Pkrevenue.com

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 to reduce withholding tax provisions under World Bank program

    FBR to reduce withholding tax provisions under World Bank program

    ISLAMABAD: Federal Board of Revenue (FBR) is required to reduce number of withholding provisions to strengthen the income tax and take out this system from indirect taxes.

    According to funding approved by the World Bank for Pakistan Revenue Mobilization Project, the FBR is required to reduce the scope of withholding regime.

    The World Bank said that the funding requires a reduction in the types of transactions subject to income tax withholding.

    “It contributes directly to transparency of the tax system, given that the withholding regime transforms income taxes into indirect taxes, which are less visible to taxpayers. It will also greatly reduce compliance costs for firms that have to act as withholding agents.

    The World Bank also approved funds for transparent tax system for Pakistan. The World Bank said that under this funding the authorities require detailed reporting of tax expenditure in the annual budget documentation with disaggregated information about the cost and beneficiaries of each exemption and concession.

    “It is important to broadening the tax base because it exposes the revenue foregone due to each exemption/concession, and the industries that benefit.”

    The World Bank also stressed on coordination of the FBR with provinces. Under this funding program the FBR needs to reach agreements with the provinces on automated sharing taxpayer information, the methodology for calculating GST input adjustments, and common updated property valuation tables.

    “This coordination will enable the FBR and the provinces to broaden their respective tax nets. Coordination can be facilitated through the newly established Fiscal Coordination Committee, comprising the federal and provincial governments.”

  • FBR is not organized revenue authority

    FBR is not organized revenue authority

    ISLAMABAD: Federal Board of Revenue (FBR), unlike most revenue authorities in the world, is not organized along functional lines, nor does it have a clear hierarchical structure.

    This was stated by the World Bank in its report on Pakistan taxation.

    It said: The FBR is a large organization with a nationwide presence and more than 21,000 staff, of whom about two thirds work for Inland Revenue Service (IRS) and one third for Pakistan Customs.

    It further said despite a government target for women to reach 10 percent of public employees, the FBR has only 962 women staff (4.6 percent).

    However, women are better represented among professional-grade staff (grades 17+), accounting for 17.6 percent of total staff in grades 17-22.

    The two services have separate career structures and human resource practices with limited shared services (e.g. accounting).

    Their audit functions, ICT systems, and territorial formations (Regional Tax Offices/Large Taxpayer Units for the IRS, Customs stations and control points) are also separate.

    The IRS is organized along tax instruments, territorial jurisdictions, and taxpayer segments (e.g. Large Taxpayer Units) rather than functions (e.g. taxpayer registration, assessment, tax audit).

    “A mixed function-based and segment-based structure is considered more efficient, as it enables technical specialization of staff, automation of business processes by function, fewer offices, and complete taxpayer profiles – rather than separate records for each tax instrument as is the case in the FBR,” the World Bank said.

    In terms of management structure, the FBR Act assigns the decision-making functions to the Board with limited powers for the Chairman.

    In turn, Board Members are responsible for different functions but do not oversee FBR territorial formations, where most FBR staff are deployed.

    Moreover, IRS Directors-General report directly to the FBR Chairman rather than Board Members.

  • Monthly sales tax return filing main reason for Pakistan’s low ranking in paying taxes

    Monthly sales tax return filing main reason for Pakistan’s low ranking in paying taxes

    ISLAMABAD: The requirement of filing monthly sales tax return is the main reason for Pakistan’s low ranking in the Paying Taxes Indicator of the World Bank.

    The World Bank in a recent report on Pakistan taxation said that the country’s tax system is complex due to overlapping jurisdictions with different laws, exemptions, and frequent policy changes.

    It said that service providers operating across Pakistan are obliged to file sales tax on services returns with all five jurisdictions every month, resulting in a total of 62 tax returns based on five different sets of rules and formats for sales tax on services alone.

    “The requirement to file monthly sales tax returns is one of the main issues for Pakistan’s low

    score and ranking in the Paying Taxes indicator, which is the country’s worst ranking in the 2019 Doing Business report.”

    Pakistan is ranked 173nd among 190 economies for this indicator with 47 payments and an estimated time to comply with tax obligations of 293.5 hours per year, down from 311.5 in the previous year.

    The World Bank said that the Constitution assigns income taxes (except for income derived from agriculture), Sales Tax on goods, customs duties, federal excises, and the Capital Gains Tax (CGT) to the federal level.

    These taxes are collected by the Federal Board of Revenue (FBR).

    The Constitutions assigns the following taxes to the provinces: sales tax on services, tax on professions, Agricultural Income Tax (AIT), Motor Vehicle Tax (MVT), Urban Immovable Property Tax (UIPT), and other taxes related to real estate (e.g. stamp duty, Capital Value Tax).

    This tax assignment essentially fragments Pakistan into five markets in the services sector, with important consequences for tax authorities and taxpayers alike.

    The World Bank said that several taxes are often levied on the same transaction (e.g. stamp duty, registration fee, Capital Value Tax, and Capital Gains Tax on property transactions) and/or affect the same taxpayer segments (e.g. professionals are liable to income tax, professions tax, and sales tax on services).

    Double taxation is particularly serious problem for firms that provide services across the country.

    These firms are liable to Corporate Income Tax paid to the FBR and sales tax on services paid to each of the provinces where they operate and to the FBR for operations in the Islamabad Capital Territory.

    The five jurisdictions have different rates for sales tax on services and apply different principles in levying this tax (e.g. some levy the tax based on the firm’s registered address, others based on the customer’s location).

    Disagreements on the definition of goods and services also affect the restaurant and catering sector, which the federal level subjects to sales tax on goods (food and beverages), while the provinces also levy sales tax on services.

  • Super tax application may be amended to generate around Rs2 billion

    Super tax application may be amended to generate around Rs2 billion

    KARACHI: Federal Board of Revenue (FBR) may recommend amending application of super tax in the forthcoming budget 2019/2020 to generate around Rs2 billion.

    FBR sources said that the tax authorities had recommended amendments to Section 4B of Income Tax Ordinance, 2001 through Finance Bill, 2019.

    The sources said that it had been recommended to apply super tax on the income computed under Fourth, Fifth, Seventh and Eighth Schedules ‘other than brought forward depreciation and brought forward business losses.

    According to the recommendation, the proposed amendment would bring uniform chargeability of super tax to all taxpayers including taxpayers falling within the purview of Fourth, Fifth, Seventh and Eighth Schedules of Income Tax Ordinance, 2001.

    As per the ordinance the fourth schedule covers insurance companies, fifth schedule covers exploration and production companies, seventh schedule for banking companies and eighth schedule covers capital gains and National Clearing Company Pakistan Limited.

    The sources said that the proposed amendment will help the FBR to generate around Rs2 billion as revenue.

  • FBR urged to allow one sales tax registration for multiple businesses

    FBR urged to allow one sales tax registration for multiple businesses

    KARACHI: Federal Board of Revenue (FBR) has been urged to allow multiple businesses on one sales tax registration for better documentation of the economy.

    In its tax proposals for budget 2019/2020, the Pakistan Tax Bar Association (PTBA) said that after amendment in Sales Tax Act, 1990, through Finance Act, 2008, FBR has directed to cancel multiple registrations under single proprietorship.

    It said that proprietor having two businesses faces with the dilemma to show his entire sales under one business, which is creating hardship for his customers in their respective returns.

    Moreover, tax department often raise queries as to how a registered person can raise a invoice relating one business if he is registered with the department under another ‘business category’.

    “FBR should issue necessary instructions to incorporate multiple business features in its web-portal to facilitate taxpayers,” the PTBA suggested.

    The PTBA said that by implementing this suggestion it would result in better documentation of economy and proper maintenance of records of taxpayer.

    Highlighting another issue, the PTBA said that the definition of time of supply as amended through the Finance Act, 2013 stating receipt of advance as subject to sales tax, has created number of practical problems because of which sales tax on advance was earlier withdrawn by Finance Act 2007.

    The registered persons besides other practical issues has to undertake a tremendous exercise of reconciliation between the books of account where sales is recorded on the basis of delivery of goods with the sales tax returns where sales tax is paid on advance receipts.

    Furthermore, this also leads to discrepancies in CREST resulting in hardships to taxpayers as well as to the department.

    Therefore, the tax bar proposed withdrawal of the amendment made through the Finance Act, 2013.

    It said that it will help taxpayers to avoid unnecessary hassle as well as for the department; as charging of sales tax on advance receipts will not create any additional revenue for the Government.

    The PTBA also pointed out ‘hire purchase’ transaction involves periodical installments received/earned over a period of time.

    Currently, Sales Tax is being charged on full amount at the time of signing (entered into) of hire purchase agreement.

    The registered is burdened with increased amount of output tax on hire purchase sale at the time of sale although the amount is received from the customers in installments.

    Definition of time of supply’ may be amended and tax should not be levied at the time of signing of HP arrangement.

    Instead, tax should be levied at the time when installment is effected / paid.

    Further, the element of interest embedded in such installment should also be excluded for assessment of sales tax.

    Charging sales tax on full amount at the signing of hire purchase agreement is not justified and is in conflict with the definition of value of supply which states that it is the consideration which the supplier receives from the recipient for the supply.

  • FBR acquires information of account holders having deposits Rs0.5 million from SBP

    FBR acquires information of account holders having deposits Rs0.5 million from SBP

    ISLAMABAD: Federal Board of Revenue (FBR) to acquire information of bank account holders having deposits above Rs0.5 million from the State Bank of Pakistan (SBP), sources said on Tuesday.

    The details of account holders would be obtained for the purpose of broadening of tax base.

    The exercise started after a letter was received by the FBR from the office of Prime Minister. Prime Minister Imran Khan expressed concerns over narrow taxation base, low tax-to-GDP ratio, systematic aberrations in the taxation system and has desired that concerted efforts should be put in to increase taxation base.

    In this regard Member Inland Revenue (Operation) issued directives to all the Chief Commissioners and Director General Broadening of Tax Base for taking following measures.

    01. Data of banks account holders above the threshold of Rs500,000 should be examined with the assistance of the State Bank of Pakistan (SBP).

    02. Data of all industrial and commercial power connections should be obtained from Distribution Companies (DISCOs) and meaningfully extrapolated to ensure filing of tax returns by all concerned.

    03. Information about all owner/tenants living in houses of two kanals or more should be obtained.

    04. Information about all persons owning luxury vehicles of 2400CC and above should be scrutinized objectively.

    Information about frequent foreign travelers should be analyzed.

    The tax offices have been directed that in addition to the above, existing base line data of all the above areas/indicators along with the targets set by field formations for the tax year 2019/2020 need to be shared by June 11, 2019 as directed by the prime minister.

    The prime minister will review the performance of FBR in the context of the broadening and widening tax base on monthly basis.

  • FBR advised to stop issuing revision in sales tax rates on petroleum products

    FBR advised to stop issuing revision in sales tax rates on petroleum products

    KARACHI: Federal Board of Revenue (FBR) has been advised to stop practice of issuing revision in sales tax on petroleum products on monthly basis.

    The Overseas Investors Chamber of Commerce and Industry (OICCI) in tax proposals for budget 2019/2020, presented suggestions regard powers to issue notifications for change in rate of sales tax – Section 3(2)(b) of Sales Tax Act, 1990.

    According to the present law the federal government may, by notification in the official Gazette, declare higher or lower rates of sales tax in respect of any taxable goods, provided that the bill for such change has been passed by the Majlis-e-Shoora.

    From 1 July 2016 to date, there have been around half a dozen notifications for changing the rates of sales tax on petroleum products.

    The rates have varied from zero percent to 36.5 percent during this period.

    The Supreme Court of Pakistan took a suo motu notice for a similar notification on June 21, 2013 and held that the federal government had no authority to levy and recover sales tax without getting the respective bill passed from the National Assembly.

    Given the Supreme Court’s verdict on the subject matter, questions arise as to whether the frequent changes in the rates of sales tax for petroleum products are maintainable under law.

    Moreover, so many changes on such frequent notice are in itself a challenge for industries which have to go through a lengthy systematic implementation process, each time such rates are notified.

    Therefore, the OICCI recommended that that changes in sales tax rates are legally vetted by the Parliament and this monthly practice of issuing notifications at the government’s behest is abolished.

  • FBR extends dates for payment, return filing of sales tax, federal excise

    FBR extends dates for payment, return filing of sales tax, federal excise

    ISLAMABAD: Federal Board of Revenue (FBR) has extended the last date for payment of duty and tax and filing of sales tax and federal excise returns for the month of May 2019.

    The FBR issued notification on Monday addressing all chief commissioners of Inland Revenue regarding extension in the date for submission of sales tax and federal excise return for the tax period of May 2019.

    The dates have been extended considering the Eid holidays which are falling on June 04 to June 07, 2019.

    The FBR extended the date of submission of Annexure-C and Annexure-I of the sales tax and federal excise return up to June 15, 2019, the date of payment of sales tax and federal excise duty up tot June 18, 2019 and the date of submission of sales tax and federal excise return up to June 21, 2019 for the tax period May 2019 due to Eid-ul-Fitr holidays.

    Earlier, tax practitioners requested the FBR to extend the dates.

    A letter has been sent on Friday to FBR Chairman Syed Muhammad Shabbar Zaidi for urgent consideration and for extension of time for e-filing of sales tax annexure ‘C’ and sales tax returns for the tax period May 2019.

    The Pakistan Tax Bar Association (PTBA) in its letter to FBR chairman informed that the last date for e-filing of sales tax annexure ‘C’ of sales tax returns and filing of sales tax return for the month May 2019 is June 10, 2019 and June 15, 2019, respectively. However, due to Eid Holidays due from June 04 to June 08, 2019, all the business houses will remain closed.

    The PTBA further said that the first word day after Eid and weekly holidays shall be June 10, 2019 which will be the last day of filing of Annexure “C”. Therefore it would not be practically possible to submit annexure “C” and Sales Tax Return in time.

    In view of above, the PTBA requested to extend the last date of e-filling of Sales Tax annexure “C” and e-filling of sales tax return up to June 18, 2019 for the tax period May 2019 to facilitate the taxpayers to fulfill their legal obligations properly.

  • Internet disconnected, information sharing banned at FBR for budget 2019/2020

    Internet disconnected, information sharing banned at FBR for budget 2019/2020

    ISLAMABAD: Federal Board of Revenue (FBR) has imposed several restrictions to prevent unauthorized access to documents of budget 2019/2020 till June 11, 2019. This restriction included inactive internet connection and ban on transferring any file.

    In an office order issued on Monday, the FBR said that internet connections, except for Chairman and Members FBR shall become inactive on June 10 and June 11, 2019 till conclusion of Budget Speech of the Finance Minister.

    Internet connection of Coordinators/ Deputy Coordinators (if needed) will only be made active with prior approval of Chief Management/ Coordinator Budget.

    The FBR said that due to budget announcement on June 11, 2019 restrictions on the access of servers/information system running at FBR HQ will come in force on June 10, 2019 from 8:00 am till the end of budget speech as per following details:

    E-Dox:

    a. Message and Engagement will be disabled and would not be accessible for the internal users of FBR House.

    b. Users located in the FBR house premises would only be limited in routing/ marking their correspondence in the wings located within FBR House. However, external users such as Regional Tax Offices (RTOs), Large Taxpayers Units (LTUs) and Mode Customs Collectorates (MCCs) would be able to mark their correspondence to the internal user/Wing of FBR.

    c. All training versions of the e-Dox system would be inaccessible during the budget days.

    d. Held desk for e-Dox will be closed.

    HRIS:

    a. Access to the system for correction of disposition list, online application of leave and other facilities will be completely banned for field formations.

    b. Help desk for HRIS will be closed.

    e-FBR portal:

    a. FBR e-portal/server will remain accessible for authorized users outside FBR HQ premises but no one within FBR HQ will be allowed to access FBR e-portal during budget exercise.

    STARR & SALES TAX SYSTEMS:

    a. STARR & Sales Tax System / Server will remain inaccessible for FBR HQ users, however, authorized users / outside FBR HQ premises will be allowed to access the system/server.

    PRAL & FBR Network:

    a. While the local networks of PRAL HQ/CDA Block II offices and FBR HQ will remain operational individually, transfer to any files/documents from FBR HQ Network to PRAL HQ/CDA Block II offices network and vice versa will be banned.

    b. Internet services in FBR HQ will remain unavailable in FBR HQ till conclusion of budget speech by the finance minister.

  • FBR extends last date for filing income tax returns up to June 30

    FBR extends last date for filing income tax returns up to June 30

    KARACHI: The Federal Board of Revenue (FBR) on Monday extended the last date for filing income tax returns for tax year 2018 up to June 30, 2019.


    The FBR said that the extension had been granted considering the Assets Declaration Ordinance, 2019.


    The FBR extended the date for filing income tax returns and statement by salarier persons and persons falling in final tax return, whose last date was August 31, 2018 and extended up to April 30, 2019. It is now further extended up to June 30, 2019.


    The FBR further extended the date of filing return of income and statement of final taxations for companies, individuals and association of persons whose last date was September 30, 2018, which was extended to April 30, 2019 is now extended up to June 30, 2019.


    The FBR also extended the last date for corporate entities whose last date for filing income tax returns was December 31, 2018 and extended up to April 30, 2019, it is further extended up to June 30, 2019.


    Earlier, Pakistan Tax Bar Association on Saturday urged FBR to extend the last date for filing income tax returns for Tax Year 2018 up to June 30, 2019 considering the recently launched tax amnesty scheme.


    In a letter to FBR Chairman Syed Muhammad Shabbar Zaidi, the PTBA informed that the Asset Declaration Ordinance, 2019 was announced on May 16, 2019 and the last date for filing declaration is June 30, 2019.


    The PTBA urged the FBR chairman to extend the last date for filing of return of income and statement of final taxation for individuals, Association of Persons (AOPs) and companies (other than public limited companies quoted on stock exchange) to June 30, 2019.


    The last date was already extended by the FBR till April 30, 2019 through Circular No. 03/2019 dated March 31, 2019.


    The apex tax bar said that the extension would encourage the new taxpayers to bring their house in order and come into the mainstream of economic activities by availing the benefit to become active taxpayers.