ISLAMABAD: Federal Board of Revenue (FBR) has issued rates of income tax for companies to be applicable during tax year 2021.
The FBR issued Income Tax Ordinance, 2001 (updated June 30, 2020) incorporating amendments brought through Finance Act, 2020.
The FBR said that the rate of tax shall be 29 percent on the taxable income of a company for tax year 2021.
As per the Income Tax Ordinance, 2001, the tax rate on corporate entities has been defined as:
The rate of tax imposed on the taxable income of a company for the tax year 2007 and onward shall be 35 percent:
Provided that the rate of tax imposed on the taxable income of a company other than a banking company, shall be 34 percent for the tax year 2014:
Provided further that the rate of tax imposed on the taxable income of a company, other than a banking company, shall be 33 percent for the tax year 2015:
Provided further that the rate of tax imposed on taxable income of a company, other than banking company shall be 32 percent for the tax year 2016, 31 percent for tax year 2017, 30 percent for tax year 2018 and 29 percent for tax year 2019 and onwards.
Where the taxpayer is a small company as defined in section 2 of Income Tax Ordinance, 2001, tax shall be payable at the rate of 25 percent:
Provided that for tax year 2019 and onwards tax rates shall be as set out in the following Table, namely:—
The Federal Board of Revenue (FBR) has updated the income tax rates for salaried individuals for the tax year 2021. These rates, which have been incorporated into the Income Tax Ordinance, 2001, as amended by the Finance Act, 2020, will remain applicable from July 1, 2020, to June 30, 2021, unless further amendments are made.
ISLAMABAD: Federal Board of Revenue (FBR) has updated advance tax rates for registration and transfer of motor vehicles during tax year 2021.
The FBR issued the tax rates as updated up to June 30, 2020 and will remain applicable during July 01, 2020 to June 30, 2021, if not amended.
The advance tax on motor vehicles at the time of registration and transfer of registration is governed under Section 231B of Income Tax Ordinance, 2001, which states:
Section 231B. Advance tax on private motor vehicles.—
(1) Every motor vehicle registering authority of Excise and Taxation Department shall collect advance tax at the time of registration of a motor vehicle, at the rates specified in Division VII of Part IV of the First Schedule:
“Provided that no collection of advance tax under this sub-section shall be made after five years from the date of first registration as specified in clauses (a), (b) and (c) of sub-section (6).”
(1A) Every leasing company or a scheduled bank or a non-banking financial institution or an investment bank or a modaraba or a development finance institution, whether shariah compliant or under conventional mode, at the time of leasing of a motor vehicle to a “person whose name is not appearing in the active taxpayers’ list”, either through ijara or otherwise, shall collect advance tax at the rate of four per cent of the value of the motor vehicle.
(2) Every motor vehicle registering authority of Excise and Taxation Department shall collect advance tax at the time of transfer of registration or ownership of a private motor vehicle, at the rates specified in Division VII of Part IV of the First Schedule:
Provided that no collection of advance tax under this sub-section shall be made on transfer of vehicle after five year from the date of first registration in Pakistan.
(3) Every manufacturer of a motor “vehicle” shall collect, at the time of sale of a motor car or jeep, advance tax at the rate specified in Division VII of Part IV of the First Schedule from the person to whom such sale is made.
(4) Sub-section (1) shall not apply if a person produces evidence that tax under sub-section (3) in case of a locally manufactured vehicle or tax under section 148 in the case of imported vehicle was collected from the same person in respect of the same vehicle.
(5) The advance tax collected under this section shall be adjustable:
Provided that the provisions of this section shall not be applicable in the case of –
(a) the Federal Government;
(b) a Provincial Government;
(c) a Local Government;
(d) a foreign diplomat; or
(e) a diplomatic mission in Pakistan.
“(6) For the purposes of this section the expression “date of first registration” means—
(a) the date of issuance of broad arrow number in case a vehicle is acquired from the Armed Forces of Pakistan;
(b) the date of registration by the Ministry of Foreign Affairs in case the vehicle is acquired from a foreign diplomat or a diplomatic mission in Pakistan;
(c) the last day of the year of manufacture in case of acquisition of an unregistered vehicle from the Federal or a Provincial Government; and
(d) in all other cases the date of first registration by the Excise and Taxation Department.
(7) For the purpose of this section “motor vehicle” includes car, jeep, van, sports utility vehicle, pick-up trucks for private use, caravan automobile, limousine, wagon and any other automobile used for private purpose.”
Explanation.— For the removal of doubt, it is clarified that a motor vehicle does not include a rickshaw, motorcycle-rickshaw and any other motor vehicle having engine capacity upto 200cc.
(1) The rate of tax under sub-sections (1) and (3) of section 231B shall be as set out in the following Table:–
S. No.
Engine capacity
Tax
(1)
(2)
(3)
1.
upto 850cc
Rs. 7,500
2.
851cc to 1000cc
Rs. 15,000
3.
1001cc to 1300cc
Rs. 25,000
4.
1301cc to 1600cc
Rs. 50,000
5.
1601cc to 1800cc
Rs. 75,000
6.
1801cc to 2000cc
Rs. 100,000
7.
2001cc to 2500cc
Rs. 150,000
8.
2501cc to 3000cc
Rs. 200,000
9.
Above 3000cc
Rs. 250,000
(2) The rate of tax under sub-sections (2) of section 231B shall be as follows:–
S. No.
Engine capacity
Tax
(1)
(2)
(3)
1.
upto 850cc
–
2.
851cc to 1000cc
5,000
3.
1001cc to 1300cc
7,500
4.
1301cc to 1600cc
12,500
5.
1601cc to 1800cc
18,750
6.
1801cc to 2000cc
25,000
7.
2001cc to 2500cc
37,500
8.
2501cc to 3000cc
50,000
9.
Above 3000cc
62,500
Provided that the rate of tax to be collected shall be reduced by 10 percent each year from the date of first registration in Pakistan.
ISLAMABAD: Federal Board of Revenue (FBR) has explained taxable income for collection of tax from persons or corporate entities. The FBR issued Income Tax Ordinance, 2001 updated June 30, 2020 incorporating amendments brought through Finance Act, 2020.
ISLAMABAD: Federal Board of Revenue (FBR) has issued draft rules for settlement of tax cases through oversight committee.
The FBR issued SRO 945(I)/2020 to notify draft rules for implementation of law of agreed assessment under Section 122D of Income Tax Ordinance, 2001.
The Section 122D has been inserted to the Ordinance through Finance Act, 2020.
The section allowed an opportunity where a taxpayer, in response to a notice under sub-section (9) of section 122, intends to settle his case, he may file offer of settlement in the prescribed form before the assessment oversight committee.
According to the draft rules, a settlement application shall be made electronically by the applicant in person or by his authorized representative, under Section 122D for agreed assessment to the committee.
A settlement application shall be preferred to the committee after the date of service of the notice under sub-section 9 of Section 122 of the Ordinance and before finalization of assessment.
The commissioner shall not conclude assessment proceedings under Section 122 if an application, made against the notice issued under sub-section (9) of Section 122, lies pending before the committee.
The committee after examination of the contents of an application submitted by an applicant and facts stated therein and on scrutiny of requisitioned record, if any, shall afford opportunity of being heard to the applicant in writing.
The committee shall finalize the application filed under Section 122D of the Ordinance within thirty days of receipt of application or within an extended period of sixty days, for reasons to be recorded in writing by the committee.
KARACHI: K-Electric has launched updating details of industrial and commercial consumers, which is mandatory under income tax law.
The company, which is providing electricity to 2.5 million consumers including residential, commercial, industrial and agriculture, has asked the consumers to update their details through an electronic form along with providing details of CNIC and NTN.
The K-Electric said that pursuant to Section 181AA of Income Tax Ordinance, 2001 all entities with industrial and commercial electricity connections are required to maintain a National Tax Number (NTN) issued by the Federal Board of Revenue (FBR).
In order to comply with the above-mentioned law, KE is updating its customer information database and in this regard we request you to share your NTN and CNIC numbers at earliest for our record.
The power utility asked the consumers to provide details, included: name, CNIC, consumer number, mobile number, NTN, email address and occupancy.
KARACHI: Commissioners of Inland Revenue have been empowered to amend assessment on the basis of best judgment and make dis-allowances without specific supporting evidence.
KARACHI: The Finance Bill 2020 has proposed major changes related to tax deduction in order to provide relief to business community. Under the proposed amendments the threshold amount has been increased up to Rs25,000 for tax deduction in case salary is paid.
According to interpretation of the Finance Bill 2020 by BDO Pakistan, the Finance Bill proposed amendments to Section 21 of the Income Tax Ordinance, 2001.
(l) The Bill seeks to enhance threshold of deduction for cash payment against business income under single account head from Rupees fifty thousand to Rupees two hundred and fifty thousand per annum.
This proposal seeks to relieve businesses from making transactions through banking channel, as it is difficult for business to make every transaction through banking channel.
Further The Bill seeks to increase the threshold of expenditure liable to be disallowed as a business expense if the same is not made through a crossed banking instrument/ online transfer of payment from Rs.10,000/- to Rs.25,000/ per transaction.
Furthermore, The Bill seeks to enhance threshold from Rs.15,000/- to Rs.25,000/- as allowable deduction against business income if the salary is paid in cash.
(p) & (q) The Bill seeks to add two new clauses to regulate limit of expenditure on account of utility bill and sales made to persons required to be registered but not registered under the Sales Tax Act, 1990 as an admissible deduction against business income where sales equal to or exceed Rs. 100 million per person. However, the disallowance of expenditure shall not exceed 20 percent of total deduction claimed.
KARACHI: The Finance Bill 2020 has proposed changes to taxability on payments made for goods, services and contracts.
According to explanation to amendments made to Section 153 of Income Tax Ordinance, 2001 through Finance Bill 2020 by BDO Pakistan Audit Consultancy and Tax Advisory Firm:
(1a): The bill seeks to include toll manufacturing to be treated as sale of good for the purpose of withholding under this subsection. This inclusion clarifies the taxability of this segment and it will be minimum tax.
(3): The bill seeks to treat taxes withheld at source as minimum tax on payment of goods, services and execution of contracts.
(4): The tax deducted at source is adjustable for the Company being manufacturer and the Public Listed Company registered on stock exchange. This inclusion will result in expansion of tax collection by the board.
The Bill seeks that the Commissioner shall respond to application for the issuance of exemption certificate related to withholding of taxes against goods, services and execution of contracts to facilitate the public listed companies registered in stock exchange, within fifteen days.
Where not responded, the IRIS may issue exemption certificate provided that the advance tax under section 147 was paid by the taxpayer.
The Commissioner retains the power to revoke the automatically issued certificate by IRIS on the basis of reasons to be recorded in writing after providing an opportunity of being heard.
(7) The Bill has sought following amendments in the requirement of the prescribed person defined as withholding agent.
Existing Description:
Individuals and association of person having turnover of fifty million rupees
Proposed Description:
Individuals and association of person having turnover of one hundred million rupees. Persons registered under Sales Tax Act, 1990 only are now required to meet turnover of one hundred million rupees or more in any preceding tax years to qualify as withholding agent.
KARACHI: The Finance Bill 2020 has proposed significant amendments related to income tax at import stage in Section 148 of Income Tax Ordinance, 2001 as it was described by BDO Pakistan Audit Consultancy and Tax Advisory Firm.
Following are the changes proposed by the Finance Bill, 2020 in Section 148:
148(1): The bill seeks to add expression “in respect of goods classified in Parts I to III of the Twelfth Schedule” in sub-section (1) of the Section 148. The tax advisory firm interprets that earlier rates of advance tax at import stage were classified in the First Schedule now a separate Twelfth Schedule is constituted which specifies goods wise rates.
148(1): The bill seeks to add a new proviso to initiate that the Board [Federal Board of Revenue] may, through a notification in the official Gazette, add a good in any Part or reclassify a good from one Part to another of the Twelfth Schedule. The firm commented that Board [FBR] reserves powers to enter any good in the Twelfth Schedule.
148(7): The Finance Bill seeks to insert the expression “goods on which tax is required to be collected under this section at the rate of 1 percent or 2 percent by an industrial undertaking for its own use” to make tax adjustable. The firm commented that tax at the rate of 1 percent or 2 percent paid by an industrial undertaking for import of goods for its own use shall become adjustable tax.
148(7): The bill seeks to omit the hyphen and clauses “(a), (c), (d). The tax advisory firm commented that the omission results in withdrawal of exemption from advance tax at import stage provided to motor vehicles in CBU condition by manufacturer of motor vehicles and large import houses.
148(8) & 148(8A): The bill seeks to omit sub-section (8) and (8A) of section 148. The firm commented that this will result in end of minimum tax regime for edible oil, packing material and plastic raw material and ships breakers and now tax paid at import stage can be claimed as adjustable tax if industrial undertaking criteria are fulfilled.
148(9): The bill seeks to amend the term “value of goods” by linking it with retail price under the Third Schedule of the Sales Tax Act, 1990, and other than Third Schedule items. The firm commented that for the purpose of collection of advance income tax at import stage, value of goods has been aligned with the enabling provision of the Sales Tax Act 1990, which specifies the value for the purpose of sale tax at import stage.
148A: Tax on local purchase of cooking oil or vegetable ghee by certain persons. The firm commented that earlier this section resulted in manufacture of vegetable ghee or cooking oil to pay 2 percent final tax on local purchase of locally produced edible oil. The Bill seeks to omit this section, which would result such manufacturer and taxing real net income of the taxpayers.
