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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 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/

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.
  
  
  

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

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.

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.

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‘.

What is DIRBS:

Mobile Device Regularization – DIRBS stands for Device Identification, Registration, and Blocking System used to identify the non-complaint devices. A strong inflow of mobile phones and their import is in demand in the country. However, leaving noteworthy issues with the grey market and counterfeit devices affecting Government, Distributors, MobileNetwork Operators, and Consumers.

How It Works:

The system uses the International Mobile Equipment Identity (IMEI) a 15-digit number that is used for identification of the device. It reveals the device make model and details of type approval, manufacturer, and country of production.

Any person who buys a new smartphone in Pakistan needs to check the phone’s compliance with PTA at the time of purchase. You can check the validity by sending the phone’s IMEI to 8484 by text message or you can check it online at the PTA website. Android users can also check it through by downloading DIRBS android mobile app from the Play Store.

Also Check: How to Pay Income Tax

Advantages Of DIRBS:

DIRBS System helps to identify the illegal devices and the devices which are imported. The copies of the original equipment from official OEMs, Devices whose import tax has not been paid, the devices with invalid IMEIs which are not assigned by GSMA, multiple devices with the same IMEI, the devices that have been reported within Pakistan and globally to GSMA  as stolen or lost these types of devices are considered as illegal or invalid devices using the DIRBS.

Objectives Of DIRBS:

DRIBS  System is used for Identification and approval of Devices in which the device with SIM functionality must contain a unique and valid IMEI, new devices with unverified DIRBS, IMEI / false identifiers will not be registered by the Mobile Network Operators (MNOs) on their networks, the retailers and users will identify the validity of IMEI and only the PTA approved devices will be imported into the country and handling of stolen devices in which the introduction of the mechanism by PTA  through which OEMs and operators will be able to notify the PTA of any business being identified by stolen devices, once notified, MNOs will block stolen devices and mobile network operators (MNOs) will notify the PTA of any device connected to their network if reported as stolen are the main focus.

Awareness Through DIRBS:

              DIRBS system is a very informative awareness for consumers and retailers to check compliance. The system is also beneficial for both the retailers and customers in a way they can check the devices is it proper in warranty in PTA or approved by PTA while purchasing new devices.

Darüber hinaus können Verbraucher und Einzelhändler das DIRBS-System verwenden, um sicherzustellen, dass ihre Mobilgeräte nicht nur konform sind, sondern auch für Bonusangebote wie Bonus Online Casinos ohne Einzahlung berechtigt sind.

If you are a filer or taxpayer and want to pay income tax, you can pay it either online or manually. Please see the payment methods:

Factors of Income Tax Calculation:

Calculating income tax depends on various factors that contain your status whether you are an individual, a company, a firm or a local authority, The amount of your income and its nature, and your age.

Heads of Income:

According to Income Tax Ordinance, 2001, taxable income is divided into five categories:

Salary

Business

Capital Gains

Income from Property

Income from Other Sources

Benefits of Paying Income Tax:

Paying your tax returns and wealth statements is good for your government as well as for you to get filer benefits to enjoy a minimum withholding tax on all of your services at excise offices, airports, banking transactions, in purchasing new cars and for real-estate matters. Earlier, the FBR had separate portals for companies and individuals. But now, they’ve made it easier for everyone.

Online Tax Payment

Steps for FBR E-Enrollment:
Here are the ways for FBR E-Enrollment to start paying your income tax: 

• Get yourself register with FBR and start paying your tax returns online.
• For unregistered person go to FBR IRIS portal provide all relevant information by clicking on the registration tab
• For different options again open the IRIS portal and click on e-enrollment.
• To complete the registration process, enter all the asked details like your mobile number, CNIC, etc.
• Login into your account and fill the form by entering all your income information.
• Now you are a Tax Filer.
• In order to check that you are on active taxpayer list or not type ATL give space then enter 13-digit CNIC number and send SMS it to 9966.
  

Guidelines to Pay Income Tax:

Once, you become tax filer you need to pay your income tax by following these steps:

• First of all, log into e-file
• Click on the e-Payments tab.
• Then, go to Create Payment, select Income Tax Annual Return option.

Creating Payment Slip:

• Selection of related tax year
• Entering the Tax amount due
• Selecting a payment mode
• Clicking on create a button and confirm the e-payment created.
• Select the nearest city branch of State Bank (SBP)or National Bank (NBP) for payment slip deposit. (you can download the PSID by printing it)
• After the payment of due tax, the COMPUTERIZED PAYMENT RECEIPT (CPR)is generated. It is reflected in Iris within 24 hours of payment being submitted
  

Manually Tax Payment:

If you can’t go online and pay taxes then you can manually submit your statements on paper at the Taxpayer Facility Counters of the relevant regional tax office.

However, if you want to pay your income tax but you are not a filer, then check the relevant blog ‘How to become filer‘.

Late Tax Payment Penalty:

Failure to pay your taxes is punishable by a fine or a penalty of one year or two in prison.

Other than apply for NTN manually, you can apply for NTN number online through the FBR official website by following steps given below:

Online Procedure:

Step 1: First of all, you need to go to the website: https://e.fbr.gov.pk in order to apply for your NTN number.

Step 2: Here you will see the ‘e-Registration’ tab. All you need to do is select a new e-registration in order to start with a new application.

Step 3: In this step, you need to select the type of application according to your requirements.

Step 4: After that, select the taxpayer type (Individual, AOP, or Company).

Step 5: Here you will have to Enter the CNIC / Reg. Inc according to the type of selected taxpayer, Name and image character then click Ok in order to continue the process.

Step 6: Now you will see the already selected category on the next screen.

Step 7: Once completing the online registration form, verify it and submit that application if you want to apply online. To process from TFC, you need to submit the application at the TFC counter along with your all required documents.

Step8: A Token number will be assigned to that application for further processing/ approval/inquiry. After login, go to the Registration=> Enrollment=> Change profile and update the information accordingly. Moreover, if you want to apply for NTN number manually other than applying for NTN number online, follow the steps:

Manual Procedure:

Step 1: Download the taxpayer registration form by clicking here.

Step 2: After filling the form, submit it to concern NTN Cell/RTO.

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