Tag: Overseas Investors Chamber of Commerce and Industry

KARACHI: The Federal Board of Revenue (FBR) has been urged to restore sales tax exemption on supply of LED or SMD lights as these are meant for conservation of energy.

Overseas Investors Chamber of Commerce and Industry (OICCI) in its proposals for budget 2022/2023 said that through Finance Act 2021, under 6th Schedule, Table II (local supply/sales stage), Serial no. 24: Exemption from sales tax on the supply of following had been withdrawn: LED or SMD lights and bulbs meant for conservation of energy, HS codes 8539.5010, 8539.5020, 9405.1030 and 9405.4020.

READ MORE: Minimum tax 0.2% suggested for listed chemical companies

It is recommended that sales tax at local supply/sales (Table II) of LED or SMD lights and bulbs meant for conservation of energy, HS codes 8539.5010, 8539.5020, 9405.1030 and 9405.4020 should be exempted as it would protect local industry setup/investment, would give it advantage over imported finished goods and provide cheaper energy efficient LED light to consumers.

The OICCI further highlighted that through Finance Supplementary Act 2022, under 6th Schedule of Table III of Sales Tax Act, sales tax exemption on import of parts and components for manufacture of LED lights was removed.

READ MORE: Proposals for capital gain on disposal of securities by insurance companies

It is recommended that sales tax exemption on import of parts and components for manufacture of LED lights under Table III of Sixth Schedule of Sales Tax Act should be restored as it would protect local industry setup/investment, would give it advantage over imported finished goods and provide cheaper energy efficient LED light to consumers.

The Finance Act 2020 declared only construction sector (person directly involved in the construction of buildings, roads, bridges and other such structures or the development of land) status as Industrial undertaking to enjoy benefit of imports of plant and machinery and other goods to be utilized in such activity as adjustable. This amendment does not include taxpayers involved in the execution of contracts and in providing of engineering services in the manufacturing, power producing and other industries and importing goods, raw material or plant & machinery.

READ MORE: FBR urged to align corporate tax rate for banks

It is recommended that taxpayers involved in execution of contracts and in providing of engineering services in manufacturing, power producing, and other industries are also included in the definition of “industrial undertakings”. Various imports are used in contract execution by companies which are not covered under Part I and II of the Twelfth Schedule, thus are also subject to minimum tax @ 5.5 per cent.

Further, the tax deducted on the contract execution under clause (c) of sub-section 1 of section 153 at the rate of 6.5% is also minimum tax on the income in terms of the provisions of sub-section 3 of section 153. it is obvious that there cannot be a double taxation of the same income, but it can be unnecessarily interpreted that the imports used in contract execution is subject to minimum tax at (i) the import stage and (ii) also on the income arisen of such contract execution. Due to such provisions taxpayer will be suffering minimum tax twice on the same income (i.e. @ 5.5 per cent at the time of import and 6.5 per cent at the time of contract execution / income from such contract execution) and can lead to litigation.

READ MORE: OICCI suggests duty cut on locally manufactured cars

KARACHI: Overseas Investors Chamber of Commerce and Industry (OICCI) has suggested that the minimum tax should be reduced to 0.2 per cent for listed companies with large turnover with lower profit margins.

The OICC in its proposals for budget 2022/2023 submitted to Federal Board of Revenue (FBR) made tax recommendations related to chemical, pesticides, fertilizers, paints and cement sectors.

READ MORE: Proposals for capital gain on disposal of securities by insurance companies

The chamber recommended that minimum tax rate should be reduced to 0.2 per cent for listed chemical companies with large turnover with low profit margins.

It recommended minimum tax at Import Stage for Fertilizer manufacturers and said: Clause b of Section 148(7) of Income Tax Ordinance, 2001 as deleted by the Finance Act, 2017 should be restated, which read as follows: “148(7) b fertilizer by manufacturer of fertilizer” to allow adjustment of tax deducted at import stage for fertilizer imported by a fertilizer manufacturer so as not to make it a Final Tax.

READ MORE: FBR urged to align corporate tax rate for banks

The chamber sought exemption under Clause 42 of Part IV of Second Schedule to the terminal operators. It recommended exemption under Clause 42 read with section 153(3) of the ITO, 2001 be available to all terminals without discrimination. The said clause be re-worded as follows:

“(42) The provisions of sub-section 3 of section 153 shall not apply in respect of payments received by a resident person for providing services by way of operation of terminal(s) at a sea-port in Pakistan or of an infrastructure project covered by the Government’s Investment Policy, 1997.”

READ MORE: OICCI suggests duty cut on locally manufactured cars

The OICCI highlighted anomaly between input and output sales tax for fertilizer manufacturers. It said for the fertilizer industry, the General Sales Tax (GST) on supply of natural gas as feed stock is at 5 per cent and as fuel stock is 17 per cent. However, the output GST rate on sales of finished goods i.e. urea is 2 per cent. This mismatch between input and output GST results in excessive input tax refundable build-up.

It is recommended: “GST rate on supply of natural gas for fertilizer industry should be zero percent.”

For sales tax rate on raw material of paints, the OICCI recommended:

i. Sales tax of 25 per cent should be imposed on some basic raw materials like Titanium dioxide and other similar categories for commercial importers.

ii. Enforcement measures to be made more effective in consultation with OICCI members, who are established taxpayers, to penalize tax evaders.

READ MORE: Return filing be made mandatory for account holders

The OICCI pointed out higher tax rates on fertilizer micronutrients. Macro nutrients being imported under Chapter 31 of Pakistan Customs Tariff, enjoy reduced duties and taxes representing only 8% of the value imported whilst in case of micronutrients being imported under Chapter 28, the import duties and taxes are quite high representing 29% of import value.

It recommended to make necessary amendments in the revenue regulation to reduce sales tax and import duties on import of micronutrients.

The authorities have been informed about dual taxation on dealers belonging to chemical sector under Section 236G and Section 233 of the Ordinance shall be removed.

It recommended that dealers of chemical sectors be removed from the scope of Section 236G who are already paying tax on their commission income under Section 233 of the Ordinance and are also appearing in Active Taxpayer List (ATL).

READ MORE: Unjustified audit notices annoy taxpayers

The OICCI sought exemptions withdrawn on import and supply of seeds for sowing.

It recommended sales tax exemption for the seeds industry be reinstated by withdrawal of amendments made through the Finance Supplementary Act 2021.

Concessions allowed to exploration and production Companies and their contractors under SRO 678(I)/2004 on custom duty on import of spares, chemicals and consumables. It is recommended E&P Companies are exempt from payment of additional customs duty (ADC) on imports for their off-shore projects. FSRU is an offshore installation and therefore imports for FSRU should be allowed the same concession as the E and P companies are allowed in condition (vii).

KARACHI: The Federal Board of Revenue (FBR) has been urged to made mandatory the filing of income tax return for account holders having turnover Rs2 million or above during a year.

Overseas Investors Chamber of Commerce and Industry (OICCI) in its recommendations for budget 2022/2023, advised that FBR and State Bank of Pakistan (SBP) should devise a framework to ensure all customers of financial institutions whose account shows turnover in excess of Rs2 million or more during the year, have filed a tax return and wealth statement.

READ MORE: Unjustified audit notices annoy taxpayers

“This could be done by the financial institutions simply notifying names/CNIC numbers of such customers to FBR without giving access to bank accounts,” it added.

The OICCI in its proposals for broadening the tax base, said the tax authorities should use technology, data analytics including Artificial Intelligence tools and make better/effective utilization of NADRA database and other documented sources to ensure that all income earners are NTN holders and “filers”, with submission of annual income tax/wealth returns and wealth reconciliation statements.

READ MORE: Foreign investors demand inter-adjustment of tax refunds

Art exhibition halls, hospitals where doctors practice, hotels and other public places holding large receptions for fashion houses & designers, sale of branded/designer dresses, airlines, travel agencies, etc. should provide names and addresses of the respective persons involved in these business activities to the FBR on a quarterly basis.

Once the FBR receives the above information, it should be pro-active and pursue potential taxpayers by sending them income tax return forms requiring them to file tax returns – rather than waiting for the tax returns to be filed.

READ MORE: OICCI presents recommendations to eliminate illicit trade

The OICCI strongly recommended to eliminate culture of amnesty schemes as it discourages the honest taxpayers.

As Pakistan is a signatory to the OECD Global Forum on Transparency and Exchange of Information for Tax Purposes, which became operational from September 2018, regular coordination should be done with relevant authorities of countries, considered as tax heavens for stashing away illegal wealth, for information sharing, and cases of proven tax evasion publicly shared.

READ MORE: OICCI urges harmonize sales tax rates

Appropriate laws should be made to enable the government to seize local assets, in equivalent value, or levy appropriate taxes, if any person holds any kind of assets outside the country for which source of income could not be established.

KARACHI: Overseas Investors Chamber of Commerce and Industry (OICCI) has highlighted the issue of unjustified audit notices served to taxpayers and said as a result companies are incurring huge administrative costs.

The OICCI in its proposals for budget 2022/2023 submitted to the Federal Board of Revenue (FBR) pointed out that each year companies are served with notices without any proper justification, requiring them to produce large volume of data and reconciliation.

READ MORE: Foreign investors demand inter-adjustment of tax refunds

This is against the concept of Universal Self-Assessment Scheme whereby a tax return filed is generally considered to be correct in the eyes of FBR unless there is proper justification to prove otherwise.

“As a result, companies are incurring huge administrative costs for audit every year as well as litigation costs to pursue their matters before various appellate forums for an indefinite period of time,” the OICCI said.

READ MORE: OICCI presents recommendations to eliminate illicit trade

It recommended that the previous limitation of conducting tax audits once in every three years should be restored.

Rules to be implemented under Section 177(2) of Income Tax Ordinance, 2001 defining risk based, sample driven and cost-efficient audit criteria instead of calling 100 per cent information for voluminous transactional data resulting in tedious exercises, wastage of man hours and no additional benefits to national exchequer.

Timeline to conclude audit after submission of requisite information by the taxpayer should be specifically provided in section 177 of the Ordinance.

READ MORE: OICCI urges harmonize sales tax rates

FBR letter on withdrawal of earlier directives related to attachment of bank accounts dated October 11, 2021 should be withdrawn and it should be provided in the law that recovery proceedings shall not be initiated until tax assessments have passed at least one independent forum.

To reduce the litigation disposal time and avoid unnecessary litigations, it is recommended: “Proviso should be added to section 124 that in case Commissioner fails to issue appeal effect order within stipulated time period, taxpayers’ position should be deemed in effect.”

READ MORE: OICCI suggests simplify issuance of exemption certificate

The Overseas Investors Chamber of Commerce and Industry (OICCI), representing foreign investors in Pakistan, has put forth a series of demands to the Federal Board of Revenue (FBR), with a key focus on the inter-adjustment of income and sales tax refunds as part of the law.

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KARACHI: Overseas Investors Chamber of Commerce and Industry (OICCI) has presented recommendations to eliminate illicit trade in Pakistan.

In its proposals for budget 2022/2023 presented to the Federal Board of Revenue (FBR), the OICCI stressed the need of structural reforms in Pakistan customs to bring Illicit Trade into tax ambit.

READ MORE: OICCI urges harmonize sales tax rates

It said custom valuation should be done by using latest method of valuation including, online search and matching international and regional pricing and taking local legal brand owners on board.

Unauthorized imports of counterfeit products should be effectively checked through registration of brands with the custom authorities in coordination with the original brand owner/ registered in Pakistan.

READ MORE: OICCI suggests simplify issuance of exemption certificate

The data of import should be public property (restrictively) to ensure transparency, which will also help in taking over of goods under section 25A of the Custom Act, 1969.

Control the Afghan Transit Trade:

a) Revise the ATTA based on current reality, to protect the revenue base of Pakistan without hurting the real spirit of such agreements. Engage key stakeholders from OICCI and business community in Pakistan in such re-negotiation.

READ MORE: OICCI suggests revamping withholding tax regime

b) Pending above, harmonize duty and tax rates to remove the incentive for evasion.

c) Fix quantitative limits for imports based on genuine Afghan needs and size of population.

d) Establish a basis of collecting duty/taxes at the point of entry into Pakistan for the account of the Afghanistan Government.

e) There should be a negative list of items which are not utilized in Afghanistan; yet are imported and make their way into Pakistan.

READ MORE: FBR proposed to reduce minimum tax rate to 0.25%

Introduce stringent controls for illicit trade:

a) Introduce tighter penalties (e.g., criminal liability) for illicit trade across categories across the whole value chain – retailers, distributors, and manufacturers.

b) Introduce a special division/ task force to raid retailers and manufacturers to confiscate and destroy illicit stocks.

KARACHI: Overseas Investors Chamber of Commerce and Industry (OICCI) has urged the tax authorities to harmonize sales tax rates.

The OICCI in its proposals for budget 2022/2022 submitted to the Federal Board of Revenue (FBR) demanded reduction in sales tax rates.

The sales tax rate in Pakistan, at 17 per cent, is the highest in Asia, as can be noted from the table here.

The analysis of the OICCI shows an average of less than 12 per cent in Asia, with a range of 6 per cent to 17 per cent.

READ MORE: OICCI suggests simplify issuance of exemption certificate

Moreover, different rates of sales tax on goods and services i.e. standard, reduced, specified etc. prevailing in the country lead to a number of issues for business organizations operating all over the country.

It is recommended that sales tax rates (federal and provincial), both on goods and services, should be harmonized throughout the country.

Earlier, the OICCI suggested the FBR to revamp withholding income tax regime in order to facilitate compliant taxpayers.

In line with the recommendations, the withholding tax regime has been subject to changes, the rationalization of withholding tax on imports and discriminating withholding tax on the basis of status of the payee is a good step towards rationalization of regime. However, there is still large room for improvement. The impact of the withholding tax regime on “Ease of Doing Business” for the large taxpayers is still very significant.

READ MORE: OICCI suggests revamping withholding tax regime

WHT regime should be revamped and reduced from existing over twenty-six to five rates only for filers.

Withholding tax should be applicable on inactive taxpayers only, or alternatively:

a) Withholding tax rates applicable on services is 8 per cent minimum tax regardless of the actual taxable income of the service provider. The nature of this tax effectively becomes indirect tax and increases the cost of doing business for service providers, hence, tax on services should be made adjustable.

READ MORE: FBR proposed to reduce minimum tax rate to 0.25%

b) Withholding tax deduction under section 153 (1)(a) of Income Tax Ordinance, 2001 which is currently considered as minimum tax for all the suppliers (except manufacturers and listed companies) should be made adjustable at least for corporates appearing in active taxpayers’ list.

READ MORE: Foreign investors seek reduction in corporate tax rate

Through Finance Act 2021 under section 165 of Income Tax Ordinance, 2001, requirement of filing reconciliation between annual withholding statement and audited accounts is introduced. It has resulted in additional compliance burden on active taxpayers and should be abolished.

Companies appearing in Active Taxpayers List (ATL) and obtained exemption certificate by discharge of full year tax liability in advance should be dispensed with requirements to obtain separate withholding tax exemption certificates under sections 151, 234, 235, 236, 236G and 236H.