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Tag: withholding tax

  • FBR to reduce withholding tax provisions under World Bank program

    FBR to reduce withholding tax provisions under World Bank program

    ISLAMABAD: Federal Board of Revenue (FBR) is required to reduce number of withholding provisions to strengthen the income tax and take out this system from indirect taxes.

    According to funding approved by the World Bank for Pakistan Revenue Mobilization Project, the FBR is required to reduce the scope of withholding regime.

    The World Bank said that the funding requires a reduction in the types of transactions subject to income tax withholding.

    “It contributes directly to transparency of the tax system, given that the withholding regime transforms income taxes into indirect taxes, which are less visible to taxpayers. It will also greatly reduce compliance costs for firms that have to act as withholding agents.

    The World Bank also approved funds for transparent tax system for Pakistan. The World Bank said that under this funding the authorities require detailed reporting of tax expenditure in the annual budget documentation with disaggregated information about the cost and beneficiaries of each exemption and concession.

    “It is important to broadening the tax base because it exposes the revenue foregone due to each exemption/concession, and the industries that benefit.”

    The World Bank also stressed on coordination of the FBR with provinces. Under this funding program the FBR needs to reach agreements with the provinces on automated sharing taxpayer information, the methodology for calculating GST input adjustments, and common updated property valuation tables.

    “This coordination will enable the FBR and the provinces to broaden their respective tax nets. Coordination can be facilitated through the newly established Fiscal Coordination Committee, comprising the federal and provincial governments.”

  • Withholding tax rates on electricity consumption for tax year 2019

    Withholding tax rates on electricity consumption for tax year 2019

    KARACHI: The electricity supply company shall collect advance tax from industrial and commercial consumer as per updated withholding tax card for tax year 2019 issued after amendments made to Income Tax Ordinance, 2001 through Finance Supplementary (Second Amendment) Act, 2019.

    Federal Board of Revenue (FBR) issued following withholding tax rates under Section 235 of Income Tax Ordinance, 2001 to be collected by person preparing electricity bills from commercial and industrial consumers of electricity along with payment of electricity consumption charges:

    Does not exceed Rs. 400: Zero tax

    Exceeds Rs400 but does not exceed Rs600: Rs80

    Exceeds Rs600 but does not exceed Rs800: Rs100

    Exceeds Rs800 but does not exceed Rs1000: Rs160

    Exceeds Rs1000 but does not exceed Rs1500: Rs300

    Exceeds Rs1500 but does not exceed Rs3000: Rs350

    Exceeds Rs3000 but does not exceed Rs4500: Rs450

    Exceeds Rs4500 but does not exceed Rs6000: Rs500

    Exceeds Rs6000 but does not exceed Rs10000: Rs650

    Exceeds Rs10000 but does not exceed Rs15000: Rs1000

    Exceeds Rs15000 but does not exceed Rs20000: Rs1500

    Exceeds Rs20000: (i) At the rate of 12 percent for commercial consumers; (ii) at the rate of 5 percent for industrial consumers.

    The tax shall be:

    (i) Adjustable In case of company.

    (ii) in case of other than company tax collected on Rs, 360000 amount of annual bill will be minimum tax.

    (iii) in case other than company tax collected on amount over and above Rs 30000/- of monthly bill will be adjustable.

    (iv) Final for CNG Stations.

    The withholding tax on domestic consumers of electricity under Section 235A shall be:

    (i) If the amount of monthly bill is Rs75,000 or more: 7.5 percent

    (ii) If the amount of monthly bill is less than Rs75,000: the tax rate shall be zero.

    The withholding tax from every steel melters and composite steel units under Section 235B shall be Re 1 per unit of electricity consumed and the tax shall be non-adjustable.

  • PBC suggests measures for broadening tax base by enhancing withholding tax rates on non-filers, unregistered persons

    PBC suggests measures for broadening tax base by enhancing withholding tax rates on non-filers, unregistered persons

    KARACHI: Pakistan Business Council (PBC) has suggested measures for broadening tax base through enhancing withholding tax rates on non-filers and unregistered persons in various sectors.

    The PBC – the advisory council of large corporate entities – in its budget proposals for 2019/2020 said that the concept of separate withholding tax rates for filers and non-filers was introduced as a measure for increasing documentation of the economy.

    “Though large amounts are being collected from non-filers, no effort has been made to increase the tax base. The non-filers for the most part have build the cost of this government levy into pricing and passed it on to their customers.”

    The PBC said that in order to broaden the tax base and to achieve increase in overall tax collection without burdening existing taxpayers, the policy to increase tax on non-filers / unregistered persons should be implemented specifically in the following cases:

    a. unregistered industrial / commercial entities (not having STRN) having bill amount in excess of Rs20,000 per month, extra sales tax should be increased from five percent to 20 percent.

    b. After collection of extra tax for a continuous period of six months, all these connections should be provisionally converted into NTN and STRN and return filing from these connections should be enforced.

    c. In case of provisional registration, utility companies should be directed to issue show cause notices where annual billing amount exceeds Rs2.4 million and directing provisionally registered persons to obtain permanent registration. In case of non-compliance, utility companies should be directed to disconnect utility connections.

    d. Moreover, in order to bring all commercial/industrial users in the tax net and to verify filer status, electric distribution companies should provide one year to all such consumers to get their NTN registered with electricity distribution companies. In case of failure to provide NTN, electricity connection should be disconnected. Considering the fact that all industrial/commercial connections will be linked with NTN, the tax department will then be in a better position to assess the electricity consumed by commercial/industrial users and corroborate the same with amount of sales/ production etc. reported in sales tax/income tax return.

    e. In order to bring all commercial/industrial users in the tax net and to verify filer status, electric distribution companies should provide one year to all such consumers to get their NTN registered with them. Thereafter, such commercial / industrial consumers without NTN should be charged advance income tax at 30 percent (from existing 12 percent) on their utility bills. Those with NTN but non-filer status should be charged at 20 percent withholding tax.

    f. Residential consumers should be made liable to provide NTN in case of electricity bill amount exceeds Rs1.2 million per year or levy advance income tax withholding of 20 percent.

    g. All exemption (like exemption on agriculture income) under the income tax law should only be made available to filers so that exempt income is also reported and wealth is reconciled.

    h. withholding tax on international business class tickets under Section 236L is same Rs16,000 for filer and non-filer, it should be increased to Rs50,000 for non-filers.

    i. Withholding tax at five percent or Rs20,000, whichever is higher, is applicable under Section 236D on all functions organized by filers as well as non-filers. Rate of withholding should be increased for non-filers to Rs100,000 as minimum and no withholding tax from filer.

    j. Function halls withholding tax on electric bills should be 30 percent which can be adjusted against tax liability by providing proof of tax deducted from their customers.

    k. Withholding income tax on interest income under section 151 of Income Tax Ordinance, 2001 is 10 percent for filer and 17.5 percent for non-filer. Rate should be increased to 30 percent for non-filers.

    l. Annual private motor vehicles tax under section 234 of the ordinance for non-filers is Rs15,000 for 1600 cc-1999cc and Rs30,000 for 2000cc and above. Rate for non-filers should be increased to Rs50,000 for 1600cc – 1999cc and Rs200,000 for 2000cc and above.

    m. Advance income tax is collected on sales of immovable property under Section 236, which is 2 percent for non-filers, should be increased for non-filers to 10 percent for properties of 900 square yards or more.

    n. Purchase of land (above specified limit) is only allowed by filers, however, holding of land and its sale by non-filers is still allowed. Holding of land by non-filers should be made more expensive by asking those authorities collecting property tax (cantonment boards/ societies/ registrars) to collect adjustable advance income tax, form non-filers, on behalf of the federal government as: Rs500,000 per year for 800 yards or more but less than 1800 yards; Rs1 million per year for 1800 yards and above.

  • Deduction of withholding tax on phone cards begins

    Deduction of withholding tax on phone cards begins

    ISLAMABAD: Federal Board of Revenue (FBR) has started collecting withholding tax on phone cards on Friday following the judgment of the Supreme Court of Pakistan (SCP).

    The apex court a day earlier in its judgment said that it would not interfere the taxation matter. The superior court itself suspended the taxation on phone cards in June 2018 after taking suo moto notice.

    The FBR started up to 12.50 percent withholding tax on prepaid card of mobile phones.

    Besides, the provinces have also started collecting sales tax on services on mobile phones usage at 17 to 19.50 percent.

    In the federal capital territory the FBR is collecting federal excise duty on mobile phones in sales tax mode.

    However, the service charges of mobile phone companies were still undecided as the apex court had not issued any such orders.

  • Withholding tax rates on imports updated through Finance Supplementary (Second Amendment) Act 2019

    Withholding tax rates on imports updated through Finance Supplementary (Second Amendment) Act 2019

    KARACHI: Federal Board of Revenue (FBR) issued withholding tax rates on imports for tax year 2019 updated as per Finance Supplementary (Second Amendment) Act, 2019.

    The withholding tax rates updated up to March 09, 2019 on import under Section 148 of Income Tax Ordinance, 2001 as follow:

    The collector of customs shall collect withholding tax from every import of goods on the value of goods at the rate of one percent from filers of the import value increased by customs – duty, sales tax and federal excise duty and at 1.5 percent from non-filers of the import value as increased by customs-duty, sales tax and federal excise duty on the value of goods, included:

    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

    — Industrial undertaking importing Plastic raw material (PCT Heading 39.01 to 39.12) for its own use.

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

    2. Persons Importing Pulses

    Filer: 2 percent of the import value as increased by Custom-duty, sales tax and federal excise duty

    Non-filer: 3 percent of the import value as 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

    Filer: 3 percent of the import value as increased by custom-duty sales tax and federal excise duty.

    Non-filer: 4.5 percent of the import value as 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

    Filer: 4.5 percent of the import value as increased by Custom-duty, sales tax and federal excise duty

    3A. Persons importing coal

    Filer: 4 percent

    Non-filer:6 percent

    4. Ship breakers on import of ship

    Filer: 4.5 percent

    Non-filer: 6.5 percent

    5. Industrial undertakings not covered under S.No 1 to 4

    Filer: 5.5 percent

    Non-filer: 8 percent

    6. Companies not covered under S. Nos 1 to 5

    Filer: 5.5 percent

    Non-filer: 8 percent

    7. Persons not covered Under S.Nos 1 to 6

    Filer: 6 percent

    Non-filer: 9 percent

    New proviso introduced through Finance Supplementary (Second Amendment) Act, 2019

    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: Rs70

    2.Exceeding $30 & up to $100: Rs. 730

    3.Exceeding $100 & up to $200: Rs. 930

    4.Exceeding $200 & up to $350: Rs. 970

    5.Exceeding $350 & up to $500: Rs. 3,000

    6.Exceeding $500: Rs. 5,200

    The tax shall be final for all other than those excluded under S. 148(7)&(8)

    The tax shall be adjustable for a tax year under S. 148(7) in respect 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.

  • Withholding tax rate on telephone cards

    Withholding tax rate on telephone cards

    KARACHI: The decision of Supreme Court of Pakistan has paved way for Federal Board of Revenue (FBR) to collect withholding tax on telephone usages under Section 236 of Income Tax Ordinance, 2001.

    The apex court on Wednesday restored taxes on pay cards to use mobile phone services. The court suspended the levy of taxes on phones in June 2018.

    Following are the applicable withholding tax rates on phone usages updated after Finance Supplementary (Second Amendment) Act, 2019:

    a. Telephone subscribers and internet will pay zero tax on monthly bill up to Rs1,000.

    However, Telephone subscribers and internet will pay 10 percent withholding tax on monthly bill up exceeding Rs1,000.

    b. In the case of subscriber of internet, mobile telephone and prepaid internet or telephone card, the FBR will collect 12.50 percent of the amount of bill or sales price of internet pre-paid card of pre-paid telephone card or sale of unit through any electronic medium or what ever form.

    The tax will be collected by person preparing telephone / Internet bill or issuing / selling prepared card for mobile phones / Internet from:

    — Telephone Subscribers, Internet subscriber, purchaser of Internet Prepaid Cards,

    — Telephone subscriber and purchaser of prepaid telephone cards

    Along with payment of telephone bill or at the time of issuance of or sales of prepared cards.

  • Many withholding tax provisions to be abolished in budget

    Many withholding tax provisions to be abolished in budget

    ISLAMABAD: The government has intended to abolish large number of withholding tax provisions in the budget.

    According to Medium-Term Economic Framework (MTEF), which was launched by Finance Minister Asad Umar on Monday, pointed out that withholding taxes become regressive if people who are not liable to income taxes and/or if firms treat them as consumption taxes and are generally passed them on to the consumers, badly impacting the progressivity of the tax.

    As such, the tax needs some fundamental reforms.

    “As a first step, the government intends to discontinue a large number of low yielding withholding taxes in the next year’s budget.”

    The framework also highlighted about the taxation and valuation of immovable properties.

    Since the federal government collects tax on income from property and provincial and local governments collect property and transaction tax on immovable property, all parties have an interest in proper documentation and valuation of property.

    “The government intends to pursue a coordinated approach to taxation and valuation of the real estate sector in a way to collect optimum revenue from it without discouraging investment.”

  • Procedure to avail reduced income tax rate on import of raw material

    Procedure to avail reduced income tax rate on import of raw material

    KARACHI – The Federal Board of Revenue (FBR) has introduced a streamlined procedure for taxpayers to apply for the reduced rate of withholding income tax on the import of raw materials through the online system, Iris.

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