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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 sets up directorate to initiate legal action in suspicious transactions, stop currency smuggling

    FBR sets up directorate to initiate legal action in suspicious transactions, stop currency smuggling

    ISLAMABAD: Federal Board of Revenue (FBR) has established Directorate of Cross Border Currency Movement (CBCM) to stop individual and trade based money laundering and initiate legal action in suspicious transactions.

    The directorate shall be function under administrative control of the Directorate General of Intelligence and Investigation, Customs, a notification said on Thursday.

    According to its scope and objectives, a database of currency seizures would be maintained and updated at the directorate. Further each Model Customs Collectorate (MCC) and regional directorate of I&I shall report information about currency seizures made within their jurisdiction on fortnightly basis to the directorate.

    The FBR said that the directorate would share the data of currency seizures with the FBR and Financial Monitoring Unit (FMU) on monthly basis or as when required.

    The FBR said that the directorate shall maintain and update database containing information of Suspicious Transaction Reports (STRs) received from the FMU. “The aforesaid data shall be shared with FBR and FMU on monthly basis or as when required,” it said.

    The directorate will require to disseminate the STRs to the concerned regional directorate of I&I for inquiry and investigation. “Each regional directorate shall maintain record of STRs received and appoint officers to carry out investigation in light of the approved plan. “Progress on the investigation conducted in each case shall be communicated to the directorate for onward submission to the FMU,” it added.

    The directorate will also responsible to devise a mechanism for information sharing with other law enforcement agencies (LEAs) on real time as well as on routine basis. The directorate shall also cooperate with LEAs in areas of mutual interest.

    The directorate has been authorized to institute cases of money laundering. “Nominated or appointed investigation officers shall instituted money laundering cases emanating from STRs or currency seizures or from other sources, by filing complaints/applications in the respective competent courts through public prosecutors appointed under AML Act, 2010.”

    The FBR said that investigation and prosecution of the cases would be conducted in accordance with the procedure laid down in AML Act, 2010 Customs Act, 1969 and Cr.P.C 1898.

    While investigating money laundering cases in general and currency cases in particular, investigating officer shall focus on the following aspects:

    a. The personal and / or family association with any religious / political/ social organization or groups, travel history, past criminal record, professional history, etc. of the accused / arrested persons shall be investigated. The motive/linkages of each currency smuggling case with any of the associated offence such as trade- based money laundering, capital flight, Hundi/Hawala, etc. shall also be covered in such investigation.

    b. Whether there is any linkage of terror financing related to trans-national terrorist networks or UN designated entities and individuals detected in the cases the officers will be required to report to the directorate.

    c. Whether there are possibilities of involvement of any foreign networks other than trans-national terrorist networks, the officers should approach Chief International Customs – FBR for seeking information about the foreign linkages of the investigation.

    d. the investigation officers are also required to find source of funding for cash smuggling and the end user of the smuggling proceeds.

  • Sales Tax Act 1990: treatment of tax paid by person required to get registration

    Sales Tax Act 1990: treatment of tax paid by person required to get registration

    KARACHI: A person, who is required to be get registration, paid sales tax on goods purchased from a registered person shall be treated as input tax.

    According to updated Sales Tax Act, 1990 issued by Federal Board of Revenue (FBR), the Section 59 explained the treatment of tax paid shall be input tax for a person who purchased goods from a registered person.

    Section 59: Tax paid on stocks acquired before registration

    The tax paid on goods purchased by a person who is subsequently required to be registered under section 14 due to new liabilities or levies or gets voluntary registration under this Act or the rules made thereunder, shall be treated as input tax, provided that such goods were purchased by him from a registered person against an invoice issued under section 23 during a period of thirty days before making an application for registration and constitute his verifiable unsold stock on the date of compulsory registration or on the date of application for registration or for voluntary registration:

    Provided that where a person imports goods, the tax paid by him thereon during a period of ninety days before making an application for registration shall be treated as an input tax subject to the condition that he holds the bill of entry relating to such goods and also that these are verifiable unsold or un-consumed stocks on the date of compulsory registration or on the date of application for registration or for voluntary registration.

  • ICAP recommends harmonization of federal, provincial tax laws

    ICAP recommends harmonization of federal, provincial tax laws

    KARACHI: Institute of Chartered Accountants of Pakistan (ICAP) has recommended harmonization of federal and provincial tax laws to facilitate the taxpayers.

    In its budget proposals for fiscal year 2019/2020 the ICAP suggested following measures for harmonization of federal and provincial taxes:

    Integration of Taxation Authorities for One-Window Solution

    The ICAP believes, there should be a strong integration of all revenue authorities in such a way that each authority would maintain its existence but should provide one-window solution for the taxpayer.

    This would be not only for enabling inter-adjustment of refunds, but also for one return for both the Federal and Provincial Taxes.

    In this regard, STRIVE should be implemented at provincial level also along with integration with the Federal return.

    The Federal Board of Revenue (FBR) is practically not allowing refunds for Provincial sales tax, owing to settlement disputes / claims pending with the Provincial Tax Authorities.

    Further, unnecessary notices are issued against input tax claims, on account of non-verification of Provincial sales tax in FBR’s system.

    This issue needs to be taken up with the Provincial sales tax authorities for its resolution at the earliest.

    Federal and Provincial Policies – Enforcing Uniformity

    A policy board comprising Chairman of the FBR as well as the Provincial Boards should be formed to ensure uniformity in policies, tax rates and procedures of the Federal and Provincial Revenue Boards. Standard Schedule of services should also be introduced.

    Classification rules play a vital role and are generally crucial in the identification of a correct tariff heading for levying tax.

    The provincial statutes should provide classification of taxable services in a more consistent manner to provide clarity and help reducing unnecessary litigation.

    Sales Tax Rate to be Standardized

    Another key area for correction is different Sales Tax rates prevailing across provinces. For example, standard rate of sales tax in Punjab is 16 percent, which is high as compared to other provinces and, therefore, needs some standardization.

    Standard rate of Sales Tax should be reduced to 13 percent, in line with the SST to attract more taxpayers into the tax net; reduce cost of doing business; and bring equity with other provinces.

    Concept of Reverse Charge under Provincial Sales Tax on Services

    All Provincial Statues provide that service provided by a non-resident service provider is liable to tax under reverse charge mechanism i.e. in the hand of service recipient.

    A nonresident has been defined as a person who is not registered with the relevant provincial statute.

    Concept of reverse charge is used in many countries so that service exporters do not have to get themselves registered in the jurisdiction of the service importer.

    In Pakistan, inter-provincial transactions are not zero-rated, or exempt in the jurisdiction of origin.

    Accordingly, such a tax framework is tantamount to double taxation in case where service provider is located in other province of Pakistan, because the service provider becomes liable to tax in his/her respective Province; while the recipient of service becomes liable to tax in the Province of his/her residence.

    It is suggested that the reverse charge should be restricted to such cases where service provider is located outside Pakistan.

    Further, tax paid under the reverse charge mechanism should be allowed as an input tax.

    Export of Services

    Unlike STA, zero rating of services is not available in other provincial statutes in line with the best international practices.

    In PSTSA, zero rating is allowed on the basis of certain harsh conditionalities; while under SSTSA, such benefit is only extended to Accountants & Auditors and Software Consultants.

    Zero rating on export of all taxable services should be allowed without any conditionalities by all provinces in order to promote export of services in the international market, and to harmonize the service tax laws with the federal tax law; in line with the best international practices.

    Time to claim Input Tax

    Presently, the time to claim input tax credit in all provinces is six months, and that in PRA is four months from the end of the relevant tax period.

    Such period is insufficient and does not cater to business needs.

    It is, therefore, suggested that the time period for claiming input tax credit be consistent across all the Provincial Statutes and be also increased to one year.

    Single Base for Calculating Property Related Taxes

    It is proposed that a single base be defined to calculate all the Provincial and Federal taxes applicable on acquisition and disposal of property.

    This would help in documentation of the untaxed money parked in the real estate sector. Appropriate changes in the Constitution of Pakistan are also desired for the purpose.

    Sales Tax Withholding

    Except for Punjab, all the Provinces require withholding of sales tax for registered / active taxpayers as well. This results in unwarranted administrative and operational issues.

    In this regard, it is suggested that in all the Provinces, sales tax withholding be exempted in cases where service provider is registered. Where a service is provided by an unregistered person to the registered service recipient, the liability to pay the tax practically falls upon the

    person receiving the service in almost all cases.

    The whole amount of sales tax is required to be withheld from the payment made to the unregistered person.

    It is suggested that the rate of withholding tax for unregistered service providers may be reduced to 1 percent; in line with the Federal Sales Tax Rules.

  • Shabbar Zaidi appointment as FBR chairman without advertisement may tantamount to contempt of court

    Shabbar Zaidi appointment as FBR chairman without advertisement may tantamount to contempt of court

    ISLAMABAD: The selection committee has observed that appointment of Shabbar Zaidi without advertising the post as chairman of the Federal Board of Revenue (FBR) and Secretary Revenue Division may tantamount to contempt of court.

    The selection committee for the selection of the senior officers held its meeting on May 06, 2019 for and considered the FBR Chairman is appointed by Federal Government in terms of Section 3 (3) of FBR Act, 2007.

    The Federal Government has been defined as the ‘Federal Cabinet’ in Article 90 of the Constitution of Islamic Republic of Pakistan, 1973 (Annex-II) and Honorable Supreme Court of Pakistan’s judgment dated 18-08-2016 passed in Civil Appeals No.1428/2016 and 1436/2016.

    The selection committee observed the name of Dr. Ahmad Mujtaba Memon (PCS/BS-21) was discussed for his appointment as Chairman, FBR / Secretary, Revenue Division.

    “After detailed discussions, the Committee was of the view that Dr. Ahmad Mujtaba Memon (PCS/BS-21) is too junior to be posted / appointed as Chairman, Federal Board of Revenue / Secretary, Revenue Division.”

    Whereafter, the Adviser on Finance, Revenue & Economic Affairs recommended Syed Muhammad Shabbar Zaidi, Chartered Accountant, for appointment as Chairman, FBR / Secretary, Revenue Division.

    The Committee observed that Islamabad High Court, Islamabad, vide judgment dated 05-06-2013 passed in Writ Petition No.812/ 2013 (Annex-IV) while setting aside notification of appointment of Ali Arshad Hakeem as Chairman, FBR, inter alia, directed Establishment Division, for appointing regular Chairman, FBR, through competitive process after advertising the post.

    “However, Ali Arshad Hakeem as Chairman, FBR, enjoyed all financial benefits of the post. It was discussed that possibility of appointment of Syed Muhammad Shabbar Zaidi may be explored on pro bono / honorary basis.”

    “The committee of the view that the advice from law and justice division may be solicited in this regard since Syed Muhammad Shabbar Zaidi is from private sector,” according to the report of selection committee.

    It further said that since pro bono appointment are being made by the government without advertisement, such as appointment of chairman, prime minister’s inspection commission (PMIC), Chairman NAVTTC, option of pro bono appointment of Chairman FBR/Secretary, Revenue Division, without advertisement is worth exploring.

    “Since express directors of the court are in field regarding appointment of chairman FBR through competitive process appointing Syed Muhammad Shabbar Zaidi without advertising the post as FBR chairman / Secretary Revenue Division may tantamount to contempt of court.”

    Keeping this aspect in view, the division sought advice from law and justice division on the following propositions:

    Whether or not FBR chairman can be appointed from private sector in terms of Section 3(3) of the FBR Act, 2007.

    Whether or not the post of FBR chairman is required to be advertised if the appointment is to be made on honorary / pro bono basis.

    Further the selection committee went through the CV of Shabbar Zaidi and observed that he had made representation before the FBR on behalf of the clients for various clarifications and reconciliations. “The existing of conflict of interest in his appointment as FBR chairman/ Secretary Revenue Division also needs to be taken into consideration,” it added.

  • FBR sets up committee to address complaints in contract bidding

    FBR sets up committee to address complaints in contract bidding

    ISLAMABAD: Federal Board of Revenue (FBR) on Wednesday constituted a grievances redressal committee to resolve the complaints of bidders pertaining to contracts of the revenue body.

    In an office order issued by the FBR stated that in accordance with rule 48(1) of the Public Procurement Rules, 2004, it had constituted the grievances redressal committee comprising the following officers of the FBR with immediate effect:

    01. Ali Raza, PD(ITTMS)/Procurement specialist: chairman

    02. Ardsher Saleem Tariq Chief Broadening of Tax Base: Member

    03. Amir Javed, Secretary (Management-IR): Member

    04. Tariq Mehmood, Second Secretary (Admin): Member

    05. Shiraz Ali, Second Secretary (SSM): Member.

    The committee will have full powers to address the complaints of bidders pertaining to procurement / contracts in FBR (Headquarter) before entry into force of the procurement contracts in question.

  • Withholding tax rates on electricity consumption for tax year 2019

    Withholding tax rates on electricity consumption for tax year 2019

    KARACHI: The electricity supply company shall collect advance tax from industrial and commercial consumer as per updated withholding tax card for tax year 2019 issued after amendments made to Income Tax Ordinance, 2001 through Finance Supplementary (Second Amendment) Act, 2019.

    Federal Board of Revenue (FBR) issued following withholding tax rates under Section 235 of Income Tax Ordinance, 2001 to be collected by person preparing electricity bills from commercial and industrial consumers of electricity along with payment of electricity consumption charges:

    Does not exceed Rs. 400: Zero tax

    Exceeds Rs400 but does not exceed Rs600: Rs80

    Exceeds Rs600 but does not exceed Rs800: Rs100

    Exceeds Rs800 but does not exceed Rs1000: Rs160

    Exceeds Rs1000 but does not exceed Rs1500: Rs300

    Exceeds Rs1500 but does not exceed Rs3000: Rs350

    Exceeds Rs3000 but does not exceed Rs4500: Rs450

    Exceeds Rs4500 but does not exceed Rs6000: Rs500

    Exceeds Rs6000 but does not exceed Rs10000: Rs650

    Exceeds Rs10000 but does not exceed Rs15000: Rs1000

    Exceeds Rs15000 but does not exceed Rs20000: Rs1500

    Exceeds Rs20000: (i) At the rate of 12 percent for commercial consumers; (ii) at the rate of 5 percent for industrial consumers.

    The tax shall be:

    (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.

    (iv) Final for CNG Stations.

    The withholding tax on domestic consumers of electricity under Section 235A shall be:

    (i) If the amount of monthly bill is Rs75,000 or more: 7.5 percent

    (ii) If the amount of monthly bill is less than Rs75,000: the tax rate shall be zero.

    The withholding tax from every steel melters and composite steel units under Section 235B shall be Re 1 per unit of electricity consumed and the tax shall be non-adjustable.

  • Sales Tax Act 1990: tax payment by company in liquidation

    Sales Tax Act 1990: tax payment by company in liquidation

    KARACHI: The sales tax law has defined the procedure for liability for payment of tax in case of private company is in state of liquidation.

    The updated Sales Tax Act, 1990 issued by Federal Board of Revenue (FBR), the Section 58 explained the payment method from the company is wound up.

    Section 58: Liability for payment of tax in the case of private companies or business enterprises

    Notwithstanding anything contained in the Companies Act, 2017 (XIX of 2017), where any private company or business enterprise is wound up and any tax chargeable on the company or business enterprise, whether before, or in the course, or after its liquidation, in respect of any tax period cannot be recovered from the company or business enterprise, every person who was a owner of, or partner in, or director of, the company or business enterprise during the relevant period shall, jointly and severally with such persons, be liable for the payment of such tax.

    Section 58A: Representatives

    Sub-Section (1): For the purpose of this Act and subject to sub-sections (2) and (3), the expression “representative” in respect of a registered person, means:

    (a) where the person is an individual under a legal disability, the guardian or manager who receives or is entitled to receive income on behalf, or for the benefit of the individual;

    (b) where the person is a company (other than a trust, a Provincial Government, or local authority in Pakistan), a director or a manager or secretary or agent or accountant or any similar officer of the company;

    (c) where the person is a trust declared by a duly executed instrument in writing whether testamentary or otherwise, any trustee of the trust;

    (d) where the person is a Provincial Government, or local authority in Pakistan, any individual responsible for accounting for the receipt and payment of money or funds on behalf of the Provincial Government or local authority;

    (e) where the person is an association of persons, a director or a manager or secretary or agent or accountant or any similar officer of the association or, in the case of a firm, any partner in the firm;

    (f) where the person is the Federal Government, any individual responsible for accounting for the receipt and payment of moneys or funds on behalf of the Federal Government; or

    (g) where the person is a public international organization, or a foreign government or political sub-division of a foreign government, any individual responsible for accounting for the receipt and payment of moneys or funds in Pakistan on behalf of the organization, government, or political subdivision of the government.

    Sub-Section (2): Where the Court of Wards, the Administrator General, the Official Trustee, or any receiver or manager appointed by, or under, any order of a Court receives or is entitled to receive income on behalf, or for the benefit of any person, such Court of Wards, Administrator General, Official Trustee, receiver, or manager shall be the representative of the person for the purposes of this Act.

    Sub-Section (3): Subject to sub-section (4), where a person is a non-resident person, the representative of the persons for the purpose of this Act for a tax year shall be any person in Pakistan:

    (a) who is employed by, or on behalf of, the non-resident person;

    (b) who has any business connection with the non-resident person;

    (c) from or through whom the non-resident person is in receipt of any income, whether directly or indirectly;

    (d) who holds, or controls the receipt or disposal of any money belonging to the non-resident person;

    (e) who is the trustee of the non-resident person; or

    (f) who is declared by the 1[Commissioner] by an order in writing to be the representative of the non-resident person.

    Sub-Section (4): No person shall be declared as the representative of a non-resident person unless the person has been given an opportunity by the 1[Commissioner] of being heard.

    Section 58B: Liability and obligations of representatives

    Sub-Section (1): Every representative of a person shall be responsible for performing any duties or obligations imposed by or under this Act on the person, including the payment of tax.

    Sub-Section (2): Subject to section 58 and sub-section (5) of this section, any tax that, by virtue of sub-section (1), is payable by a representative of a registered person shall be recoverable from the representative only to the extent of any assets of the registered person that are in the possession or under the control of the representative.

    Sub-Section (3): Every representative of a registered person who pays any tax owing by the registered person shall be entitled to recover the amount so paid from the registered person or to retain the amount so paid out of any moneys of the registered person that are in the representative’s possession or under the representative’s control.

    Sub-Section (4): Any representative, or any person who apprehends that he may be assessed as a representative, may retain out of any money payable by him to the person on whose behalf he is liable to pay tax (hereinafter in this section referred to as the “principal”), a sum equal to his estimated liability under this Act, and in the event of disagreement between the principal and such a representative or a person as to the amount to be so retained, such representative or person may obtain from the 1[Commissioner] a certificate stating the amount to be so retained pending final determination of the tax liability, and the certificate so obtained shall be his authority for retaining that amount.

    Sub-Section (5): Every representative shall be personally liable for the payment of any tax due by the representative in a representative capacity if, while the amount remains unpaid, the representative:

    (a) alienates, charges or disposes of any moneys received or accrued in respect of which the tax is payable; or

    (b) disposes of or parts with any moneys or funds belonging to the person that is in the possession of the representative or which comes to the representative after the tax is payable, if such tax could legally have been paid from or out of such moneys or funds.

    Sub-Section (6): Nothing in this section shall relieve any person from performing any duties imposed by or under this Act on the person which the representative of the person has failed to perform.

  • FBR reinstates nine customs officers into service on court order

    FBR reinstates nine customs officers into service on court order

    ISLAMABAD: Federal Board of Revenue (FBR) on Tuesday reinstated nine customs officials into service following an order of Supreme Court of Pakistan.

    The FBR said that in pursuance of judgment dated November 26, 2018 passed by Federal Service Tribunal, Islamabad duly upheld by the Supreme Court of Pakistan through order dated April 17, 2019, the following officers, who were compulsorily retired from service through FBR notification dated May 08, 2017 are hereby reinstated into service with effect from May 08, 2017 i.e. the date of their compulsory retirement:

    01. Qaiser Khan Loni, ex-principal appraiser, Model Customs Collectorate Quetta.

    02. Muhammad Zaman Mazari, ex-Inspector, MCC Quetta

    03. Haji Zahir Ali, ex-Inspector, MCC Quetta

    04. Shireen Subhan, ex-Inspector, MCC Peshawar

    05. Muhammad Akram, ex-Inspector, MCC Quetta

    06. Faiz Muhammad Khoso, ex-Inspector, MCC Quetta

    07. Musa Kha Awan, ex-Inspector, MCC Quetta

    The FBR said that matter of back benefits for the intervening period from May 08, 2017 till their re-instatement, during which they remained out of service, would depend upon final outcome of denovo proceedings to be initiated against them in due course of time in the light of federal service tribunal judgment and the apex court order.

    The FBR said that in pursuance of judgment dated February 01, 2018 passed by Federal Service Tribunal, Lahore duly upheld by the Supreme Court of Pakistan dated April 04, 2019, the FBR’s notifications dated May 08, 2017 and Dated August 22, 2017 are hereby withdrawn and following officers of customs service are reinstated into service with effect from May 08, 2017 i.e. date of their removal from service:

    01. Waqar Ahmed Cheema, ex-Superintendent, Directorate of Intelligence and Investigation, FBR, Lahore

    02. Aziz-ur-Rehman, ex-Inspector, MCC Islamabad

    The FBR said that matter of back benefits for the intervening period from May 08, 2017 till their re-instatement, during which they remained out of service, would depend upon final outcome of denovo proceedings to be initiated against them in due course of time in the light of federal service tribunal judgment and the apex court order.

  • ABAD welcomes new chairman FBR

    ABAD welcomes new chairman FBR

    KARACHI: Association of Builders and Developers of Pakistan (ABAD), welcoming the appointment of a leading Chartered Accountant and tax expert Shabbar Zaidi as the Chairman of Federal Board of Revenue (FBR), has hoped that Shabbar Zaidi will bring in new strategy to solve problems of business community of the country as well as creating new venues for tax collection rather than taxing already taxed people.

    Chairman ABAD Muhammad Hassan Bakshi, Senior Vice Chairman Anwar Dawood, Vice Chairman Abdul Kareem Adhia and Chairman Southern Region Ibrahim Habib, in a statement, said that the PTI-led federal government has taken right decision by appointing a technocrat from private sector as Chairman FBR. This decision will have good impact on revenue generation and solution of tax-related problem as Shabbar Zaidi is well-known in business circles as well as in bureaucracy of FBR as a tax expert and provincial and federal governments used to take advice from him, they said. Recently, in an interview, Shabbar Zaidi had said that he will try his best to increase tax to GDP ratio from 13 percent to 26 percent.

    ABAD office-bearers said that widening tax net is necessary for more tax collection. They demanded of the federal government to announce and implement much-talked Tax Amnesty Scheme as soon as possible for boosting revenue collection.

  • FBR, traders discuss broadening of tax base

    FBR, traders discuss broadening of tax base

    ISLAMABAD: A Consultative Meeting between the Traders Associations and FBR representatives was held in the Broadening Tax Base Zone (BTB), Islamabad to find ways of broadening the tax base.

    The Consultative Meeting was chaired by Mir Badshah Khan Wazir, DG, BTB and was attended by Commissioner BTB (HQ) and Commissioner BTB Zone Islamabad.

    The BTB Zone Islamabad had invited Traders Association of G-11 Markaz and F-11 Markaz, Islamabad to seek business community’s views on broadening the tax base.

    The Traders Associations were represented by Aftab Gujjar and Mahar Khuda Dad, Presidents of Traders Associations of G-11 and F-11 Markaz respectively along with their office bearers.

    The Director General BTB apprised the participants about the significance of broadening of tax base in enhancing national tax revenue.

    He stated that due to smaller tax base, the burden gets shifted to existing taxpayers. He stressed on the need to have cooperation of trade bodies in the identification and enrollment of potential taxpayers and sought their help to hold facilitation camps in their respective areas.

    The representatives of trade bodies appreciated the initiative of DG BTB for holding the consultative meeting.

    They shared views on the difficulties’ faced by the business community in the enrollment and filing of returns.

    They advocated the idea of fixed tax regime for the small traders. They agreed to extend cooperation in holding awareness and enforcement camps of BTB Zone in their respective areas.