KARACHI: Karachi Tax Bar Association (KTBA) on Friday submitted its observations on reporting of suspicious transactions by jewelers and real estate agents to Federal Board of Revenue (FBR).
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KTBA seeks date extension for Tax Year 2019 return filing
KARACHI: Karachi Tax Bar Association (KTBA) on Wednesday asked Federal Board of Revenue (FBR) to extend the last date for filing income tax returns for tax year 2019 in order to facilitate the genuine taxpayers and give opportunity to those who are out of tax net.
The KTBA in a letter to FBR chairman said that against the legal and permissible time period for filing the return of income of ninety (90) days under section 118 of the Ordinance, only 58 days have been allowed between September 2nd and October 31, 2019, which implies that 32 more days should be allowed further for the purpose.
It said that at the same time, it is equally critical to decide the fate of the filers of the Assets Declaration Scheme of 2019 who could not submit their declarations due to untimely closure of the option on IRIS.
Consequently, they also could not revise their wealth statements for the Tax Year 2018, which you would appreciate is a necessary component for filing the return of income for the Tax Year 2019.
It is apprehended that if they are not allowed to submit their declarations, which they have not been so far, in the last four months, their right to timely file their returns of income for the Tax Year 2019 is systematically been jeopardized as well.
Lastly, it would not be out of context to refer to the ongoing resistance from Shopkeepers and Trader of the country who still have to be given, inter alia, a final format of Return for their tax filing, which the FBR introduced vide its notification under Sections 99B and 9C of the Ordinance and committed that the same would be applicable right from the very Tax Year of 2019.
It may be appreciated that we as a Bar, are very much cognizant of the FBR’s campaign to increase the number of tax filers and compliant taxpayers in the country to proportionately increase the much needed Tax revenue for which we would like to render our due role as an association.
Taking stock of whole of the ongoing situation, however, it can conveniently be drawn that unless and until the concerns are addressed, not less than two third of the population of the tax payers of the country will turn to Non-Filers or to say “not appearing on the ATL”, which merely would further add to their woes.
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How taxpayers fail in filing returns by due date, KTBA questions FBR
KARACHI: A body of tax practitioners has questioned Federal Board of Revenue (FBR) that how taxpayers fail to file returns for tax year 2019 on September 30, 2019 when the tax authorities extend the date ahead of cutoff time.
The Karachi Tax Bar Association (KTBA) in a letter to FBR chairman referring the Circular No. 14 of 2019 dated September 30, 2019 whereby the due date for filing the returns of income had been extended till October 31, 2019 in respect of Individuals and AOPs, and Companies following Special Tax Year.
“At the outset, regarding the construction of the above mentioned Circular, it is pertinent that it was communicated to the taxpayers around 9:30 pm on September 30, 2019 whereas the deadline was up to 12:00 am.
“The extension has purportedly been announced on account of alleged ‘failure of the taxpayers’ to file the returns of income by the due date of September 30, 2019 as the Circular states that the taxpayers (Individuals, AOPs and Companies) “failed to file their income tax returns/ statements.”
On behalf of its members, the bar takes serious exception to the use of this uncalled for statement for, the said extension was necessitated due to the FBR’s failure to timely issue the final forms of returns of income.
Even after issuance of SRO 979(I)/2019 on 02 September 2019, it took couple of more days for the FBR to upload these forms on IRIS and after the same having been uploaded, were carrying certain system issues/ technical glitches as well as interpretational matters.
These were duly intimated by the Bar vide its letter dated 20 September 2019.
The tax bar is of the view that instead of blaming the taxpayers who “could not file” the income tax returns by September 30, 2019 on account of the above discussed reasons, the Board acknowledging the same would have allowed the taxpayers without blaming them, due time of ninety days to file the income tax returns.
As regards the extension allowed to the companies, it is tainted with an unprecedented condition of payment of 95 percent of admitted income tax liability by September 30, 2019.
“This condition of payment of 95 percent tax liability is completely unheard and couldn’t be found to have existed anywhere under any provision of the Income Tax Ordinance, 2001 including the very section 214A under which the aforesaid Circular has been issued.”
Besides the debate of any legality, what needs to be emphasized here remain that had there been any patent or latent intention of the Board to extend the due date only for those Companies which would have paid 95 percent of their income tax liability, the same should have been communicated clearly well before the last date of filing to provide necessary time to them to deposit the income tax demanded at the eleventh hour.
What however, has been witnessed that the above Circular, with this irrational condition, was issued at the eleventh hour and came as a surprise, when the extended banking hours had already been lapsed.
It was therefore, impossible for anyone to fulfill the condition even if they were forced too. Thought it was reported in the news media that the FBR had issued a Circular letter on this topic of payment of 95 percent income tax before availing extension in time, however the said Circular letter was never made public.
Besides the above pandemonium, what needs emphasis here is that legal and permissible time period for filing the return of income in terms of section 118 of the Ordinance has not been allowed to Companies for, the final SRO for Companies was issued on September 06, 2019 allowing only twenty four (24) days to them for filing the return of income.
It is, therefore, a strange condition in the first place and that too without any legal footing hence it would be all just and bona fide that the due number of days, which are ninety (90) from the issuance date of the final forms of return of income are allowed to the taxpayers including Companies without any pre-condition levied upon.
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KTBA highlights glitches, lacunas in income tax return forms
KARACHI: Karachi Tax Bar Association (KTBA) on Friday pointed out glitches and lacunas in income tax return forms which resulted in difficulties in filing tax returns for tax year 2019
The tax bar wrote a letter to the chairman of Federal Board of Revenue (FBR) regarding its previous communication on August 27, 2019 about the draft income tax return forms for for individuals and AOPs for the tax year 2019 were issued on August 23rd, 2019 through SRO 951 of 2019.
Through our above letter we communicated our serious concern as to the shortage of time period allowed in terms of number of days, for going through the entire SRO which contained 56 pages of returns of income and their annexures, which were only seven days and that too were issued in the evening of Friday followed by Saturday and Sunday, the next days.
The shortage of time was coupled with the fundamental drawback, which was also duly highlighted in our above referred correspondence that the return forms were neither issued in offline/demo mode, with the formulas, nor in the Excel format, at the least, so as to enable the user to have any clue as to what changes have actually been made.
“This, you [FBR chairman] would appreciate can only be done by feeding the data in the forms so as to evaluate whether the form is correctly performing the computation/ working out the income and the tax liability.”
It is an admitted norm that where suggestions are genuinely intended to be solicited, these are facilitated not only in terms of ample time but in the right desired format as well, which the Bar and its members have been deprived of completely this year.
The forms were not rolled out either in Excel form or on the IRIS till the last day.
Despite our genuine request what came out as a startling fact that the Draft Returns were finalized on the eve of September 02, 2019 through SRO 979 of 2019, without any modicum of change, let alone any suggestion.
Up till now since the issuance of the forms, more than seventeen (17) days have been passed on and it is now not a much unknown fact that return forms are filled with glitches and lacunas, which are factually deterring any bona fide filing of a tax return by an individual, whether Salaried or Business; resident or a non-resident.
Needless to mention that Individuals constitute the largest class of tax filers out of 2.5 million club of taxpayers.
Few of these flaws are being narrated hereunder for your necessary attention as filing of tax returns has been seriously jeopardized by these anomalies:
i. Statement of Final Taxation for Individuals, Salaried Individuals and AOPs is not accompanied with Wealth Statement, which is a separate requirement under Section 116 of the Income Tax Ordinance, 2001;
ii. Non-residents are not required to file Wealth Statement. On the other hand, the IRIS is invalidating their filing at the portal without a Wealth Statement;
iii. The IRIS is also asking for details of Personal Expenses in cases of Non-resident, without which the return cannot be submitted.
iv. Tax Return of a Salaried Individual contains only Reconciliation of Wealth without any details of assets/ Wealth Statement which is not in accordance with Section 116 of the Ordinance;
v. In the Wealth Reconciliation which is accompanied with the Tax return, the detail from the last year Amnesty is being included in the inflows of the total. All those who filed Asset Declaration last year are now unable to file return as of now.
vi. Person who is required to file statement under Section 115(4) of the Ordinance has no option left to file Wealth Statement as no separate tab is appearing in IRIS module.
vii. There is a single field/ column for foreign income only contrary to the requirements of section 103(8) read with section104 of the Ordinance that provides computation of foreign income/ loss and adjustment and carry forward of losses;
viii. There is no option to declare foreign income with their respective heads of income and instead only figure sums it all which does not give the fair picture of the foreign income;
ix. Tax on income from Bahbood Certificates/ Pensioners Benefit account is not being properly worked out.
x. There is no provision for adjustment or claim of capital loss in return form after NCCPL issues the annual certificate
Besides the above lacunas, what needs emphasis here is that legal and permissible time period for filing a return is 90 days under section 118 of the Ordinance, while on the contrary, only 27 days have been given here between September 2nd and September 30, 2019.
The tax bar said that the obnoxious condition imposed on them September 5, 2019 vide C.No.2(I)Cond./I.Tax/2018 dated September 05, 2019 whereby the instruction was given to the Commissioners to ensure the payment of due tax before allowing any extension.
“It means the taxpayer has to pay for the income tax first if one has to apply for extension, beyond the dead line of September 30th, 2019 which he should not be needed to beg for in the first place. It is not only a disgrace to a bonafide taxpayer to succumb to an unwarranted condition of tax payment but also tantamounts to make him suffer through the encroachment in his legal space under the Ordinance, which allows him necessary time period to file his return of income with respect and without getting his legal right vitiated. It need not to be emphasized that the Commissioner is otherwise independently empowered to grant extension to a taxpayer in terms of section 119(3) of the Ordinance if such a request is made to him without regard to any instructions from the Board.”
At the same time, the bar is cognizant of the fact the FBR’s campaign to increase the number of returns/ compliant taxpayers should not be sabotaged merely on the ground of short time period given firstly to understand the forms and again to file the returns of income.
It is, therefore, all befitting that the due number of days, which are ninety (90) from the issuance date of the final return forms are allowed to the taxpayers and is not compromised on any pretext.
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KTBA refuses comments on draft return forms on given format
KARACHI: Karachi Tax Bar Association (KTBA) has refused the Federal Board of Revenue (FBR) for giving comments on draft return form for tax year 2019 as the present format of the draft form was not appropriate for checking.
The FBR issued draft return forms for individuals and Association of Persons (AOPs) through SRO 951(I)/2019 dated August 23, 2019 and it asked stakeholders to provide feedback within seven days in order to finalize the return forms.
“The forms of returns of income are in pdf format and therefore, it is not possible to check as to whether row and columns of the return forms are in consonance with the provisions of the Income Tax Ordinance, 2001 as applicable to the tax year 2019,” the KTBA said in its letter to the FBR chairman sent on Wednesday.
Unless these forms are provided in offline/demo mode along with the formulas or at least in Excel format, the members of the bar are not in position to provide any feedback / comments.
The KTBA asked the FBR to provide these forms in offline/demo along with the formulas or in excel format in order to evaluate the forms and provide FBR with feedback/comments.
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KTBA urges prime minister for extending amnesty scheme for one month
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CNIC condition not applicable on purchases below Rs50,000
KARACHI: The condition of providing CNIC details is not applicable on purchases up to Rs50,000 by a person, said Zeeshan Merchant, former vice president of Karachi Tax Bar Association (KTBA).
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FBR urged to allow filing amnesty scheme declarations
KARACHI: Federal Board of Revenue (FBR) has been urged to allow those persons to file their declarations who have paid duty and taxes under amnesty scheme 2019 by due date.
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KTBA urges prime minister for extending amnesty scheme for one month
KARACHI: Tax practitioners of Karachi Tax Bar Association (KTBA) have urged Prime Minister of Pakistan Imran Khan to extend the last date for availing tax amnesty scheme to July 31, 2019 from existing June 30, 2019.
In a letter sent to Prime Minister Imran Khan on Saturday, the KTBA requested for extension of due date for filing of Assets Declaration Scheme 2019.
It said that the last date to avail the Assets Declaration Scheme 2019 (Amnesty Scheme 2019) is expiring in the next two days while there still lies innumerable cases of taxpayers who are yet to file their Amnesties but for the reason of paucity of time and extremely slow speed of the IRIS Software of the FBR.
The KTBA said that the Foreign Amnesty Scheme was launched by the government through an Ordinance on May 14, 2019 whereby a 47 days window was available to declare foreign and local assets and expenditure.
Though the Ordinance was promulgated on May 14, 2019 but the filing under the Scheme accelerated only after the launch of the online Citizen Profile on NADRA and Tax-Profile on FBR on its “Malumaat” application which took the public in general by surprise and after which considerable discomfort and anxiety echoed in the ranks, which resulted in the radical change in the perception of seriousness of the Amnesty drive by the FBR as was factually reflected by it.
However, since all these announcements were made only a few days before the June 30 which left very short time to fill in and to file the Amnesty even if someone genuinely wants to.
Had these announcement been made earlier, the desired level of momentum which is visible today could be seen earlier as well.
It is germane to mention here that the decision to upload the personal data of around 53 million citizens online was also taken without following a stakeholder process and is quite concerning among the public that also created panic on the way to avail the benefits of the scheme.
Further, FBR and the SBP’s delayed response on the clarifications for implementation of scheme like foreign currency remittance/accounts etc, is also delaying the process of declaration filing.
In view of the above it is requested to kindly give directions to the ministry to extend the date of filing of Amnesties till July 31, 2019.
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KTBA discusses impact of SRO 1125 withdrawal
KARACHI: The tax practitioners have discussed impact of abolishing SRO 1125(I)/2011 under which sales tax zero rating was available for export sector.
These were discussed at post budget seminar organized by Karachi Tax Bar Association (KTBA) in collaboration with Pakistan Tax Bar Association (PTBA) on Thursday.
Adnan Mufti at Shekha & Mufti Chartered Accountants explained changes in indirect taxes in his presentation.
He said zero rated and reduced rates tax regime for 5 export oriented sectors i.e. textile, leather, carpets, sports and surgical goods was introduced from 1st January 2012 vide SRO 1125. Thereafter 19 amendments were made from time to time in SRO 1125.
He highlighted following impacts would emerge after abolishment of SRO 1125:
a) Goods which were notified under SRO 1125 now would restored at standard rate of sales tax i.e. 17%.
b) Supplies of finished articles of textile, textile made ups, leather and artificial leather made by retailers would be subject to sales tax @ 15% subject to integration with FBR online system where data is transmitted to the FBR’s computerized system in real time. Mode and manner to be prescribed by FBR.
c) Zero rating on import of plant & machinery (not manufactured locally) by textile industry would be abolished and will be subject to sales tax @ 10%;
d) Ginned cotton, one of the major raw material of textile sector, will become subject to sales tax @ 10% under Eight Schedule. It was previously zero rated under SRO 1125 for textile sectors and exempted under Sixth Schedule for others;
e) Zero rating facility on “raw cotton” stands transposed with tax exemption under Sixth Schedule;
f) Zero rating facility on furnace oil, diesel oil, coal, electricity and gas will be withdrawn.
He explained in details about the overall changes brought in the indirect measures through Finance Bill 2019.
The changes in tax structure will have inflationary impact on sugar, milk, soft drinks, garments, shoes, cooking oil, cement, etc. costlier than before. Customs Duty on more than 1,650 raw materials and industrial inputs reduced – paper industry to enjoy more benefits.
He said that restoration of trust was much needed for a tax revenue target of Rs5555 billion.
Practical measures for boosting exports, employment, protection of local industry missing. Imports of luxury items like chocolate, eatable, shaving razors, heavy cars, etc. should have been banned. Revenue hit for the initial short run should be absorbed for a long term sustainability.
Machinery parts and accessories used in the textile sector will be free from CD; it’s a mismatch since zero rating for textiles has been abolished in sales tax.
FED imposed on cars; mismatch vis.a.vis sugar, milk, cooking oil, etc.
CD waived on 18 medicinal inputs as well as on medicines for certain rare diseases. We should expect cheaper medicines in the next fiscal year.
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KTBA discusses tax proposals at pre-budget seminar
KARACHI: Karachi Tax Bar Association (KTBA) on Monday organized pre-budget seminar to recommend tax proposals for year 2019/2020.
Ali A Rahim, Director, Bakertilly Chartered Accountants presented income tax recommendations for the upcoming budget.
Rahim presented following recommendations:
Depreciation on Musharika Assets Under Section 22(15)C
Proposal: The depreciation on Musharika assets to be allowed retrospectively since inception.
Set off of Losses against income from property Under Section 56
Proposal: The position prior to amendment made through Finance Act, 2013 should be restored to allow set off against property income as well.
Restriction on setting off of depreciation losses Under Section 57
Proposal: The amendment brought through Finance Bill 2018 relating to unabsorbed depreciation and amortization is proposed to be deleted.
Workers Welfare Fund and Workers Profit Participation Fund Under Section 60A & 60B
In both the Law it is categorically stated that this shall be allowed if the payment is made to the Federal Government. Since the enactment of the 18th Amendment in 2010, the same is collected by the Provincial Government.
Since, there is no mention of the payment to the Provincial authorities the same is being disallowed by the Income Tax Authorities.
Proposal: It is therefore proposed that the payment made under the Provincial Laws may be incorporated in Section 60A and 60B.
Tax Credit to persons registered under Sales Tax Act, 1990 Under Section 65A
Tax credit of 2½ was available from tax year 2009 to Manufacturers registered under the Sales Tax, if 90% of the sales were to those persons registered in Sales Tax. In 2016 this was increased to 3%, to encourage persons towards documentation.
However to reasons best known to the Government, this was deducted vide Finance Act, 2017
Proposal: It is proposed that this section should be reincorporated in the tax Law.
Non Recognition Rules Under Section 79(2)
This section excludes any gain or loss arising from disposal of assets if certain conditions are fulfilled including gift of an assets to a relative.
However, if the recipient is a non-resident at the time of the acquisition then the said person is not entitle to an exemption which is very unfair as now every family has persons living abroad.
Proposal: It is therefore proposed that section 79(2) should be deleted.
Adjustment of Minimum Tax payment in case of Tax Loss Under Section 113(2)(c)
The following Explanation is proposed to be inserted:
“Explanation –For the removal of doubt, it is declared that the expression “the excess amount of tax” apply to all cases where no tax is payable for any reason whatsoever including any loss of income, profits or gains or set-off of losses or unabsorbed depreciation of earlier years, exemption from tax and allowances and deductions admissible under any provision of this Ordinance.
Appointment of the Appellate Tribunal Under Section 130
Accountant members are posted in the Tribunal from the tax department and can be reposted back in the tax department and hence are very conservative when imparting Justice.
Proposal: It is proposed that once an officer is posted to the Tribunal, he should then retire from there and should in no way go back to the tax department. This will go a long way in imparting Justice.
Stay order by Tribunal should be valid till Disposal of its Appeal Under Section 131
Proposal: It is proposed that the said amendment be deleted and the earlier position of law should be restored in the interest of natural justice so as to provide relief to the taxpayer.
Tax deduction on Import of Plant and Machinery by Service Sector Under Section 148(7)
It is proposed to insert the following in the list of exceptions provided under sub-section (7) of section 148:
Equipment imported by service sector companies for their own use.
Exemption from Income Tax on Imports to NPOs Under Section 148 SRO 947 of 2008
It is proposed that such exemption is also extended at least to such non-profit organizations whose income is exempt in terms of Clause (66) of Part I of the Second Schedule.
Excessive Tax Deduction from Salary Under Section 149
It is proposed to:
-replace section 64 with 62A of the Ordinance to allow tax credit on House Loan.
-insertion of new clause to allow tax adjustment for deductible allowances on account of Zakat, Allowance for payment of Profit House Loan and Education expenses under Sections 60, 60C and 60D, respectively.
-tax withheld and paid under any other Section of the Ordinance.
Withholding on Local Royalty Under Section 153
It is proposed that the separate flat rate of tax withholding is specified if royalty is paid to residents which should fall under Final Tax Regime.
Deduction of tax Under Section 153
No withholding in the case of registered persons [Filers]
It is proposed to amend the Section 153 that the withholding agents should only deduct/collect tax in the cases of Non-Filers or Unregistered Services providers, Suppliers & Contractors.
Automatic credit of tax deducted Under Section 153
It is proposed that when the tax is deducted, credit of the same should automatically be given to the withholdee.
Withholding on Rent in case of Multiple Years Under Section 155
It is proposed to include an explanation under Section 155 that tax withholding is required on the basis of annual rent paid for a tax year at the applicable rates to each year.
Time limit for Monitoring of Withholding of Income Tax Under Section 161 & 162
It is proposed to insert the following provisions under Section 161/162:
Proceedings for monitoring of withholding taxes should not be initiated for a tax year after expiry of 6 tax years
Allow ability of Tax Payment as a Credit after Monitoring of Withholding of Taxes. Under Section 161 (1A)
It is proposed that the withholder should be allowed to deposit the tax in the
name of the parties whose withholding fell short.
Bi-Annual Statements to be replaced with Monthly Withholding Statement Under Section 165
It is proposed that the filing of biannual is replaced with monthly filing of withholding statement.
Offences and Penalties Under Section 182(1)
An explain was incorporated explaining “Tax Payable” and it stipulated to mean tax chargeable on the basis of the taxable income.
The purpose of the penalty is to educate the taxpayers and the same should not be for the purpose of tax generation. In addition taxes deducted/paid, other then payment along with the return, is already with the Government, hence there is no loss of revenue.
It is therefore proposed that penalty should be on the balance of tax payable along with the return and not the total tax liability.
Returns Not filed within due date Under Section 182A
A person filing the returns late by even 1 day will be treated as a non filers for the full year.
There is already a provision in the Law under section 182 for imposition of penalty for late filers.
Proposal: Section 182A should be withdrawn and the person filing the return late should also be considered as a filer, after payment of the penalty under section 182.
Duplication of Advance tax on payment of foreign Education made through Credit Card or Debit Card or Prepaid Card Under Sections 236R & 236Y
The provisions should be withdrawn in its entirety for filers.