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ISLAMABAD: Federal Board of Revenue (FBR) has granted Rs30 billion as initial allowance to new business entities during fiscal year 2019/2020. The concession of allowance has been granted under Section 23 of Income Tax Ordinance, 2001. As per Section 23 the allowance has been granted as: Section 23. Initial allowance.— Sub-Section (1): A person who places an eligible depreciable asset into service in Pakistan for the first time in a tax year shall be allowed a deduction (hereinafter referred to as an “initial allowance”) computed in accordance with sub-section (2), provided the asset is used by the person for the purposes of his business for the first time or the tax year in which commercial production is commenced, whichever is later. Sub-Section (2): The amount of the initial allowance of a person shall be computed by applying the rate specified in Part II of the Third Schedule against the cost of the asset. [The rate of initial allowance under section 23 shall be 25 per...

KARACHI: Federal Board of Revenue (FBR) has granted an amount Rs45 billion as cost of customs duty exemption and concession of customs duty on imports under free and preferential trade agreements. According to official data of exemption and concessions against imports under Free trade Agreements (FTAs) and Preferential Trade Agreements (PTAs) during fiscal year 2019/2020 was Rs45.02 billion. According to breakup of the concessions and exemptions, the FBR exempted Rs1.6 billion worth imports from SAARC countries under SAFTA Agreement on the basis of SRO 12749i)/2006. The FBR granted exemption Rs26.85 billion as general exemption on imports from China under Pak-China FTA on the basis of Table-I of SRO 659(I)/2007. Another exemption of Rs6.911 billion was granted under Table-II of SRO 659(I)/2007 as general exemption on import from China under Pak-China FTA. An amount of Rs2.52 billion was granted under SRO 1261(I)/2007 Table-I as general exemption on import from Malaysia under...

KARACHI: The minimum tax on turnover has been proposed to impose on non-resident companies having permanent establishment (PE) in Pakistan. The amendment in Section 113 of the Income Tax Ordinance, 2001 has been proposed through Finance Bill, 2020. According to EY Ford Rhodes Chartered Accountants the Section 113 of the Ordinance levies minimum tax on a person based on his turnover where such person is not liable to pay tax due to various reasons listed therein. However, the levy of minimum tax in case of corporate taxpayers, is only applicable on resident companies. This means that foreign companies having a permanent establishment in Pakistan (including a branch) are not subject to minimum tax. The Finance Bill 2020 has now proposed to include non-resident companies having a permanent establishment in Pakistan under the domain of minimum tax on turnover. Consequently, such companies would be required to compute minimum tax under Section 113 of the Ordinance for determina...

KARACHI: Pakistan Tax Bar Association (PTBA) has urged the tax authorities to allow time extension to taxpayers for making compliance in audit notices of tax year 2014. In a letter sent to Ms. Nausheen Javaid Amjad, Chairperson, Federal Board of Revenue (FBR) on Friday, the PTBA urged to grant an extension of time under Section 214A of the Income Tax Ordinance, 2001 to complete the amendment of assessment proceedings for the tax year 2014 in order to provide sufficient time to taxpayers for compliance of such notices issued by the department in the best possible interest of the taxpayers at large. The apex tax bar said that it had been brought to the notice that the officers of Inland Revenue had initiated amendment of assessment proceedings by issuing various notices under Section 177/174/176/122 of the Ordinance, ibid in the last month of June 2020 to the taxpayers for the year 2014 as the said tax year is going to be time barred as on June 30, 2020 under Section 122(2) of the I...

ISLAMABAD: The Senate of Pakistan has recommended the government to abolish withholding tax on cash transactions from banks. In its key tax recommendations for finalizing budget 2020/2021, the Senate recommended that the government should abolish all kinds of withholding tax chargeable on cash transactions from banks. It recommended that instead of the proposed amendment in clause 3A and 3B of the Income Tax Ordinance, 2001, capital gain tax may completely be done away with on the sale and purchase of a house or a plot. The Senate recommended that amendments in 5 th  Schedule of Customs Act and 6 th  Schedule of Sales Tax Act may be made for import of goods including vehicles and other equipment for sole use of the IPC to propagate its objectives subject to the certification of by the chair that such items are bon-fide requirement of the International Parliamentarians’ Congress (IPC) and shall not be disposed of without permission of the Federal Board of Revenue (FBR) a...

KARACHI: The Chief Commissioner Inland Revenue of Corporate Regional Tax Office (CRTO)-Karachi started recovery of reward amount that was sanctioned to the officials beyond authorized approval. In an official notices issued by Mushtaque Ali Wagan, Additional Commissioner (HQs) asked 42 officers and officials of the CRTO Karachi to deposit the sanctioned amount in government treasury through State Bank of Pakistan or National Bank of Pakistan within two days from the issuance of the letter i.e. June 24, 2020. The recovery has been initiated after detection that the then Chief Commissioner-IR, CRTO Karachi sanctioned stipend, incentives, awards and allied to the following officers of the CRTO without consultation of the Federal Board of Revenue (FBR): 01. Imran Ali Sheikh, Additional Commissioner-IR, CRTO Karachi 02. M. Masood Ahmed Gorsi-IR, Additional Commissioner-IR, CRTO, Karachi. 03. Kashif Hafeez, Additional Commissioner-IR, CRTO, Karachi. 04. Naseer Ahmed, Additional ...

KARACHI: The Finance Bill 2020 has proposed major changes related to tax deduction in order to provide relief to business community. Under the proposed amendments the threshold amount has been increased up to Rs25,000 for tax deduction in case salary is paid. According to interpretation of the Finance Bill 2020 by BDO Pakistan, the Finance Bill proposed amendments to Section 21 of the Income Tax Ordinance, 2001. (l)  The Bill seeks to enhance threshold of deduction for cash payment against business income under single account head from Rupees fifty thousand to Rupees two hundred and fifty thousand per annum. This proposal seeks to relieve businesses from making transactions through banking channel, as it is difficult for business to make every transaction through banking channel. Further The Bill seeks to increase the threshold of expenditure liable to be disallowed as a business expense if the same is not made through a crossed banking instrument/ online transfer of...

KARACHI: Sindh Revenue Board (SRB) has suspended sales tax registration of M/s. Turnotech (Pvt) Limited defaulting tax payment and non-compliance of filing monthly returns. In a notice the SRB said that M/s. Turnotech (Pvt) Limited had failed to comply with the following obligations: — To discharge the Sindh sales tax liability against the services provided or rendered during the tax periods from March 2015 to July 2015, September 2015 to December 2015 and April 2016 to July 2018. — e-file their Sindh sales tax return for the tax periods from March 2015 to July 2015, September 2015 to December 2015 and April 2016 to July 2017. The SRB said that the suspension of the company would be revoked on taking following measures: — to discharge the due Sindh Sales Tax liability along with default surcharge for the tax periods from March 2015 to July 2015, September 2015 to December 2015 and April 2016 to July 2017. — to e-file the true and correct monthly Sindh sales tax returns for...

KARACHI: The Finance Bill 2020 has proposed changes to taxability on payments made for goods, services and contracts. According to explanation to amendments made to Section 153 of Income Tax Ordinance, 2001 through Finance Bill 2020 by BDO Pakistan Audit Consultancy and Tax Advisory Firm: (1a): The bill seeks to include toll manufacturing to be treated as sale of good for the purpose of withholding under this subsection. This inclusion clarifies the taxability of this segment and it will be minimum tax. (3): The bill seeks to treat taxes withheld at source as minimum tax on payment of goods, services and execution of contracts. (4): The tax deducted at source is adjustable for the Company being manufacturer and the Public Listed Company registered on stock exchange. This inclusion will result in expansion of tax collection by the board. The Bill seeks that the Commissioner shall respond to application for the issuance of exemption certificate related to withholding of taxes ...

KARACHI: Taxpayers shall require to pay 10 percent of tax demand while filing an appeal before Appellate Tribunal challenging the order of commissioner appeals. Deloitte Yousuf Adil, Chartered Accountants, said that a new requirement is proposed in the Finance Bill 2020 for filing of appeal before the Appellate Tribunal for challenging the order of Commissioner Appeals. Proof of payment by the taxpayer of ten percent of the amount of tax upheld by the Commissioner Appeals is required to be submitted along with the appeal documents. The chartered accountants said that currently, no such payment requirement exists for filing of appeal before the appellate tribunal. No appeal shall be admitted unless 10 percent of amount upheld by the Commissioner Appeals is deposited. The proposed amendment is against the principle of natural justice and would create cash flow problems for the tax payers considering the illegal tax demands that are generally created through assessment proceeding...

Presently, expenses incurred to the extent of 6 percent of rent chargeable wholly and exclusively for deriving rent are admissible as deduction against rental income. The Bill proposed to reduce the limit from 6 percent to 2 percent. The experts said that further reducing such limit would deprive a taxpayer for claiming a legitimate expense incurred solely for deriving taxable income and would ultimately lead to higher tax payable by the taxpayer. “It may encourage taxpayers to under-report their taxable income on the grounds that their legitimate expenses are disallowed,” experts at Deloitte Yousuf Adil Chartered Accountants said. Presently, income from property derived by an individual or an Association of Persons is subject to tax at the specified slab rates and treated as a separate block of income. However, individuals or AOPs whose income from property exceeds Rs 4 million per annum can opt to claim deductions under section 15A of the Ordinance and pay tax at normal rate...

KARACHI: The federal government has made amnesty granted to real estate sector to the part of Finance Bill, 2020 in order to get approval from the Parliament. Deloitte Yousuf Adil Chartered Accountants in their budget explanations said that to stimulate investment in real estate and construction sector, a no-questions-asked amnesty has been introduced. Under this amnesty the Federal Board of Revenue (FBR) has been restrained from asking question related to source of investment made into the real estate / construction business. Both previous and current federal governments have launched tax amnesty schemes in 2018 and 2019, albeit the scope of this scheme is limited to investment made in construction sector only. The proponent of this particular amnesty scheme argues that this would act as a catalyst to increase economic activity in the country thereby improving employment opportunities as number of sub-sectors and small and medium size industries are associated with construct...