Valuation procedure for undeclared motor vehicles

Valuation procedure for undeclared motor vehicles

The Federal Board of Revenue (FBR) has outlined a detailed procedure for the valuation of motor vehicles identified as undeclared or concealed assets in the Income Tax Rules, 2001.

The FBR, in line with its commitment to transparency and fair taxation, issued updated rules on September 8, 2020, to address the valuation of motor vehicles under Section 111 of the Income Tax Ordinance, 2001.

Section 111 empowers tax authorities to frame charges against individuals for the concealment of assets. The new rules provide a systematic approach to determine the value of motor cars and jeeps for taxation purposes, ensuring a fair and standardized assessment of these assets.

According to the outlined procedure:

(a) New Imported Cars or Jeeps: The value of a new imported car or jeep will be the Cost, Insurance, and Freight (C.I.F.) value, plus all charges, customs duty, sales tax, levies, octroi fees, and other applicable duties and taxes up to the point of registration.

(b) New Locally Purchased Cars or Jeeps: The value of a new car or jeep purchased locally from the manufacturer, assembler, or dealer in Pakistan will be the price paid by the purchaser, inclusive of charges, customs duty, sales tax, and all other applicable taxes, levies, octroi fees, and duties up to the point of registration.

(c) Used Imported Cars or Jeeps: For a used car or jeep imported into Pakistan, the value will be the import price determined by customs authorities for customs duty purposes. This includes freight, insurance, all charges, sales tax, levies, octroi fees, and other applicable duties and taxes up to the point of registration.

(d) Depreciation for New Cars or Jeeps: The value of a car or jeep, whether new or used, at the time of its acquisition will be determined based on the specified calculation. For new cars or jeeps, a reduction of ten percent of the value specified in clauses (a), (b), or (c) will be applied for each successive year, up to a maximum of five years.

(e) Depreciation for Used Locally Purchased Cars or Jeeps: The value of a used car or jeep purchased locally will be considered the original cost as specified in clauses (a), (b), or (c), reduced by ten percent for every year following the year in which it was imported or purchased from a manufacturer.

These valuation rules aim to standardize the assessment process for motor vehicles, providing clarity for taxpayers and tax authorities alike. The systematic approach helps in ensuring a fair and accurate representation of the value of these assets, aligning with the broader goals of promoting transparency and accountability in the taxation system. This initiative reflects the FBR’s commitment to creating a robust and equitable tax framework in Pakistan.