is to be imposed. In this case, the FBR value of property is greater than DC value, hence penalty shall be imposed at 5 percent of Rs8,000,000 at Rs400,000.

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FBR allows reduced duty rates for import of certain CBU vehicles

July 30, 2019
Draft MoU for sharing taxation data sent to China

ISLAMABAD: Pakistan has sent draft Memorandum of Understanding (MoU) to China for sharing taxation data between the two countries.

Federal Board of Revenue (FBR) Chairman Syed Muhammad Shabbar Zaidi on Monday sent the draft Memorandum of Understanding (MoU) on cooperation between FBR and China’s State Administration of Taxation in order to share taxation data between both the countries.

A statement said that the draft MoU has been sent through a letter addressed to Pakistan’s Ambassador in China Ms Naghmana A. Hashmi.

In this regard, Pakistan’s Ambassador in China has been authorized to sign the MoU on behalf of FBR.

The FBR chairman in his letter has stated that the signing of the MoU will enable the Taxation Authorities of both the countries to share data and learn from each other’s best practices.

The MoU will promote improvement in trade and investment in both countries.

July 29, 2019
FBR notifies revision in exemption regime under sales tax laws

ISLAMABAD: Federal Board of Revenue (FBR) has issued changes brought through Finance Act, 2019 in exemption regime under Sixth Schedule of the Sales Tax Act, 1990.

Following changes have been made in Table-1 of the Schedule:

i. Exemptions at the existing serial numbers 2,3, and 72, relating to meat, fish, poultry meat etc. have been amended to clearly provide that these exemptions also apply to products specified thereunder even if these products are packed.

ii. Under serial number 19, the products of milling industry, as sold in retail packing bearing brand names, have been excluded from purview of exemption, however, wheat and meslin flour shall remain exempt even if so packed or sold under a brand name. Redundant PCT Heading 1102.1000 has also been omitted.

iii. Serial numbers 36 and 37 pertaining to Gold and Silver, in unworked condition, have been omitted. Gold and Silver have been placed in the 8th schedule and chargeable to sales tax at the reduced rate of 1%. Gold and Silver have also been excluded from the purview of minimum value-addition tax of@ 3% at import stage under Twelfth Schedule.

iv. The expression “excluding electricity and natural gas” has been added in serial number 52A relating to exemption on goods supplied to specified hospitals. Now, such hospitals are no more eligible for exemption on supplies of electricity and gas.

v. The exemption at serial number 85, as available to fat filled milk, has been restricted to such milk as is not sold in retail packing under a brand name or a trademark. Such packed and branded fat filled milk now shall be subject to 10% sales tax under Eighth Schedule.

vi. In view of doing away with the special procedure for steel industry, the exemption available to vessels / ships for breaking at serial number 95 has been omitted. Vessels imported for breaking up are now taxable at 17%. Field formations of Customs should ensure chargeability of sales tax on import of vessels since 1st July, 2019.

vii. New serial number 151 has been added. This is a transposition of exemption under SRO 1212(I)/2018 which now has been rescinded and which provided exemption on supplies made within the tribal areas. In the transposed form, it allows further exemption on imports of industrial input including plant and machinery imported by industrial units located within tribal areas. These exemptions on imported inputs / plant and machinery shall be available subject to security mechanism specified under this serial.

viii. Newly added serial 152 provides exemption on supplies of electricity as made to all consumers in tribal areas. However, this exemption shall neither be available to industries established after 31st May, 2018, nor to any steel and ghee /oil industries.

ix. Through new serial number 153, imports and supplies by manufacturers of steel billets, ingots, ship plates, bars and other long re-rolled profiles, have been exempted. In lieu of this exemption, federal excise duty has been imposed on these items in sales tax mode.

In Table-2, relating to local supplies, two changes have been made:

(i) Exemption under serial number 16 shall not be available to ginned cotton, as the same has been subjected reduced rate of 10% in Eighth Schedule, at newly inserted serial number 65 in Table 1.

(ii) The exemption to cottonseed oil has been provided at serial number 25.

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FBR issues new withholding sales tax rates on supplies

July 29, 2019
Non-ATL person to pay 10pc withholding tax for offshore digital service

ISLAMABAD: Persons not appearing in the Active Taxpayers’ List (ATL) shall pay 10 percent as withholding tax on payment of fee for offshore digital service to non-resident person under Section 152(1C) of Income Tax Ordinance, 2001.

The Federal Board of Revenue (FBR) issued withholding tax card for tax year 2020 effective from July 01, 2019. The FBR said that tax shall be deducted on remittance outside Pakistan, of fee for off-shore digital services , chargeable to tax u/s 6, to a non-resident person on behalf of any resident or a permanent establishment of a non-resident in Pakistan.

A banking company or financial institution shall collect withholding tax under this section from non-resident persons at the time the amount is actually paid at 5 percent of the gross amount.

The FBR said that persons not appearing in the Active Taxpayers’ List: The applicable tax rate is to be increased by 100 percent (Rule-1 of Tenth Schedule to the Ordinance), i.e. 10 percent of the gross amount.

The FBR said that tax will be deducted from Non-resident on any payment of insurance premium or re-insurance to a non-resident person under Section 52(1AA) of Income Tax Ordinance, 2001 at 5 percent of gross amount by every person making the payments from non-resident person at the time the amount is actually paid.

The FBR further said that tax will be deducted under Section 152 (1AAA) on payments for advertisement services from non-resident person relaying from outside Pakistan.

The tax shall be collected by every person making payment non-resident at the time the amount is actually paid. The tax rate shall be 10 percent of the gross amount. Persons not appearing in the Active Taxpayers’ List : The applicable tax rate is to be increased by 100% (Rule-1 of Tenth Schedule to the Ordinance), i.e. 20% of the gross amount.

July 29, 2019

FBR issues new withholding sales tax rates on supplies

ISLAMABAD: Federal Board of Revenue (FBR) has announced new rates of withholding sales tax after abolishing Sales Tax Special Procedure (Withholding) Rules, 2007.

The FBR said that as Sales Tax Special Procedure (Withholding) Rules, 2007, have been rescinded, the rates of withholding and exclusions for the same have been provided in newly inserted Eleventh Schedule, as provided in amended section 3(7) of Sales Tax Act, 1990, effective from July 01, 2019, as under:

Table

S.No.	Withholding agent	Supplier category	Rate or extent of deduction
(1)	(2)	(3)	(4)
1	(a) Federal and provincial government departments; autonomous bodies; and public sector organizations (b) Companies as defined in the Income Tax Ordinance, 2001 (XLIX of 2001)	Registered persons	l/5th of Sales Tax as shown on invoice
2	(a) Federal and provincial government departments; autonomous bodies; and public sector organizations (b) Companies as defined in the Income Tax Ordinance, 2001 (XLIX of 2001)	Person registered as a wholesaler, dealer or distributor	1/10th of Sales Tax as shown on invoice
3	Federal and provincial government departments; autonomous bodies; and public sector organizations	Unregistered persons	Whole of the tax involved or as applicable to supplies on the basis of gross value of supplies
4	Companies as defined in the Income Tax Ordinance, 2001 (XLIX of 2001)	Unregistered persons	5% of gross value of supplies
5	Registered persons as recipient of advertisement services	Person providing advertisement services	Whole of sales tax applicable
6	Registered persons purchasing cane molasses.	Unregistered persons	Whole of sales tax applicable

The rates for withholding or deduction by the withholding agent shall not be applicable on following goods and supplies:

(i) Electrical energy;

(ii) Natural gas;

(iii) Petroleum products as supplied by petroleum production and exploration companies, oil refineries, oil marketing companies and dealers of motor spirit and high speed diesel;

(iv) Vegetable ghee and cooking oil;

(v) Telecommunication services;

(vi) Goods specified in the Third Schedule to the Sales Tax Act, 1990;

(vii) Supplies made by importers who paid value addition tax on such goods at the time of import; and

(viii) Supplies made by an Active Taxpayer as defined in the Sales Tax Act, 1990 to another registered persons with exception of advertisement services.

July 28, 2019

Imported consumer items to be cleared on declared retail prices: FBR

ISLAMABAD: Federal Board of Revenue (FBR) has said that the consumers items falling under mandatory retail price print will be assessed at declared retail price at clearance stage instead of determination through customs value.
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July 27, 2019
FBR notifies transfers, postings of BS-20 IRS officers

ISLAMABAD: Federal Board of Revenue (FBR) on Friday notified transfers and postings of BS-20 officers of Inland Revenue Service (IRS) with immediate effect and until further orders.

The FBR notified transfers and postings of following officers:

01. Syed Syedain Raza Zaidi (Inland Revenue Service/BS-20) has been transferred and posted as Commissioner Inland Revenue (Appeals-III) Karachi from the post of Commissioner, (Zone-V) Corporate Regional Tax Office, Karachi. He will assume charge of post of Commissioner, Appeal-III, Karachi on proceeding of Hyder Ali Dharejo to NMC.

02. Javaid Iqbal (Inland Revenue Service/BS-20) has been transferred and posted as Commissioner Inland Revenue (Appesls-III) Islamabad from the post of Commissioner, Inland Revenue (Appeals-I), Islamabad.

03. Sajjad Akbar Khan (Inland Revenue Service/BS-20) is currently posted as Commissioner, Inland Revenue (Appeals-I), Karachi. He will hold additional Charge of post of CIR (Appeals-II), Karachi in addition to his own duties.

04. Muhammad Javaid Badar (Inland Revenue Service/BS-20) has been transferred and posted as Commissioner Inland Revenue (Appeals) Faisalabad from the post of Commissioner, (Rahimyar Khan Zone) Regional Tax Office, Bahawalpur.

05. Rafique-ur-Rehman Memon (Inland Revenue Service/BS-20) has been transferred and posted as Commissioner Inland Revenue (Appeals-IV) Karachi from the post of Director, Directorate of Immovable Property (South), Karachi. He will assume the charge of post of Commissioner Appeals-IV, Karachi on proceeding of Dr. Tauqeer Irtiza to NMC.

06. Dr. Muhammad Idrees (Inland Revenue Service/BS-20) has been transferred and posted as Commissioner Inland Revenue (Appeals) Sargodha from the post of Commissioner, (Zone-II) Regional Tax Office, Sargodha.

07. Muhammad Faisal Mushtaq Dar (Inland Revenue Service/BS-20) has been transferred and posted as Commissioner Inland Revenue (Appeals-I) Islamabad from the post of Commissioner, (WHT Zone) Regional Tax Office, Sargodha.

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.

July 26, 2019
FBR issues withholding tax rates on commercial, industrial electricity consumers

KARACHI: Federal Board of Revenue (FBR) has issued withholding tax rates to be collected from electricity consumers of commercial and industrial.

According to Withholding Tax Card for tax year 2020 applicable from July 01, 2019, the power utility preparing electricity bills shall collect withholding tax under Section 235 of Income Tax Ordinance, 2001 from commercial and industrial consumers along with payment of electricity consumption on charges.

The FBR issued following withholding tax rates on electricity consumption by commercial and industrial consumers”

If monthly bill does not exceeds Rs400 the rate of withholding tax shall be zero.

Exceeds Rs. 400 but does not exceed Rs. 600 the rate of withholding tax shall be Rs80.

Exceeds Rs. 600 but does not exceed Rs. 800 the rate of withholding tax shall be Rs100.

Exceeds Rs. 800 but does not exceed Rs. 1000 the rate of withholding tax shall be Rs160.

Exceeds Rs. 1000 but does not exceed Rs. 1500 the rate of withholding tax shall be Rs300.

Exceeds Rs. 1500 but does not exceed Rs. 3000 the rate of withholding tax shall be Rs350.

Exceeds Rs. 3000 but does not exceed Rs. 4,500 the rate of withholding tax shall be Rs450.

Exceeds Rs. 4500 but does not exceed Rs. 6000 the rate of withholding tax shall be Rs500.

Exceeds Rs. 6000 but does not exceed Rs. 10000 the rate of withholding tax shall be Rs650.

Exceeds Rs. 10000 but does not exceed Rs. 15000 the rate of withholding tax shall be Rs1000.

Exceeds Rs. 15000 but does not exceed Rs. 20000 the rate of withholding tax shall be Rs1500.

Exceeds Rs20000:

(i) The tax shall be at the rate of 12 percent for commercial consumers;

(ii) The tax shall be at the rate of 5 percent for industrial consumers.

The FBR said that the tax shall:

(i) Adjustable In case of company.

(ii) In case of other than company tax collected on Rs, 360000 amount of annual bill will be minimum tax.

(iii) in case other than company tax collected on amount over and above Rs 30000/- of monthly bill will be adjustable

(i) Minimum Tax for CNG Stations.

The FBR said that power utilities are required to collect adjustable withholding tax under Section 235A from domestic consumers along with payment of electricity consumption on charges.

The tax shall be collected at 7.5 percent if the amount of monthly bill is Rs75,000 ore more. However, tax shall not be collected if the amount of monthly bill is less than Rs75,000.

July 26, 2019
No tax imposed on motorcycles, auto rickshaws: FBR

ISLAMABAD: Federal Board of Revenue (FBR) on Thursday said that it has not imposed any tax on motorcycles and auto rickshaws.

“The new circulating about imposition of tax on motorcycle and auto rickshaws by FBR is baseless and false, the FBR clarified and strongly refuted this baseless news.

The FBR clarified that no change or increase in tax has been levied on motor vehicles under section 231B and 234 of Income Tax Ordinance-2001.

Further, there is no suggestion under consideration to levy tax on Motorcycle and Auto Rickshaws.

“The tax is levied only on cars as per Income Tax Ordinance-2001,” the FBR said.

The government is working to provide facilities to the less income segment of the society.

July 26, 2019
FBR establishes FATF cell

The Federal Board of Revenue (FBR) has established a dedicated cell to oversee compliance with actions mandated by the Financial Action Task Force (FATF).
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July 25, 2019