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Tag: Finance Act 2020

  • Simplified tax regime for shopkeepers implemented

    Simplified tax regime for shopkeepers implemented

    KARACHI: The Federal Board of Revenue (FBR) has implemented a simplified tax regime from shopkeepers and small retailers.

    Through the Finance Act, 2022 important amendments have been made to Income Tax Ordinance, 2001.

    READ MORE: Pakistan withdraws tax amnesties for industrial promotion

    Tax experts at PwC A. F. Ferguson & Co. explained that for other than Tier – 1 retailers and specified service providers, a ‘final tax’ has been levied on the basis of gross amount billed for commercial electricity connections at the following rates:

    Where the amount does not exceed Rs. 30,000: the tax shall be Rs3,000

    READ MORE: Pakistan expands tax exemptions under foreign treaties

    Where the amount exceeds Rs. 30,000 but does not exceed Rs. 50,000: the tax shall be Rs5,000

    Where the amount exceeds Rs. 50,000 but does not exceed Rs. 100,000: The tax shall be Rs10,000

    Specified retailers and service providers through Income Tax General Order: the tax shall be Rs200,000

    READ MORE: Capital gains tax revamped on disposal of immovable properties

    The aforesaid tax shall be collected by the electricity companies through monthly bills in addition to withholding tax under section 235 of the Income Tax Ordinance, 2001.

    However, in case sales tax is collected from such retailers through electricity bills under section 3(9) of Sales Tax Act, 1990, the sales tax will constitute discharge of tax liability under this section and thus no tax will be charged/ collected along with electricity bills.

    READ MORE: Tax on deemed income arising from capital assets in Pakistan

    The Federal Government is empowered to issue income tax general order for implementing this scheme and to specify service providers eligible for this regime.

  • Resident shipping companies granted final tax regime

    Resident shipping companies granted final tax regime

    ISLAMABAD: The income tax law has allowed final tax regime for Pakistani resident shipping company, which is registered after November 15, 2019.

    According to explanation to changes made to Income Tax Ordinance, 2001 through Finance Act, 2020, the FBR said that clause (c) has been added to sub-section (1) of section 7A to provide for imposition of final tax of an amount equivalent to seventy-five US cents per ton of gross registered tonnage per annum for a Pakistani resident ship owning company registered with Securities and Exchange Commissioner of Pakistan (SECP) after November 15, 2019 and having its own sea worthy vessel registered under the Pakistan flag.

    The FBR said that final tax regime for taxing gross amount received or receivable by non-resident shipping companies at fixed tax rate under section 7 did not cover shipping income of a resident person.

    A new section 7A was, therefore, inserted through Finance Act, 2015, which provides for taxing shipping of residents under final tax regime.

    Further, dates of applicability of section 7 and clause (98) of Part-IV of Second Schedule which exempts import of ships and other floating crafts including tugs, survey vessels and other specialized crafts purchased or bare-boat chartered by a Pakistani entity and flying Pakistani flag from applicability of provision of section 148, have been extended to 30-06-2030.

  • FBR explains holding period, tax rates on disposal of immovable properties

    FBR explains holding period, tax rates on disposal of immovable properties

    ISLAMABAD: Federal Board of Revenue (FBR) has explained holding period and tax rates for the computation of capital gains on disposal of immovable properties, which were amended through Finance Act, 2020.

    (more…)
  • FBR enhances threshold to designate withholding agent

    FBR enhances threshold to designate withholding agent

    ISLAMABAD: In a significant move to enhance the ease of doing business, the Federal Board of Revenue (FBR) has announced that taxpayers with a turnover below Rs100 million are now excluded from the mandatory collection and deduction of withholding tax.

    (more…)
  • FBR allows monthly salary up to Rs25,000 paid in cash as business expense

    FBR allows monthly salary up to Rs25,000 paid in cash as business expense

    ISLAMABAD: Federal Board of Revenue (FBR) has allowed monthly salary up to Rs25,000 per employee paid in cash as business expense after amendment made to Income Tax Ordinance, 2001.

    The FBR on Thursday issued Income Tax Circular No. 03 to explain changes made to Income Tax Ordinance, 2001 through Finance Act, 2020.

    The FBR said that section 21(m) of the Ordinance previously disallowed expenditure on account of monthly salary against business income if it was paid in excess of threshold of Rs 15,000 per month per employee and payment was made otherwise than through crossed cheque or direct transfer of funds to the employees bank account.

    The FBR said that the Finance Act, 2020, had increased this threshold to Rs25,000 per month per employee for payment of salary otherwise than through crossed cheque or direct transfer of funds to the employees bank account.

    The FBR further explained that Section 21(l) of the Ordinance does not allow deduction against business income if claim of a business expenditure exceeds Rs50,000/- under a single account head in aggregate and payment is made otherwise than through crossed banking instrument, online transfer of payment or credit card from business account of the taxpayer.

    However, this inadmissibility of deduction did not apply if a single transaction on account of such business expenditure remained at Rs. 10,000/- or below.

    “Finance Act, 2020 has increased these thresholds from Rs. 50,000 to Rs. 250,000/- and from Rs.10,000/- to 25,000/-respectively,” the FBR added.

    However, the FBR said that expenditure on account of utility bills is allowed against business income under section 20 of the Ordinance.

    “A new clause (p) has been added to Section 21 to disallow it if it is incurred in excess of certain limits and is in violation of certain conditions as may be prescribed by the FBR,” It added.

  • Filing income tax return mandatory for FTR taxpayers: FBR

    Filing income tax return mandatory for FTR taxpayers: FBR

    ISLAMABAD: Federal Board of Revenue (FBR) has said that filing annual income tax return is mandatory for taxpayers falling under final tax regime (FTR).

    The FBR on Thursday issued Income Tax Circular No. 03 of 2020 to explain major changes to Income Tax Ordinance, 2001 through Finance Act, 2020.

    The FBR said that prior to the Finance Act, 2020 persons subject to the final tax regime were obliged to file statement of final taxation under section 115(4) of the Ordinance.

    This section has now been omitted since final tax regime has been phased out for most of the transactions.

    “However, any person whose income is still subject to final tax regime, is now obligated to file normal income tax return and allied documents under the newly inserted clause (ae) in sub-section (1) of section 114 of the Ordinance,” the FBR said.

    The FBR further added that an enabling provision has also been inserted in clause (a) of sub-section (2) of section 114 of the Ordinance whereby the Board had been empowered to prescribe different returns for different classes of income or persons including persons subject to final taxation.

  • Withholding sales tax regime streamlined

    Withholding sales tax regime streamlined

    ISLAMABAD: Federal Board of Revenue (FBR) has streamlined sales tax withholding regime for compelling sales tax return filing and realizing full revenue on sale/purchase.

    The FBR issued Circular No. 01 dated August 06, 2020 to explain changes made to Sales Tax Act, 1990 through Finance Act, 2020.

    The FBR said that Eleventh Schedule provides for withholding agents to deduct tax at the time of purchase from both registered and unregistered persons.

    The categories of withholding agents include Federal and Provincial Government departments, companies, public sector organizations and autonomous bodies.

    However, it has been noticed that most of the registered suppliers whose tax has been withheld do not usually file their sales tax returns and resultantly, fail to pay their remaining amount of 4/5th tax in case 1/5th of the tax involved is withheld by the purchaser as aforementioned.

    To enforce returns by the such suppliers and payment of remaining tax involved, the whole concept of withholding has now been linked to the supplier (withholdee) being on the ATL list of the FBR or otherwise.

    The persons other than Active Taxpayers shall be given the same treatment as was previously accorded to unregistered persons i.e. government and public sector enterprises shall deduct whole of the tax involved in case of supplies made by persons other than those on ATL and the companies shall deduct 5 percent of gross value of supplies on supplies by such persons. This aims at promoting return filing and documentation culture in the country.

  • CNIC condition on sales up to Rs100,000 relaxed to facilitate retailers: FBR

    CNIC condition on sales up to Rs100,000 relaxed to facilitate retailers: FBR

    ISLAMABAD: Federal Board of Revenue (FBR) has said that the retailers are not required to maintain information of Computerized National Identity Card (CNIC) of a consumer on sales not exceeding above Rs100,000.

    The FBR issued Sales Tax Circular No. 01 dated August 06, 2020 to explain changes brought to main statute through Finance Act, 2020.

    The revenue body said that through the Finance Act 2019, Section 23 of Sales Tax Act, 1990 was amended by inserting the condition of mentioning of CNIC of the unregistered purchaser on the invoice.

    The measure was introduced to broaden the income as well as sales tax base.

    However, in case of supplies by a retailer to end consumers, the requirement was applicable if the transaction value exceeded Rs50,000.

    “Many representations were received stating that the retailers are facing hardship in obtaining CNIC of the buyers/ customers,” the FBR said.

    Hence, amendment in section 23 has been made for enhancing the threshold from Rs50,000 to Rs100,000.

    “Now, it would not be compulsory for the retailers to mention NIC of buyer if transaction value does not exceed Rs100,000 where supply is made to an ordinary consumer,” the FBR added.

  • Inland Revenue officers empowered to recover non-tax revenue

    Inland Revenue officers empowered to recover non-tax revenue

    ISLAMABAD: The officers of Inland Revenue have been empowered to recover non-tax revenue by invoking provisions of Income Tax Ordinance, 2001.

    The finance ministry has issued Public Finance Management Act, 2019, which was amended up to June 30, 2020 through Finance Act, 2020.

    According to Section 40E of the Act, a commissioner of Inland Revenue has been empowered to make recovery of non-tax revenue.

    “40E. Recovery of non-tax revenue by Commissioner (Inland Revenue).-

    (1) If the amounts as per sections 40B and 40D are not paid within ninety days of having been due, the Finance Division, in consultation with the concerned Division may refer any defaulter’s case to the Commissioner (Inland Revenue) concerned for recovery as it were an arrear of income tax.

    (2) The Commissioner (Inland Revenue) shall recover the arrear in accordance with the provisions of the Income Tax Ordinance, 2001(XLIX of 2001) and deposit the receipt in the Federal Consolidated Fund as per section 40C.”

    Section 40B. Levy and collection.

    (1) Non tax revenue shall be levied and charged in accordance with the provisions of relevant laws and such other applicable instruments.

    (2) Notwithstanding anything to the contrary contained in any other law for the time being in force, public entities as defined under section 36 shall pay non tax revenue representing-

    (a) mark up on loans lent by the Government, as per the amortization schedule attached with the financing agreement;

    (b) dividend against the Government’s equity investments as declared by the respective board of directors out of accrued profits of the entity:

    Provided that if public entity is wholly or substantially owned by the Government, proposals with regard to declaration of dividend and allocation for reserve fund, capital requirements etc shall be examined by the controlling Division in consultation with the Finance Division before deliberations and decision in the board of directors.

    (c) surplus profits as per the provisions of relevant laws; and

    (d) any other amount owed to the Government as accrued:

    Provided that the public entities shall pay accrued amounts of non-tax revenue as per clauses (a) to (d) being the first charge on their gross revenues or profits, as the case may be.

    (3) Non tax revenue representing foreign grants and payments, receipts from provision of services, rents, recovery of over-payments, sale of property etc shall accrue on completion of the prescribed process.

    (4) The revenue collection offices shall be responsible for collection of all the accrued amounts of non tax revenue from liable public entities, individuals, firms, companies etc as per the time specified in the relevant laws and rules. Finance Division shall prescribe procedures for monitoring and reporting of non tax revenue by the revenue collection offices.

    Section 40D. Late payment surcharge.-

    (1) Notwithstanding anything to the contrary contained in any other law for the time being in force, an amount equal to monthly weighted financing cost of Government’s domestic borrowings shall be payable during the period of default, in addition to the amount due under section 40B, if not paid within the stipulated time.

    (2) Finance Division may prescribe procedure for levy and collection of the surcharge under sub-section (1).

  • Reduced rate of withholding sales tax withdrawn for registered persons

    Reduced rate of withholding sales tax withdrawn for registered persons

    ISLAMABAD: A registered person, who is not an active taxpayer, may not avail benefit of reduced rate of withholding sales tax after amendment made through Finance Act, 2020.

    Sources in Federal Board of Revenue (FBR) said that amendments have been made to Eleventh Schedule of Sales Tax Act, 1990 through Finance Act, 2020 under which the active taxpayers would be eligible to avail reduced rate of withholding sales tax at the time of supplies.

    Prior to this amendment registered persons were enjoying the reduced rate at the time of supply but now the registered persons, if not active taxpayers, shall pay full amount of sales tax.

    According to the amendment the withholding agents including federal and provincial government departments; autonomous bodies; and public sector organizations; companies as defined in the Income Tax Ordinance, 2001 shall collect/deduct 1/5th of sales tax as shown on invoice from those persons, who are active taxpayers.

    Similarly, person registered, but no active taxpayer, as a wholesaler, dealer or distributor are required to pay full amount of sales tax instead of reduced rate.

    Prior to the amendment, the withholding agents including federal and provincial government departments; autonomous bodies; and public sector organizations; companies as defined in the Income Tax Ordinance, 2001 were required to collect/deduct 1/10th of sales tax as shown on invoice from person registered as a wholesaler, dealer or distributor.

    In serial No. 03 of the Schedule, the Federal and provincial government departments; autonomous bodies; and public sector organizations are required to collect/deduct whole of the tax involved or as applicable to supplies on the basis of gross value of supplies form person other than active taxpayer.

    Similarly in Serial No. 04, the companies as defined in the Income Tax Ordinance, 2001 are required to collect/deduct five percent of gross value of supplies from persons other than active taxpayers.

    In serial number 06 the registered persons purchasing cane molasses are required to collect/deduct whole of sales tax applicable from persons other than active taxpayers.

    Active Taxpayer has been defined under Sales Tax Act, 1990 as a registered person who does not fall in any of the following categories, namely:-

    (a) who is blacklisted or whose registration is suspended in terms of section 21;

    (b) fails to file the return under section 26 by the due date for two consecutive tax periods;

    (c) who fails to file an Income Tax return under section 114 or statement under section 115, of the Income Tax Ordinance, 2001(XLIX of 2001), by the due date; and

    (d) who fails to file quarterly or an annual withholding tax statement under section 165 of the Income Tax Ordinance, 2001.