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Tax Appeals in Pakistan

tax appeals in pakistan

What is Tax Appeal:

Most of the tax appeals in Pakistan arise between taxpayers and tax collectors (Inland Revenue Department) over the verification of the amount of taxable income and the imposition of default surcharges and penalties on it.

Right of Appeal:

To resolve such disputes, the law provides the procedure, which gives taxpayers the right to appeal to the Commissioner (Appeals) and, if still not satisfied, then there is more right to appeal to the high courts.

Also Read: Property Tax In Pakistan 2019-20

Who can appeal/Eligibility:

  1. Any individual disappointed with any order passed by a Commissioner/Officer Inland Revenue has the privilege to appeal.


  2. On account of an individual, the individual himself.


  3. On account of the Association of Persons (AOP), any partner or individual from the Association.

  4. On account of any company any the Principle officer


  5. On account of the deceased person, any legal representative of the deceased.


  6. On account of a person with a legal disability or unrelated or non-resident person, his / her representative.

Requirements for Making Tax Appeals in Pakistan:

In order to appeal, the person has to pay tax on the declared income along with the return of income.
Documents required to file an appeal with the Commissioner (Appeals) are:

1.      Appropriately checked from of Appeal in copy 
2.      Grounds of Appeal in copy 
3.      Two duplicates of the Order against which an appeal is filed. 
4.      Two duplicates of Notice of Demand issused u/s 137(2)
5.      Certificate of communication of memorandum/form of appeal and grounds of appeal to the Officer who issued the order.
6.      Certificate of service of order
7.      Proof of deposited appeal fee

8.      Powerof Attorney

Time limit for appeal:

The limitation of appeal filling is before the Commissioner (Appeals) is thirty (30) days from the date of receipt of the notice of demand identifying with an assessment, penalty, or some other enforcement action.

Source: Income Tax Appeals – FBR



Property tax in Pakistan 2019-20

Property tax in Pakistan

Property tax in Pakistan is a tax that is owned by an individual or another legal entity, such as a corporation. Property taxes are paid by the property owner calculated by the government on property value and location basis.

Before going into the changes in property tax for the year 2019-20, the government has done, we need to understand what kind of taxes apply in Pakistan.

Types of Tax:

Basically, there are four types of tax:
• Capital Gains Tax
• Capital Value Tax
• Stamp Duty
• Withholding tax

Concept Of Tax Year:

Basically, the tax year is 12 months but for different from the year that starts in January and ends in December. The tax year 2019 starts from 01 July 2018 to 30 June 2019. The tax year ends on June 30. The tax year 2020 begins on July 1, 2019, and ends on June 30, 2020.

Amount of Tax Needs to Pay While Selling A Property:

When you are selling property in Pakistan, you will need to pay capital gains tax on the profit.

Capital Gain tax:

This is the tax that the seller has to pay. When the seller makes a profit when selling the property, it is the same capital that is taxable. Capital gains tax is levied when the property is sold within three years of purchase.

For the first year, a 10% tax is paid, while in the second-year sales are taxed at 7.5% and in the third year at 5%. Profitable tax collection is calculated with reference to the appropriate market value. If the property has been held for more than three years, the seller will not pay capital gains tax.

Amount of Tax Needs to Pay While Buying A Property:

Different types of tax need to pay while purchasing a property in the year 2019-2020 are mentioned below:

Capital Value Tax:

A provincial tax paid by the buyer while buying a property is known as capital value tax. Capital value tax is payable on the value of the asset acquired. According to the Finance Act, 2006, capital value tax is levied at the rate of 2% of the recorded value.

According to the new budget 2019-2020, the federal government has supported the abolition of DC rates. Currently, the total capital value tax for the urban property is 2%.

Stamp Duty:

Stamp duty is a tax on a legal document when buying a property. Basically, stamp duty is levied at 3% of the property’s DC rates.

Withholding Tax (WHT):

Withholding tax is very important. This is the federal tax that buyers and sellers have to pay when dealing with property paid at the time of the property deal

Withholding Tax for Buyer:

An individual who is an income tax filer is buying a property that has to pay a 2% holding tax and non-filers have to pay 45% tax.

People who are buying property need to pay tax only if the value of the property is more than Rs 4 million.

Withholding Tax For Seller:

If the seller of the property is an income tax filer then he has to pay a 1% tax whereas non-filers have to pay 25% tax. This rule has been passed so that more people can file income tax every year.

Source: https://www.fbr.gov.pk/












What is Federal Board of Revenue?

tax profile update

Federal Board of Revenue (FBR), formerly known as Central Board of Revenue (CBR) was formed on April 1, 1924, with the enactment Central Board of Revenue  Act of 1924. The Federal Board of Revenue (FBR) is a special government association of Pakistan to investigate money laundering and tax evasion crimes. The FBR works with all individuals and organizations to strengthen tax assessment in the nation.


The FBR perform special duties for FBR headquarters through tax inspectors who monitor tax evaders. The FBR also collects tax evasion intelligence and manages tax laws for the government of Pakistan and acts as Pakistan’s central agency of collection of revenue.

Mission of FBR

Federal Board of Revenue’s mission is to increase the capacity of the tax system through modern techniques by providing taxpayer guidelines, support, and the ability to pay taxes through a motivated, devoted, satisfied, and professional workforce.

Also Read: What is Value Added Tax

Functions of FBR

The FBR is a semi-autonomous federal agency of Pakistan responsible for enforcing financial laws and collecting taxes for the Government of Pakistan. Provides approval for appeal/reference before High Courts and CPL / review before the Supreme Court and approval for litigation in courts. The responsibilities of FBR are:

  • Formulating and managing fiscal policies.
  • Federal duties and collection of revenues, taxes and other levies,
  • Intentional court work in deciding tax cases and appeals

FBR basically works through its main collection branches across the country involving Regional Tax Offices (RTOs) and Large Taxpayer Units (LTUs). To perform functions accurately on the basis of different duties FBR consist of following wings:

  S.No.
FBR Wings
01 Inland Revenue
02 Customs
03 Admin
04 Taxpayers Audit
05 Legal
06 Facilitate and Taxpayer Education (Fate)
07 Strategic Planning Reforms &Statistics(SPR&S)
08 Human Resource Management (HRM)
09 Information Technology
10 Accounting
11 Legal and Accounting – Customs

FBR Wing has responsibilities and functions according to their specifications. Rather than other wings there are two major wings of FBR with major function

A) The Inland Revenue
The Inland Revenue Service (formerly known as the Income Tax Department) levies domestic taxes, including Income Tax, Sales tax and Federal excise duty, and is a central component of the FBR.

B) The Custom
The Pakistan Customs Service directs import obligations and various taxes levied at the import stage, also manages international trade and manages the limits and restrictions imposed by government legislation.

For the purpose of tax collection and prosecution of tax evaders, the powers and functions of the FBR include yet are not restricted to:

  • Investigating and auditing tax matters,

  •  Arrest warrants, with attachments.

  • Also, the public auction of movable and immovable assets was non-compliant.



Pakistan Budget 2020-21 Highlights

Budget 2020-21

Here are budget 2020-21 highlights:

1- No new tax to give relief to people
2- Ahsas program to continue by increased budget
3- To improve tax collection
4- To decrease in govt. expenditure
5- To improve subsidy system
6- Poverty elevation program
7- Higher education budget increased
8- Measures taken to improve remittances
9- Kamyab Naujawan program budget introduced
10- To improve public services through E-governance
11- Artist welfare fund increase
12- Inflation to be decrease
13- FBI increase by 25%
14- To improve health services by ICT
15- To open smart schools
TAXES :
16- POS of retailer business to increase
17- 14% to 12% sales tax on retailers
18- Hotel minimum tax decrease to 0.5% July to September
19- Fixed tax scheme introduced for Small and medium businesses
20- Export rebate, to direct transfer in business bank accounts
21- Raw Material fully exempt from custom duty to respective nature of businesses having 20000 items
22- Custom duty of 200 items in tariff line decrease
23- PRD to decrease
24- Poor people benefits — corona—supplements etc to be exempted from duties and taxes
25- Custom official powers has been decreased
26- Inclusive of advance ruling methods in custom law
27- Unregistered sales tax person—CNIC condition from 50 thousand to one lakh
28- Covid 19 sales items exemption period increased
29- 237 sro for relief extended for further 3 months
30- 11th schedule of sales tax to improve
31- Increase in FED in all type of cigarettes and its articles increased to 100%
32- Caffine items FED from 13 to 25%
33- Double pick up FED to be taxed as other vehicles
34- 17% sales tax on potassium cholaride decrease

35- 14% sales tax decrease to 12% of big retailers
36- Wastage to fixed in manufacturing business
37- 12 schedule sales tax of VAT—manufacturers no sales tax
38- Cement sector decrease from 2 to 1.75 per kilo
39- If Appeal than reference can be made to following years
40- ADRC law to be change
41- STAY provision to be made in ADRC
42- FED law to be enhanced
43- Sales tax act 9th schedule mobile phone manufacture decrease in sales tax
44- E Audit / video link introduced for audit
45- Online sharing of assess data introduced
46- WHT Regime to delete 9 sectors (Education and marriage hall etc)
47- Commercial importer and manufacturer importing on raw material and machinery from 5.5 top 2% and 1%
48- Machinery examination certificate abolished
49- Aop and individual allowed expenditure to be claimed against property Income
50- Foreign remittances transfer from one bank to another – no tax on that
51- Tax Refund procedure – now changed – one centralized system introduced
52- 152 WHT of non resident for Hajj Companies
53- Advance tax abolished under section 231b and 234 on rickshaw and cars
54- Advance tax payment threshold increased
55- Exemption certificate through automation system
56- Schedule 12 Exemption certificate for advance tax to be produced by person who had already paid advance tax
57- RIET residential properties CGT period extended
58- Free Zone benefits also to be given modern developers
59- To simple law and business only for PE tax deduction to be made
60- Tax deduction under section 235 now fully adjustable
61- Inclusion in Active tax payer list, proper enquiry to be conducted
62- Automatic return process system to be introduce for any error in return if any
63- For and increase in data base and WHT 236V to be introduce
64- Non resident and resident tax should be same
65- Purchase and leased vehicle threshold to be same
66- Depreciation to be as per best international practice
67- NPO status per 2nd schedule section 100C condition to be strictly followed and only those NPO be there who benefits the community in general
68- 10% tax to be paid while filing appeal
69- Auto system advance tax to introduce through IRIS by 5th of every advance tax due date
70- CGT on Immoveable property decrease from 5 years to 4 years
71- Non Resident- royalty, fees etc to be decrease

72- FTR to be filed with section 114
73- Appeal fees increased
74- Section 165 WHT for bio annual now to be filed by 3 months instead of 6 months
75- Immoveable taxation CGT from 8 to 4 years and every year decrease by 25%


What Is Value Added Tax (VAT)?

Value Added Tax

Value Added Tax is a consumption tax that is levied on a product whenever it is added to the price at every stage of the supply chain from production to sales. The VAT that the consumer pays is on the cost of the product, less than the price of the material used in the product that has already been taxed.

Scope of VAT:

Value Added Tax is usually expressed as a percentage of the total cost and increases government revenue without punishing success or wealth. VAT covers the supply of both goods and services (including imported) at a uniform rate of 15% unless subject to VAT exemption. Businesses with an annual turnover of less than Rs 7.5 lakh will be out of the VAT net.

Advantages of VAT:

  1. VAT offers more benefits than the national sales tax as :

  2. It is very easy to track.

  3. Exact tax is levied on every step of production.

  4. Furthermore, because VAT is only levied on every price increase, it is not a sale of a product itself due to which it ensures that no double tax has been levied on the same product.

Also Read: What is Withholding tax?

Impact of VAT on Improving Economy Documentation And Revenue Collection:

All commercial activities related to rallies, production, and distribution of goods and provision of services are brought under the tax net which is tolerated to the extent of default registration. As a result of documenting each body in the supply chain. People who are not registered in the chain are not in a position to claim or deduct the tax paid at the purchase level. VAT promotes financial documents using its built-in invoice-based credit mechanism. The tax invoice is a bloodline of documents related to VAT. VAT includes self-enforced features and business transaction documents through tax invoicing.

Source: Investopedia




‘Business activities to continue till May 31 as per notified timings’

Business activities all over Sindh will continue till May 31 as per the directives of the Supreme Court of Pakistan, said Minister for Information Syed Nasir Shah in a statement issued here on Thursday.

The federal government, in consultation with all the provincial governments, has imposed a lockdown till May 31. The Supreme Court, hearing a suo motu case (No. 01 of 2020) on May 18 had given directions that the business activities would continue to operate on all days till May 31.

The National Coordination Committee is scheduled to meet under the prime minister within the next two days to decide on what to do regarding the lockdown. Therefore, till May 31, the business activities would continue to operate as usual as per the timings ordered by the Sindh government through a home department’s notification.

Source: The News

Documenting economy: FBR urged to use data of bourse, the property market

Pakistan Business Council (PBC) has asked the Federal Board of Revenue (FBR) to use stock market/property data and the National Database and Registration Authority (Nadra) information for documenting the economy and providing a level-playing field to the domestic manufacturing from the next fiscal year.

According to the budget proposals of the PBC for 2020-21, the FBR has got access to financial data in various forms including the monthly statements submitted by withholding tax agents of the various withholding deductions made by them.

This can be a start to bringing new taxpayers in the net.

In addition, the FBR has also collected data about tax paid by non-filers on property and on gains made in the stock market.

The information as per statement filed under Section 165A and the NADRA records are also available.

This can be a start to bringing new taxpayers in the net, the PBC added.

The number of taxpayers needs to be increased; the narrow taxpayer base is leading to greater pressure on the existing taxpayers.

An increase in the tax base will reduce the FBR’s ever increasing reliance on existing taxpayers, it proposed.

The monthly sales declared by commercial importers should be matched with sales declared in annual income tax return as well as the credit entries in all business bank accounts.

In case of any discrepancy, reconciliation with justifiable reasons should be submitted by the commercial importers.

Online CREST system must be amended in a way to trace sales along with value addition, thereon of person to whom supplies were made by the commercial importers.

The PBC has proposed 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.

Non-filers for the most part have built the cost of this government levy into pricing and passed it on to their customers.

The withholding tax regime should be simplified by reducing the number of rates significantly.

The current withholding tax guide available on the FBR website is a 76-page document, clearly shows the complexity of the regime from compliance and ease of doing business.

There needs to be a significant distinction in the withholding income tax rates charged from non-filers vs the rates for filers.

Across the board, massive under-invoicing and dumping of imported products have been increasing.

Information regarding values at which various custom check posts clear import consignments is not publicly available.

This encourages unscrupulous importers to under-declare the value of consignments to evade government revenues, it proposed.

In order to broaden the tax base and to achieve an increase in overall tax collection without burdening existing taxpayers, the policy to increase the 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 as referred above for a continuous period of six months, all these connections should be provisionally converted into NTN and STRNs and return filings from these connections should be enforced.

c) In case of provisional registration as above, utility companies 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 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 the 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 be charged at 20 percent WHT.

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

g) All exemptions (like exemption on agricultural 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 be increased for non-filers to Rs100,000 as minimum and no WHT from the filer, PBS added.

News Sources: https://www.brecorder.com/2020/05/28/600647/documenting-economy-fbr-urged-to-use-data-of-bourse-property-market/

What is Withholding Tax (WHT)?

withholding tax

Withholding tax is a requirement of government for the buyer of any service or item of income to withhold or the deduction of tax from the payment which is paid to the government.

Why Withholding Tax?

  • Less interference with the tax authority
  • Helps to expand the tax net
  • Daily basis revenue generation
  • Includes Tax Evasion
  • Economics documents
  • Maintaining flow with the least cost

Withholding Tax Trend:

Withholding tax (WHT) regime is a worldwide trend and the largest source of national revenue in Pakistan. The dependence on WHT has also been on the rise in recent years. Of the 740 (b) direct tax reserves for the financial year 2012, Rs.422 (b) with a share percentage of 57% was derived from different holding taxes.

Scores Of Withholding Tax:

WHT has been part of the tax system in one way or another since Government and taxpayers directly taxed the two scores.

  • Provides regular revenue to the government for its expenses and operations throughout the year
  • It provides taxpayers with an opportunity to meet their obligations in qualifying installments.

Directorate General of Withholding Tax:

Currently, globalization has forced many countries to adapt their economies to new trade and investment policies included in free trade agreements, tax policies, and alignment. Countries cannot close their borders or their economies. Tax policies are inseparable from international economies. Therefore, the Directorate General of Withholding Tax has been set up by the Finance Act 2008 under Section 230A of the Income Tax Ordinance 2001 to review and manage these holding tax systems while maintaining this competitive environment.

Also Read: What are the penalties of being non-filer?

Efficient Source Of Revenue:

WHT is an efficient source of revenue. Their share of direct tax revenue is about 41%. Rise of Rs.422(b) in 2012 as compared to Rs. 5(b) in 1991 talks about rapid growth and consequent heavy dependence on withholding tax.

According to the Income Tax Act, 1922 tax deduction was from two source salaries and interest on securities. Different provision of the tax law was introduced later to extend WHT net in the 1990s, by providing WHT on large-scale transactions.

The main withholding provisions are related to salaries, imports, exports, commissions and brokerage, dividends, contracts, loan interest, utilities, car taxes, stock exchange provisions, and non-residents, etc. with different rates.



What are the penalties of being non-filer?

penalties of being non-filer

Being a responsible Pakistani, if you haven’t filed your tax then you will have to face the penalties of being non-filer. According to PkRevenue , the date on which you pay your taxes has expired or you may not have the information for your return completion, or you may not have enough money to pay taxes and you may be afraid to file your return. In any case, the non-payment of taxes has serious consequences.

Those who do not file their tax will be caught sooner or later.

We have all heard many stories of income tax denials, whether they are straightforward tax dodgers or political demonstrators everyone has to face major civil penalties as well as criminal penalties of fines and imprisonment.

 Beware, the thing you were not told is that failure in filing tax returns can be very costly.

According to Tax laws:

According to Income Ordinance, 2001, tax laws define both lenient and severe penalties for the individuals who have taxable income but not paying their tax or the individuals who are registered with tax authority but their annual returns are not filed or filed after the due date.

Specification of the number of Fines and penalties :

The Income Tax Ordinance, 2001 specifies the number of fines and penalties for non-compliance. Section 114 of the Ordinance deals with the persons who are required to file their annual income tax returns and Section 116 relates to wealth-related statements.

Penalties Under Section 114:

According to section 114 the person who fails to return the required income within the due date will have to face penalties of being non-filer which are the following :

Penalties for late filing income tax   0.1% of the tax payable in respect of the defaulted tax year on each day and a maximum of 50% of the tax payable

Provided that the above-mentioned fine is less than Rs. 40,000 or no tax is paid in this tax year, then such a person will have to pay a fine of Rs. 40,000


Provided that if the income amount is 75% of the income amount coming from salary and the amount of income from salary is under Rs.50 lakhs, the penalty amount, in that case, will be at least Rs.5,000



Penalties for failure to present the statement of wealth and Reconciliation of Wealth Statement   Such a person will have to pay a penalty of 0.1% per week of taxable income or Rs.100,000 whichever is excessive
Penalty for failure to submit foreign assets and income statement within the due date An individual has to pay 2 % of the income of foreign income or assets each year  
Penalty for the fake or misleading written, oral or electronic statement to Inland Revenue Authority or to an Income Tax Authority   Rs. 25,000 or 100% of tax amount whichever is higher an individual has to pay

According to section 182 A:

According to section 182 A, FBR declares that the taxpayers who will not file their returns within the due date will not appear in the active taxpayer’s list for the year the returns have been paid that person will be included in active taxpayer list only in the condition if he pays he following surcharges:

Categories of Taxpayers   Surcharges at Rupees
For Individual 1000  
For Company   20,000  
For an Association of a Persons   10,000

Penalties Under Section 191:

Further penalties according to the income tax ordinance under Section 191 for the person who fails to submit a notice under subsection (3) and subsection (4) of section 114 of subsection (1) of section 116. Commit a crime or offense with a fine or imprisonment for a term not exceeding one year.

More Penalties of being non-filer:

Taxpayer’s failure for presenting a return of income or wealth statement without any excuse within the period prescribed by the court is considered as a crime and is punishable according to which a person is liable to a fine, not more than fifty thousand rupees or imprisonment not more than two years, or both.

What are the consequences of missing tax deadline?

What are the consequences of missing tax deadline

It is the duty of every filer to tax their files before the deadline in order to protect him from the consequences of missing the tax deadline. However, If any person failed to tax his filer before the deadline, he should file his tax as soon as possible. In case of failure of pay tax, you will have options for a tax extension, late payment, or penalties of late payment.

Note: The last date for federal tax return filing for tax year 2019 is July 15, 2020

Filing for an Extension:

In case of missing tax deadline, you can go for a file for an extension if you want to get yourself protected from penalties. You will have to pay a 5% amount each month after missing the deadline. However, if IRS is paying you the refund, then there is no need to ask for tax extension but if you are not getting a refund then there is a need to filing a tax extension. Moreover, if you are getting refind from IRS for 3 to 4 taxpayers every month in a year then there will be no penalty for missing the deadline.

If the balance is pending:

In case if you have paid your tax before the deadline but you still have a pending amount due then every month, you will have to pay the penalty of 0.5% of the total amount per month and it will be a maximum of 25% payment of late payment. You can also end up likely to owe interest to the remaining amount.

If you are not given with extension, then you will have to pay a penalty of 5% of the pending amount per month with interest as well.

Extension of time for tax payment:

You also have an option to apply for an extension of time in order to pay your tax after the deadline but you will have to meet the legal requirements as well in order to get a time extension. You can apply for a time extension here: Application form for Extension of Time for Tax Payment.

If you want to pay your income tax, visit ‘How to pay income tax‘.