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Tag: Finance Bill 2021

  • Advance tax on stock exchange transactions abolished

    Advance tax on stock exchange transactions abolished

    KARACHI: The government through budget 2021/2022 has abolished advance tax on stock exchange transactions and in this regard required amendment has been proposed through Finance Bill, 2021.

    Tax experts at KPMG Taseer Hadi & Co. in its commentary on budget 2021/2022 said that the stock exchanges registered in Pakistan were required to collect advance tax from their members on purchases and sales of shares in lieu of tax on commission earned by them.

    The Finance Supplementary (Second Amendment) Act, 2019 abolished the collection of this advance tax effective 01 March 2019.

    Resultantly, applicability of section 233 of the Income Tax Ordinance, 2001 i.e. withholding of tax on commission income was triggered.

    However, there is a point of view that taxation of income earned by members of stock exchange registered in Pakistan still covered under this section.

    In view of above, the Bill proposes to withdraw section 233A of the Income Tax Ordinance, 2001, hence, after such amendment, the taxability of income earned by members of stock exchanges now compulsorily fall under section 233 of the Ordinance.

    The bill also proposed to abolish collection of tax by National Clearing Company of Pakistan Limited (NCCPL).

    NCCPL collects advance tax from the members of Stock Exchanges registered in Pakistan on margin financiers, trading financiers and lenders in respect of margin financing in share business. The Bill proposes to withdraw such collection of tax.

  • Retailers accepting debit, credit cards payment to be treated as Tier-I

    Retailers accepting debit, credit cards payment to be treated as Tier-I

    ISLAMABAD: The Federal Board of Revenue (FBR) will bring more retailers into sales tax ambit after the proposal made through Finance Bill, 2021 related to Tier-I retailers.

    Tier-I retailers are commonly known for having huge volume sales and operating in a mall, air conditioned environment etc.

    Sources in the FBR said that retailer receiving payment through debit card and debit card would also qualify for Tier-I retailers.

    KPMG Taseer Hadi & Co. Chartered Accountants in its commentary on Budget 2021/2022 stated that the Section 2(43A) of Sales Tax Act, 1990 provides threshold limit and qualification criteria for tier-1 retailers.

    The Finance Bill now proposes to enhance the qualification criteria of tier-1 retailers by following additions

    – Retailers of furniture whose shop measures two (2) thousand square feet or more.

    – Retailer operating an online market place supplying goods through e-commerce platform, whether the goods are owned by him or not.

    – A retailer who has acquired point of sale for accepting payment through debit or credit cards from banking companies or any other digital payment service provider authorized by State Bank of Pakistan.

    The Bill further proposes to do away with on incentive of the cash back, up to five percent of the tax involved, to customers of Tier-1 retailer who have integrated their retail outlets with the Board’s computerized system for real-time reporting of sales.

  • No withholding tax on cash withdrawal from July 01

    No withholding tax on cash withdrawal from July 01

    ISLAMABAD: Banks shall not collect/deduct withholding tax on cash withdrawal from July 01, 2021 subject to approval of the Finance Bill by the National Assembly.

    The Finance Bill 2021 proposed abolishing levy of withholding tax on cash withdrawals from banking system.

    The withholding tax on cash withdrawal was imposed through Finance Act, 2005 in order to bring persons having taxable income but out of tax net.

    Initially the withholding tax was imposed at withdrawal of Rs25,000 on all persons making such transaction at 0.5 percent. However, through Finance Act, 2012 this threshold was increased to Rs50,000.

    Later, the withholding tax rate was reduced for income tax return filer to 0.3 percent and for non-filer it was increased to 0.6 percent.

    Through Finance Supplementary (Second Amendment) Act, 2019 the withholding tax on return filer at the rate of 0.3 percent was abolished and non-filers were required to pay 0.6 percent on making cash withdrawal above Rs50,000 per day.

    Now through Finance Bill 2021 proposed to abolish the 0.6 percent withholding tax on persons not on the Active Taxpayers List (ATL) or non-filers.

    The changes proposed through Finance Bill 2021 will be applicable from July 01, 2021 subject to the approval from the National Assembly.

  • Online market places to require collect sales tax

    Online market places to require collect sales tax

    In a move aimed at streamlining taxation in the digital era, proposed amendments to the Sales Tax Act, 1990 are set to require individuals operating online marketplaces to collect sales tax on goods sold through their platforms, regardless of ownership.

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  • Tax Rates for Individuals and Association of Persons

    Tax Rates for Individuals and Association of Persons

    ISLAMABAD: The government has decided to retain the tax rates for individuals and Association of Persons (AOPs) for the year 2021-2022, sources in Federal Board of Revenue (FBR) said.

    Since there is no change proposed through the Finance Bill, 2021 the rates applicable in Tax Year 2021 shall remain applicable in Tax Year 2022.

    Rates of Tax for Individuals and Association of Persons

    (1) Subject to clause (2), the rates of tax imposed on income of every individual and association of persons except a salaried individual shall be as set out in the following Table, namely:—

    TABLE

    S. No.Taxable incomeRate of tax
    (1)(2)(3)
    1.Where taxable income does not exceed Rs. 400,0000%
    2.Where the taxable income exceeds Rs. 400,000 but does not exceed Rs. 600,0005% of the amount exceeding Rs. 400,000
    3.Where taxable income exceeds Rs. 600,000 but does not exceed Rs. 1,200,000Rs. 10,000 plus 10% of the amount exceeding Rs. 600,000
    4.Where taxable income exceeds Rs.1,200,000 but does not exceed Rs. 2,400,000Rs. 70,000 plus 15% of the amount exceeding Rs. 1,200,000
    5.Where taxable income exceeds Rs. 2,400,000 but does not exceed Rs. 3,000,000Rs. 250,000 plus 20% of the amount exceeding Rs. 2,400,000
    6.Where taxable income exceeds Rs. 3,000,000 but does not exceed Rs. 4,000,000Rs. 370,000 plus 25% of the amount exceeding Rs. 3,000,000
    7.Where taxable income exceeds Rs. 4,000,000 but does not exceed Rs. 6,000,000Rs. 620,000 plus 30% of the amount exceeding Rs. 4,000,000
    8.Where taxable income exceeds Rs. 6,000,000Rs. 1,220,000 plus 35% of the amount exceeding Rs. 6,000,000
  • Super tax permanently imposed on banking companies

    Super tax permanently imposed on banking companies

    ISLAMABAD: The levy of super tax has been permanently imposed on banking companies as it was expiring in the tax year 2021.

    Sources in the Federal Board of Revenue (FBR) said that the super tax was only imposed on banking companies while the other taxpayers were exempted from tax year 2020.

    The sources said that the Finance Bill 2021 had proposed to continue the levy of super tax at 4 percent on banking companies beyond Tax Year 2021 and onwards.

    The government imposed the super tax through Finance Act, 2015 for one year, which was later extended for subsequent years, by inserting Section 4B to the Income Tax Ordinance, 2001.

    According to Section 4B:

    Super tax for rehabilitation of temporarily displaced persons.― (1) A super tax shall be imposed for rehabilitation of temporarily displaced persons, for tax years 2015 and onwards, at the rates specified in Division IIA of Part I of the First Schedule, on income of every person specified in the said Division.

    (2) For the purposes of this section, “income” shall be the sum of the following:—

    (i) profit on debt, dividend, capital gains, brokerage and commission;

    (ii) taxable income (other than brought forward depreciation and brought forward business losses) under section (9) of this Ordinance, if not included in clause (i);

    (iii) imputable income as defined in clause (28A) of section 2 excluding amounts specified in clause (i); and

    (iv) income computed, other than brought forward depreciation, brought forward amortization and brought forward business lossess under Fourth, Fifth, Seventh and Eighth Schedules.

    (3) The super tax payable under sub-section (1) shall be paid, collected and deposited on the date and in the manner as specified in sub-section (1) of section 137 and all provisions of Chapter X of the Ordinance shall apply.

    (4) Where the super tax is not paid by a person liable to pay it, the Commissioner shall by an order in writing, determine the super tax payable, and shall serve upon the person, a notice of demand specifying the super tax payable and within the time specified under section 137 of the Ordinance.

    (5) Where the super tax is not paid by a person liable to pay it, the Commissioner shall recover the super tax payable under subsection (1) and the provisions of Part IV,X, XI and XII of Chapter X and Part I of Chapter XI of the Ordinance shall, so far as may be, apply to the collection of super tax as these apply to the collection of tax under the Ordinance.

    (6) The Board may, by notification in the official Gazette, make rules for carrying out the purposes of this section.

  • FBR to confiscate goods without brand licensing

    FBR to confiscate goods without brand licensing

    In a bid to enhance regulatory oversight and combat counterfeiting, the proposal to make brand licensing mandatory for manufacturers of specified goods has been put forward. In the event of non-compliance, the Federal Board of Revenue (FBR) is poised to be empowered with the authority to confiscate such items.

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  • FBR forms committees to remove anomalies in Finance Bill

    FBR forms committees to remove anomalies in Finance Bill

    ISLAMABAD: The Federal Board of Revenue (FBR) on Friday formed committees to identify and remove technical and legal anomalies in the Finance Bill, 2021.

    The FBR formed following committees:

    Sultan Ali Allana, Chairman, HBL has been appointed as chairman of the business anomaly committee. Ch. Muhammad Tarique, Member (IR- Policy), FBR is co-chairman of the committee. The other members of the committee are included:

    01. Ehsan A Malik, CEO, Pakistan Business Council

    02. M. Shariq Vohra, President, Karachi Chamber of Commerce and Industry

    03. Irfan Siddiqui, President, Overseas Investors Chamber of Commerce and Industry

    04. Sherbaz Ilyas Ghazanfar Bilour, President, Sarhad Chamber

    05. Abdul Samad, President, Quetta Chamber

    06. Mian Naseer Hayat Maggo, President, Federation of Pakistan Chambers of Commerce and Industry

    07. Mian Tariq Misbah, President, Lahore Chamber of Commerce and Industry

    08. Adil Bashir, Chairman, All Pakistan Textile Mills Association

    09. Asif Peer, President, American Business Council

    10. Asad Shah, Director (External Affairs), PTC

    11. Amir Waheed, ex-President of Islamabad Chamber

    Naeem Akhtar Sheikh, UHY Hassan Naeem & Co. has been appointed as chairman of the anomaly technical committee constituted by the FBR. The co-chairman of the committee are: Ch. Muhammad Tarique, Member (IR-Policy), FBR; and Syed Hamid Ali, Member (Customs –Policy), FBR,

    The other members of the committee are:

    01. Ashfaq Tola, FCA, FCMA

    02. Abdul Qadir Memon, Patron Pakistan Tax Bar, Karachi

    03. Syed Yawar Ali, Chairman, Pakistan Business Council, Karachi

    04. Shahzad Hussain, Ex- Partner, A F Ferguson & Co.

    05. Khurram Mukhtar, Patron-in-Chief, PTEA

    06. Ms. Sadia Nazeer, FCA, Partner KPMGA

    07. Hafiz Muhammad Idrees, Advocate, Supreme Court, Ex-President, Tax Bar

    08. Habib Fakhruddin, CA

    09. Abdul Wahab Kodvai

    The committees have been given tasks to review the anomalies identified and to advise FBR on removal of anomalies.

  • Tax amendments made for income of salaried persons, individuals

    Tax amendments made for income of salaried persons, individuals

    KARACHI: The Finance Bill, 2021 has proposed certain amendments in Income Tax Ordinance, 2001 related to income of salaried persons and business individuals.

    According to a presentation made at post budget 2021/2022 webinar of Karachi Tax Bar Association (KTBA) the major changes proposed through the Finance Bill 2021, are:

    — Interest income above Rs5 million taxable at normal rates (previously Rs. 36 million); withholding @15 percent (previously 10 percent) for interest income below Rs. 500,000.

    — Exemption for medical allowance / reimbursement withdrawn, which needs to be reconsidered.

    — Interest income distributed by Provident Fund above Rs. 500,000 taxed @ 10 percent – conflict with 6th Schedule needs to be addressed.

    — Rental income taxable at normal rate.

    — No tax on transfer of assets via gift / inheritance etc. to non-resident relatives.

    — Giftee allowed to claim FMV of gifted assets, after a holding period of 2 years.

    — Individuals have been made a withholding agent for payment of commission (having turnover of Rs. 100 million).

  • Final tax regime allowed for export of services

    Final tax regime allowed for export of services

    KARACHI: The Finance Bill 2021 has proposed a final tax regime for export of IT and IT enabled services.

    According to commentary on budget 2021/2022 released by KPMG Taseer Hadi & Co. currently, tax deduction on foreign proceeds from export of goods are taxed at 1 percent which is considered as final tax.

    The Finance Bill proposes similar taxation regime for following specified services:

    —Export of IT and IT enabled services where tax credit under section 65F is not available;

    —Services or technical services rendered outside Pakistan or exported from Pakistan;

    —royalty, commission or fees derived by a resident company from a foreign enterprise in consideration for the use outside Pakistan of any patent, invention, model, design, secret process or formula or similar property right, or information concerning industrial, commercial or scientific knowledge, experience or skill made available or provided to such enterprise;

    —construction contracts executed outside Pakistan; and

    —other services rendered outside Pakistan as notified by the Board from time to time.

    The tax deductible will be final tax subject to following conditions:

    (i) Income tax return has been filed;

    (ii) withholding tax statements for the relevant tax year have been filed;

    (iii) sales tax returns under Federal or Provincial laws have been filed, if required under the law; and

    (iv) no credit for foreign taxes paid shall be allowed.

    The Bill also proposes an option for taxation under Normal Tax Regime which is to be exercised every year at the time of filing of income tax return.

    The Bill proposes while explaining the nature and source of any amount, investment, money, valuable article, expenditure, referred to in section 111, a taxpayer takes into account any source of income under this section, he shall not be entitled to take credit of a sum that can be reasonably attributed to the business activity under this section.