Tag: Income Tax Ordinance 2001

FBR excludes self-generated goodwill from intangibles

ISLAMABAD: Federal Board of Revenue (FBR) has said that self-generated goodwill or any adjustment arising on account of account treatment as may be prescribed in rules has been excluded from the definition of intangibles.

Explaining the changes made to Income Tax Ordinance, 2001 through Finance Act, 2019, the FBR said that the term intangible has been defined in sub-section (11) of section 24.

The Ordinance defines the intangible as: “any patent, invention, design or model, secret formula or process, copyright, trade mark, scientific or technical knowledge, computer software, motion picture film, export quotas, franchise, licence, intellectual property, or other like property or right, contractual rights and any expenditure that provides an advantage or benefit for a period of more than one year (other than expenditure incurred to acquire a depreciable asset or unimproved land).

The FBR said that amortization deduction has been allowed under Section 24 for the cost of a person’s intangibles that have a normal useful life exceeding one year and that are wholly or partly used by the person in the tax year in deriving income from business chargeable to tax.

Amortization deduction for a tax year is computed by dividing the cost of the intangible over normal useful life of the intangible in whole year.

Prior to the Finance Act, 2019, sub-section (4) of Section 24 stated that where an intangible had a normal useful life of more than ten years or where its useful life was not ascertainable, it was treated to have a normal useful life of 10 years.

Through the Finance Act, 2019, sub-section (4) of Section 24 has been substituted to the effect that an intangible shall now be amortized over its actual normal useful life which can extend beyond ten years also.

Further, where the normal useful life is not ascertainable, the intangible shall be treated to have normal useful life of 25 years.

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FBR issues withholding tax rates for sale, purchase of immovable properties

August 11, 2019
FBR issues withholding tax rates on cash, online banking transactions

KARACHI: Federal Board of Revenue (FBR) has issued withholding tax card for tax year 2019/2020 and prescribed the rate of withholding income tax to be deducted/collected on transactions made through banking system either by cash or online transfers.
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August 4, 2019
FBR issues rules for filing biannual withholding statement

ISLAMABAD: Federal Board of Revenue (FBR) on Wednesday notified amendments to Income Tax Rules, 2002 under which withholding agents are required to file withholding statements biannually instead monthly.
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July 25, 2019
Withholding Tax Card: non-ATL persons to pay 30pc tax on dividend income

KARACHI: Federal Board of Revenue (FBR) has issued withholding tax card for tax year 2019/2020 effective from July 01, 2019 under which person not appearing on the Active Taxpayers List (ATL) shall pay up to 30 percent on dividend income.

According to documents made available to PkRevenue.com, the FBR said that every person paying dividend shall collect withholding tax under Section 150 of the Income Tax Ordinance, 2001 at the time the dividend is actually paid.

The following rates shall be applicable for tax year 2019/2020:

(a) In the case of dividend paid by Independent Power Purchasers (IPPs) whereas such dividend is a pass through item under an Implementation Agreement or Power Purchase Agreement or Energy Purchase Agreement and is required to be reimbursed by Central Power Purchasing Agency (CPPA-G) or its predecessor or successor entity:

The tax rate shall be 7.5 percent and in case persons not appearing in the ATL the applicable tax rate is to be increased by 100 percent (Rule-1 of Tenth Schedule to the Ordinance), i.e. 15 percent.

(b) In cases other than mentioned at (a) above the tax rate shall be 15 percent and if persons not appearing in the Active Taxpayers’ List the rate of tax required to be deducted/collected, as the case may be, is to be increased by 100 percent of the above (as specified in the First Schedule to the Income Tax Ordinance, 2001 (updated as per Finance Act, 2019), i.e. 30 percent.

The FBR further said that special purpose vehicle, company shall collect withholding tax under Section 150A of Income Tax Ordinance, 2001 from Sukuk holders on payment of gross amount of return on investment.

On Payment of return on investment in Sukuks:

a) In case the Sukuk- holder is a company, the tax rate shall be 15 percent and if persons not appearing in the Active Taxpayers’ List the applicable tax rate is to be increased by 100 percent (Rule-1 of Tenth Schedule to the Ordinance), i.e. 30 percent.

b) In case the Sukuk – holder is an individual or an association of person, if the return on investment is more than one million, the tax rate shall be 12.5 percent and if persons not appearing in the Active Taxpayers’ List then the applicable tax rate is to be increased by 100 percent (Rule-1 of Tenth Schedule to the Ordinance), i.e. 25 percent.

c) In case the Sukuk – holder is an individual and an association of person, if the return on investment is less than one million, the tax rate shall be 10 percent and if persons not appearing in the Active Taxpayers’ List then the applicable tax rate is to be increased by 100 percent (Rule-1 of Tenth Schedule to the Ordinance), i.e. 20 percent.

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Withholding Tax Card: Tax rates on imports of goods for ATL, non-ATL persons

July 19, 2019
Withholding Tax Card: Tax rates on imports of goods for ATL, non-ATL persons

KARACHI: Federal Board of Revenue (FBR) has issued withholding tax rates on imports of goods for persons appearing on Active Taxpayers List (ATL) and for persons not on ATL under Section 148 of Income Tax Ordinance, 2001 for tax year 2019/2020 effective from July 01, 2019.

According to documents made available to PkRevenue.com the FBR said that the collector of customs shall collect the withholding tax rate at the prevailing rates from persons on the Active Taxpayers List (ATL) and double amount of tax from those persons, who are not on the ATL.

The FBR said that 1 percent of the import value increased by Custom duty, sales tax and federal excise duty shall be collected. And in case persons not appearing in the Active Taxpayers’ List : The applicable tax rate is to be increased by 100 percent (Rule-1 of Tenth Schedule to the Ordinance), i.e. 2 percent of the import value increased by Custom –duty, sales tax and federal excise duty.

Tax to be collected from every importer of goods on the value of goods.

1 (i) Industrial undertaking importing remeltable steel (PCT Heading 72.04) and directly reduced iron for its own use;

(ii) Persons importing potassic of Economic Coordination Committee of the Cabinet’s decision No. ECC-155/12/2004 dated the 9th December, 2004

(iii) Persons importing Urea;

(iv) Manufactures covered under Notification No. S.R.O 1125(I)/2011 dated the 31st December, 2011 and importing items covered under S.R.O 1125(I)/2011 dated 31st December, 2011.

(v) Persons importing Gold; and

(vi) Persons importing Cotton

(vii) Persons importing LNG.

Minimum Tax [Section 148(7)]
The tax required to be collected under this section shall be minimum tax on the income of importer arising from the imports subject to sub-section (1) of this section and this sub-section shall not apply [i.e Adjustable] in the case of Import of:

a. Raw material, plant, equipment & parts by an industrial undertaking for its own use;

b. [motor vehicle] in CBU condition by manufacturer of motor vehicle].

c. Large import houses as defined / explained in 148(7)(d)

d. A foreign produced film imported for the purposes of screening and viewing]

The tax collected under this section at the time of import of ships by ship-breakers shall be minimum tax. [Section 148(8A)]

Industrial undertaking importing Plastic raw material (PCT Heading 39.01 to 39.12) for its own use, the tax rate shall be

1.75 percent of the import value as increased by Custom-duty, sales tax and federal excise duty

Persons not appearing in the Active Taxpayers’ List :

The applicable tax rate is to be increased by 100 percent (Rule-1 of Tenth Schedule to the Ordinance), i.e. 3.5 percent of the import value increased by Custom –duty, sales tax and federal excise duty.

2. Persons importing pulses shall pay 2 percent of the import value as increased by Custom-duty, sales tax and federal excise duty.

Persons not appearing in the Active Taxpayers’ List :

The applicable tax rate is to be increased by 100 percent (Rule-1 of Tenth Schedule to the Ordinance), i.e. 4 percent of the import value increased by Custom –duty, sales tax and federal excise duty.

3. Commercial importers covered under Notification No. S.R.O 1125(I)/2011 dated the 31st December, 2011 and importing items covered under S.R.O 1125(I)/2011 dated the 31st December, 2011, shall pay 3 percent of the import value as increased by custom-duty sales tax and federal excise duty.

Persons not appearing in the Active Taxpayers’ List :

The applicable tax rate is to be increased by 100 percent (Rule-1 of Tenth Schedule to the Ordinance), i.e. 6 percent of the import value increased by Custom –duty, sales tax and federal excise duty.

Commercial Importer importing Plastic raw material (PCT Heading 39.01 to 39.12) for its own use shall pay 4.5 percent of the import value as increased by Custom-duty, sales tax and federal excise duty.

Persons not appearing in the Active Taxpayers’ List :

The applicable tax rate is to be increased by 100 percent (Rule-1 of Tenth Schedule to the Ordinance), i.e. 9 percent of the import value increased by Custom –duty, sales tax and federal excise duty.

4. Persons importing coal shall pay 4 percent.

Persons not appearing in the Active Taxpayers’ List :

The applicable tax rate is to be increased by 100 percent (Rule-1 of Tenth Schedule to the Ordinance), i.e. 8 percent of the import value increased by Custom –duty, sales tax and federal excise duty.

5. Persons importing finished pharmaceutical products that are not manufactured otherwise in Pakistan as certified by the Drug Regulatory of Pakistan, shall pay 4 percent.

Persons not appearing in the Active Taxpayers’ List :

The applicable tax rate is to be increased by 100 percent (Rule-1 of Tenth Schedule to the Ordinance), i.e. 8 percent of the import value increased by Custom –duty, sales tax and federal excise duty.

6. Ship breakers on import of ship shall pay 4.5 percent.

Persons not appearing in the Active Taxpayers’ List :

The applicable tax rate is to be increased by 100 percent (Rule-1 of Tenth Schedule to the Ordinance), i.e. 9 percent of the import value increased by Custom –duty, sales tax and federal excise duty.

7. Industrial undertakings not covered under S.No 1 to 6 shall pay 5.5 percent.

Persons not appearing in the Active Taxpayers’ List :

The applicable tax rate is to be increased by 100 percent (Rule-1 of Tenth Schedule to the Ordinance), i.e. 11 percent of the import value increased by Custom –duty, sales tax and federal excise duty.

8. Companies not covered under S. Nos. 1 to 7 shall pay 5.5 percent.

Persons not appearing in the Active Taxpayers’ List :

The applicable tax rate is to be increased by 100 percent (Rule-1 of Tenth Schedule to the Ordinance), i.e. 11 percent of the import value increased by Custom –duty, sales tax and federal excise duty.

9. Persons not covered Under S.Nos1 to 8 shall pay 6 percent.

Persons not appearing in the Active Taxpayers’ List :

The applicable tax rate is to be increased by 100 percent (Rule-1 of Tenth Schedule to the Ordinance), i.e. 12 percent of the import value increased by Custom –duty, sales tax and federal excise duty.

On Import of Mobile Phones by any Person (individual, AOP, Company) :

C&F Value of Mobile Phone (in USD ($) ) Tax (in Rs)
1. Up to $30 the tax rate shall be Rs. 70

2. Exceeding $30 & up to $100 the tax rate shall be Rs. 730

3. Exceeding $100 & up to $200 the tax rate shall be Rs. 930

4.Exceeding $200 & up to $350 the tax rate shall be Rs. 970

5.Exceeding $350 & up to $500 the tax rate shall be Rs. 3,000

6.Exceeding $500 the tax rate shall be Rs. 5,200.

Persons not appearing in the Active Taxpayers’ List :
The applicable tax rate is to be increased by 100 percent (Rule-1 of Tenth Schedule to the Ordinance), i.e.

C&F Value of Mobile Phone (in USD ($) ) Tax (in Rs)

1. Up to $30 the tax rate shall be Rs. 140

2. Exceeding $30 & up to $100 the tax rate shall be Rs. 1,460

3. Exceeding $100 & up to $200 the tax rate shall be Rs. 1,860

4.Exceeding $200 & up to $350 the tax rate shall be Rs. 1,940

5.Exceeding $350 & up to $500 the tax rate shall be Rs. 6,000

6.Exceeding $500 the tax rate shall be Rs. 10,400.

July 19, 2019
FBR seeks power companies help for mandatory registration of businesses

ISLAMABAD: Federal Board of Revenue (FBR) has sought help of ministry of power for invoking Section 181AA of Income Tax Ordinance, 2001 whereby it is mandatory for a businessman to get registered and file income tax return while requesting industrial or commercial connection.

Chairman Federal Board of Revenue Syed Muhammad Shabbar Zaidi in his letter to Ministry of Power has sought its help for the implementation of Section 181AA of Income Tax Ordinance, 2001 which specifically stipulates that any application for commercial or industrial connection of electricity or gas shall not be processed and such connection shall not be provided unless the person applying for electricity or gas connection is registered under the said Section which pertains to filing of income tax returns.

Chairman FBR has further added that FBR has extended the date of filing the return of income for the year 2018 to August 2, 2019 to facilitate filing of return by all persons who were required to file the return of income but have not filed so far. Chairman FBR has requested Ministry of Power to issue instructions to Power Distribution Companies to apprise them that it is mandatory to be on ‘Active Taxpayers List (ATL)’ for every commercial and industrial electricity or gas consumer.

Chairman FBR appreciated the cooperation of Ministry of Power for providing the data of industrial and commercial users of electricity and hoped that Ministry of Power would also help in the implementation of Section 181AA of Income Tax Ordinance through the involvement of respective ‘Distribution Companies’.

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FBR grants general relaxation to file tax year 2018 income returns up to August 02

July 16, 2019
FBR probes concealment in land, immovable property purchases

ISLAMABAD: Federal Board of Revenue (FBR) has obtained data of land and immovable property transactions from provincial registrar offices and started proceedings against those who concealed the actual amount to purchase the assets.

FBR sources said that the data had been obtained on the basis of withholding tax deduction by the property registrars. The sources said that the FBR was probing the lower values declared by the purchasers against the fair market values.

The FBR is also probing those people who have such immovable properties where filing of income tax returns is mandatory.

As per Section 114 of Income Tax Ordinance, 2001 following persons are required to annual income tax returns:

— owns immovable property with a land area of two hundred and fifty square yards or more or owns any flat located in areas falling within the municipal limits existing immediately before the commencement of Local Government laws in the provinces; or areas in a Cantonment; or the Islamabad Capital Territory;

— owns immovable property with a land area of five hundred square yards or more located in a rating area;

— owns a flat having covered area of two thousand square feet or more located in a rating area.

The sources said the FBR has been allowed to investigate transactions of past six years.

The sources said that the FBR through Finance Act, 2018 notified Directorate General of Immovable Property for determination of fair market values and authorized this directorate with immense powers.

The Directorate-General may, subject to the provisions and conditions as may be prescribed, initiate proceedings for the acquisition of property for the reasons to believe that any immovable property of a fair market value has been transferred by a person, hereinafter referred to as the transferor, to another person, hereinafter referred to as the transferee, for a consideration which is less than the fair market value of the immovable property and that the consideration for such transfer as agreed to between the transferor and transferee has been understated in the instrument of transfer for the purposes of ─

(a) the avoidance or reduction of withholding tax obligations under this Ordinance;

(b) concealment of unexplained amount referred to in sub- section (1) of section 111 representing investment in immovable property; or

(c) avoidance or reduction of capital gains tax under section 37.

The sources said that the FBR had extended the filing of income tax returns for tax year 2018 up to August 2, 2019 to facilitate persons to file their returns, especially in those cases where immovable properties had been purchased but not declared.

July 11, 2019
Income Tax Ordinance 2001: Income from pension funds tax exempted

KARACHI: The government has allowed tax exemption to the income derived by pensioners invested in various schemes, including pension funds.

The Second Schedule of Income Tax Ordinance, 2001 allowed tax exemption to the income derived by pensioners.

The following exemptions are available to the pensioners:

Any payment from a provident fund to which the Provident Funds Act, 1925 applies.

The accumulated balance due and becoming payable to an employee participating in a recognized provident fund.

The accumulated balance up to 50 percent received from the voluntary pension system offered by a pension fund manager under the Voluntary Pension System Rules, 2005 at the time of eligible person’s-

(a) retirement; or

(b) disability rendering him unable to work.

The amounts received as monthly installment from an income payment plan invested out of the accumulated balance of an individual pension accounts with a pension fund manager or an approved annuity plan or another individual pension account of eligible person or the survivors pension account maintained with any other pension fund manager as specified in the Voluntary Pension System Rules 2005 shall be exempt from tax provided accumulated balance is invested for a period of ten years:

Provided that where any amount is exempted under this clause and subsequently it is discovered, on the basis of documents or otherwise, by the Commissioner that any of the conditions specified in this clause were not fulfilled, the exemption originally allowed shall be deemed to have been wrongly allowed and the Commissioner may, notwithstanding anything contained in this Ordinance, re-compute the tax payable by the taxpayer for the relevant years and the provisions of this Ordinance shall, so far as may be, apply accordingly.

Any withdrawal of accumulated balance from approved pension fund that represent the transfer of balance of approved provident fund to the said approved pension fund under the Voluntary Pension System Rules , 2005.

Any benevolent grant paid from the Benevolent Fund to the employees or members of their families in accordance with the provisions of the Central Employee Benevolent Fund and Group Insurance Act, 1969.

Any payment from an approved superannuation fund made on the death of a beneficiary or in lieu of or in commutation of any annuity, or by way of refund of contribution on the death of a beneficiary.

Any income of a person representing the sums received by him as a worker from out of the Workers Participation Fund established under the Companies Profits (Workers Participation) Act, 1968.

March 29, 2019
Income Tax Ordinance 2001: total exemption on payment of pension, retirement

KARACHI: Any income representing any payment received by way of gratuity or commutation of pension by an employee on his retirement is exempted from income tax.

The Second Schedule of Income Tax Ordinance, 2001 explained the exemption from total income.

Any income representing any payment received by way of gratuity or commutation of pension by an employee on his retirement or, in the event of his death, by his heirs as does not exceed –

(i) in the case of an employee of the Government, a Local Government, a statutory body or corporation established by any law for the time being in force, the amount receivable in accordance with the rules and conditions of the employee’s services;

(ii) any amount receivable from any gratuity fund approved by the Commissioner in accordance with the rules in Part III of the Sixth Schedule;

(iii) in the case of any other employee, the amount not exceeding three hundred thousand rupees receivable under any scheme applicable to all employees of the employer and approved by the Board for the purposes of this sub-clause; and

(iv) in the case of any employee to whom sub-clause (i), (ii) and (iii) do not apply, fifty per cent of the amount receivable or seventy-five thousand rupees, whichever is the less:

Provided that nothing in this sub-clause shall apply –

(a) to any payment which is not received in Pakistan;

(b) to any payment received from a company by a director of such company who is not a regular employee of such company;

(c) to any payment received by an employee who is not a resident individual; and to any gratuity received by an employee who has already received any gratuity from the same or any other employer.

March 27, 2019
Income Tax Ordinance 2001: Corporate tax rate to be reduced to 25pc

The government of Pakistan has undertaken a strategic initiative to gradually reduce corporate income tax rates, aiming to bring them down to 25% by the tax year 2023 and onwards.
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March 26, 2019