TAX YEAR 2021: minimum tax rates

ISLAMABAD: Federal Board of Revenue (FBR) has updated rates of minimum tax to be applicable during tax year 2021 (July 01, 2020 – June 30, 2021).

The FBR issued Income Tax Ordinance, 2001 (updated up to June 30, 2020) after incorporating amendment brought through Finance Act, 2020. The FBR updated following rates of minimum tax under Section 113 of the Ordinance:

S.NoPerson(s)Minimum Tax as percentage of the person’s turnover for the year
(1)(2)(3)
1.  (a) Oil marketing companies, Oil refineries, Sui Southern Gas Company Limited and Sui Northern Gas Pipelines Limited (for the cases where annual turnover exceeds rupees one billion.)   (b) Pakistani Airlines; and   (c) Poultry industry including poultry breeding, broiler production, egg production and poultry feed production.   (d) Dealers or distributors of fertilizer ; and (e) person running an online marketplace as defined in clause (38B) of section 2.0.75%
2.  (a) Distributors of pharmaceutical products, fast moving consumer goods and cigarettes; (b) Petroleum agents and distributors who are registered under the Sales Tax Act, 1990; (c) Rice mills and dealers; and (d) Flour mills.  0.25%
3.Motorcycle dealers registered under the Sales Tax Act, 1990.0.3%
4.In all other cases.1.5%

Section 113: Minimum tax on the income of certain persons.

(1) This section shall apply to a resident company, permanent establishment of a non-resident company, an individual (having turnover of ten million rupees or above in the tax year 2017 or in any subsequent tax year) and an association of persons (having turnover of ten million rupees or above in the tax year 2017 or in any subsequent tax year) where, for any reason whatsoever allowed under this Ordinance, including any other law for the time being in force—

(a) loss for the year;

(b) the setting off of a loss of an earlier year;

(c) exemption from tax;

(d) the application of credits or rebates; or

(e) the claiming of allowances or deductions (including depreciation and amortization deductions) no tax is payable or paid by the person for a tax year or the tax payable or paid by the person for a tax year is less than the percentage as specified in column (3) of the Table in Division IX of Part-I of the First Schedule of the amount representing the person’s turnover from all sources for that year:

Explanation.-For the purpose of this sub-section, the expression “tax payable or paid” does not include-

(a) tax already paid or payable in respect of deemed income which is assessed as final discharge of the tax liability under section 169 or under any other provision of this Ordinance; and

(b) tax payable or paid under section 4B.”

(3) Where this section applies:

(a) the aggregate of the person’s turnover as defined in sub-section (3) for the tax year shall be treated as the income of the person for the year chargeable to tax;

(b) the person shall pay as income tax for the tax year (instead of the actual tax payable under this Ordinance), minimum tax computed on the basis of rates as specified in Division IX of Part I of First Schedule;

(c) where tax paid under sub-section (1) exceeds the actual tax payable under Part I, clause (1) of Division I, or Division II of the First Schedule, the excess amount of tax paid shall be carried forward for adjustment against tax liability under the aforesaid Part of the subsequent tax year:

Provided that the amount under this clause shall be carried forward and adjusted against tax liability for five tax years immediately succeeding the tax year for which the amount was paid.

(4) “turnover” means,-

(a) the gross sales or gross receipts, exclusive of Sales Tax and Federal Excise duty or any trade discounts shown on invoices,

or bills, derived from the sale of goods, and also excluding any amount taken as deemed income and is assessed as final discharge of the tax liability for which tax is already paid or payable;

(b) the gross fees for the rendering of services for giving benefits including commissions; except covered by final discharge of tax liability for which tax is separately paid or payable;

(c) the gross receipts from the execution of contracts; except covered by final discharge of tax liability for which tax is separately paid or payable; and

(d) the company’s share of the amounts stated above of any association of persons of which the company is a member.

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