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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 chairman warns unregistered industrial, commercial consumers of penal action

    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.

  • FBR suggested reducing income tax rate for banks

    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.

  • FBR issues draft rules to implement tax amnesty scheme 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.

  • Additional advance tax proposed on all type of motor vehicles to discourage premium

    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…)
  • FBR advised to stop treating taxpayers unfairly

    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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    FBR recommended to exempt income tax on mortgage loans to facilitate salaried persons

  • Higher duty rates proposed for car, luxury items import

    Higher duty rates proposed for car, luxury items import

    KARACHI: The Federal Board of Revenue (FBR) has been suggested to impose higher rates of duties on import of non-essential and luxury items in order to reduce current account deficit.

    Association of Chartered Certified Accountants (ACCA) in its tax proposals for budget 2019/2020 said that tangible measures should be taken to reduce the import burden.

    “Heavy duties should be levied on all non-essential imports like expensive electronics, cars & luxury items.”

    In addition incentives should be announced for local industry to encourage domestic products, it suggested.

    In other key reforms, the ACCA said that agricultural sector needs to be re-evaluated.

    Being an agricultural country its GDP share must be according to its volume. Currently its share in GDP is 24 percent while it has the potential to reach up to 55 percent.

    Large landowners should be taxed at minimal rates i.e. 7 percent with that revenue used to subsidize seeds, fertilizers, water, electricity, fuel, etc. for the small farmers.

    Cheap and low quality smuggling and imports from India should be controlled.

    The ACCA said that for Pakistan, a country of 220 million people, human capital is a huge resource in new era, but unfortunately due to incompetent and poor policies we are unable to convert this power in to workable force, un-employment has increased to almost 6 percent and over 4 million people are unemployed.

    Keeping in view the above indicators the government needs to encourage services sectors, new industries and agriculture.

    Banking sector should be used to incentivize and promote a culture of entrepreneurship.

    Incentives must be announced for Services sectors particularly Telecom, home based industries, young entrepreneurship programs with special focus on women.

  • FBR chairman agrees on abolishing withholding tax on raw materials

    FBR chairman agrees on abolishing withholding tax on raw materials

    KARACHI: Shabbar Zaidi, Chairman, Federal Board of Revenue (FBR) on Saturday asked business community to provide list of raw material for reducing tax rates on import stage.

    Addressing the business community at Karachi Chamber of Commerce and Industry (KCCI), Shabbar Zaidi agreed with the business community that there should not be withholding tax on import of raw material.

    The KCCI members raised the issue that withholding tax rates ranging 3 percent to 6 percent were imposed on import of raw materials.

    “Yes. There should not be withholding tax on raw material,” Zaidi said and asked the KCCI to provide list for taking action before the next budget.

    Talking on Amnesty Scheme – 2019, the chairman said that the asset declaration scheme was clear and there was no ambiguity.

    He said that the scheme would be part of the Finance Bill for formal approval from the parliament and it would be the same as promulgated through the presidential ordinance.

    The chairman said that the rules were being formulated for intending declarants.

    Shabbar Zaidi also talked about smuggling and misuse of tax concessions.

    He said that tax relief may be given to small number of raw materials but it cannot be extended to all imported goods.

    He said that Afghan Transit Trade was used for smuggling into Pakistan. “But there are other ways to import illegal goods into the country,” he added.

    The chairman asked the business community that once they declare the smuggled goods were illegal for selling in the local market. “If the business community support and promise there will be no protest then the raids against illicit goods will be launched from tomorrow,” the chairman added.

  • Elimination of regulatory duty, additional customs duty on essential raw materials recommended

    Elimination of regulatory duty, additional customs duty on essential raw materials recommended

    KARACHI: Federal Board of Revenue (FBR) has been suggested to eliminate additional customs duty and regulatory duty on essential raw materials.

    The Overseas Investors Chamber of Commerce and Industry (OICCI) in its tax proposals recommended tariff rationalization in the forthcoming for budget 2019/2020.

    It recommended elimination of additional custom duty and regulatory duty on essential raw materials, which are either not locally available or in limited supply, used for local manufacturing.

    The OICCI – the representative body of foreign investors – also suggested bringing illicit trade into tax ambit.

    It said that on the basis of survey conducted by OICCI amongst its members, losses to the government exchequer due to Illicit trade (business in products which are either smuggled, counterfeit, under-invoiced imports, sold by unregistered manufacturer/seller, etc.) is estimated at Rs200 billion (tobacco alone estimated at Rs63 billion only).

    In order to control the Afghan Transit Trade, it recommended:

    Harmonize duty and tax rates to remove the incentive for evasion.

    Fix quantitative limits for imports based on genuine Afghan needs and size of population.

    Establish a basis of collecting duty/taxes at the point of entry into Pakistan for the account of the Afghanistan Government

    Fix import value in consultation with the brand owner in Pakistan.

    Customs procedures and Cross-border rules should be published for transparency.

    Containers coming back from Afghanistan should be checked by customs.

    There should be a negative list of items which are not utilized in Afghanistan; yet are imported and make their way into Pakistan.

    Streamlining of border crossing procedures on financial guarantee by banks and anti‐corruption measures.

    Export to Afghanistan be facilitated with simplified procedure by FBR and border control authorities.

    For stringent controls illicit trade, it recommended:

    Introduce tighter penalties for illicit trade across categories, including criminal liability across the value chain, including retailers, distributors and manufacturers

    Introduce a special division/ task force to raid retailers and manufacturers to confiscate and destroy illicit stocks

    Launch a media campaign to increase awareness in consumers of the harms of illicit products and discourage them from purchasing such products

    The OICCI suggested structural reforms in the customs:

    Do a thorough review of the custom regime, in consultation with brand owners, to address issues of counterfeiting, smuggling, and rationalization of duty structure and fixing of import Tariff prices.

    Custom valuation should be done on modern lines through online search and matching international and regional pricing and taking local legal importers of items on board.

    IPR (Intellectual Property Rights) laws implementation in Pakistan need to be strengthened. Special IPR tribunals may be formed for speedy trials leading towards IPR compliance at par with international standards of IPR enforceability.

    Unauthorized imports of counterfeit products should be effectively checked through registration of brands with the custom authorities in coordination with the original brand owner/ registered in Pakistan.

    Valuation ruling should be issued in consultation with the owner of the brand or its authorized representative.

    The data of import should be public (restrictively) to ensure transparency and this will also help in taking over of goods under section 25A of the Custom Act, 1969.

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  • FBR advised reducing income tax to half for exporters other than five zero-rated sectors

    FBR advised reducing income tax to half for exporters other than five zero-rated sectors

    KARACHI: Federal Board of Revenue (FBR) has been suggested to reduce the income tax rate to half for exporters not falling under five zero-rating scheme in order to promote and diversification of exports.

    Pakistan Business Council (PBC) in its tax proposals for forthcoming budget 2019/2020 said that at present the rate of tax deduction on export proceeds under Section 154 of Income Tax Ordinance, 2001 is one percent, which is same as for five export oriented sector as well as for other than five sectors.

    The council said that in order to promote diversification of exports instead of relying on only five specified sectors, rate of tax on export proceeds should be reduced to 0.5 percent from one percent for sectors which are not covered under the five specified export oriented sectors.

    Giving rationale for the change, it said that at present sales tax zero rating is available to five specified export oriented sectors on their input materials whereas such benefit is not available to other potential export sectors.

    Moreover, gas supply is also available to five specified sectors at 600/MMBTU whereas rate of gas per MMBTU for non-conventional sectors is Rs780 in addition to GIDC, which makes potential export uncompetitive and consequently, Pakistan is unable to diversify export markets.

    “In order to compensate such exporters and to promote export of other than five sectors, rate should be decreased to five percent for such sectors,” the PBC recommended.

    The PBC further pointed out that manufacturing bond/DTRE rules are cumbersome and in certain cases lack clarity whereby many potential exporters cannot avail them. Consequently, it results in lost exports.

    Therefore, it is recommended that manufacturing bond/DTRE rules should be modified to make it easily accessible and lend full clarity to allow exporters to fulfill potential export orders.

    The proposed amendment would increase exports by facilitating existing and potential exporters.

  • FBR recommended to exempt income tax on mortgage loans to facilitate salaried persons

    FBR recommended to exempt income tax on mortgage loans to facilitate salaried persons

    KARACHI: Federal Board of Revenue (FBR) has been recommended to exempt income tax on mortgage loans in order to facilitate salaried persons.

    Currently the loans obtained from the employer below Benchmark interest rate is subject to tax, said Institute of Chartered Accountants of Pakistan (ICAP) in its tax proposals for budget 2019/2020.

    It recommended that the taxation of marginal income on loans obtained from the employer below benchmark rate should be exempted by deleting sub-section (7) of Section 13 of Income Tax Ordinance, 2001.

    Alternatively, the minimum threshold of the loan amount on which the provisions of Section 13(7) would not be attracted, should be raised to at least Rs2,500,000 from the existing limit of Rs1,000,000.

    Moreover, current benchmark rate of 10 percent of much higher than the prevailing KIBOR rates, therefore, benchmark rate should be reduced suitably to somewhere near KIBOR rate.

    “Alternatively, at least the mortgage loans should be exempted from the operation of Section 13(7) of the Income Tax Ordinance, 2001.”

    The institute said that this is not a significant source of revenue for the Government on the one hand and very rigid piece of legislation on the salaried taxpayer on the other hand who are hard hit by the present economic situation.

    The taxation of this notional income is highly unjust since it taxes the notional income of the salaried person, which is against the basic principle of taxation since this notional income will never ever be received by the taxpayer.

    Similar notional income in the hands of employees of educational institutions, restaurants, hospitals, clinics etc. is already exempt under clause (53A) of Part I of Second Schedule.

    The rationale underlying this proposal is that:

    a) It will boost the housing industry since in today’s economic situation and the presence of speculators in the property market it is next to impossible for a salaried employee to own a house on commercial mark-up rates. Once this industry takes off there will be provision of cheap houses and there will be increase in tax revenue from housing and allied sector;

    b) It will contribute in enhancing the national economic activity by extending affordable loans and advances to middle class income group of society;

    c) It will remove detrimental financial ramifications due to incremental rate of interest on notional income for all other salaried persons, who are already facing a tough challenge to survive within their paltry resources- all legally declared and tax paid; and

    d) The FBR is also cognizant of this fact by stating in Clause (53A) that “any other perquisite or benefit for which the employer does not have to bear any marginal cost; and the Circular Letter 4(8)IT-J/91 dated June 30, 1991 issued by then CBR opines that “…it is not desirable to tax such notional income…”. The same principle should be applied in this situation.