PM praises FBR for achieving 41pc growth in March

PM Imran Khan

Prime Minister Imran Khan on Wednesday commended the Federal Board of Revenue (FBR) for posting an unprecedented 41 percent growth in revenue collection by March 2021.
“I commend the efforts of FBR, I even have achieved a historic growth of 41 percent in March 2021 with recorded shares of Rs460 billion,” the prime minister said during a tweet.
FBR collected about Rs322 billion in the same month last year. FBR also posted a 10 percent growth rate of Rs3,380 billion over the first nine months (July-March) in the current financial year. FBR collected Rs3,060 billion within the corresponding months of the previous fiscal year. “This reflects the broader environmental reforms that are driven by government policies,” the prime minister added.

Source: PkRevenue

Date extended up to June 30 for updating tax profile

tax profile update

The Federal Board of Revenue (FBR) on Friday extended the deadline for updating taxpayer information until June 30, 2021.

FBR issued Circular No. 14 of 2021 March 26, 2021, to extend the date of renewal of the taxpayer profile from March 31, 2021 to June 30, 2021.

The date has been extended with a request for tax restrictions that coronavirus cases were on the rise and most offices were operating at 50% capacity.

Updating the profile of all taxpayers registered under Section 181 of the Income Tax Ordinance, 2001 and other conditions specified by the Federal Board of Revenue (FBR) is a required requirement under Section 114A of the Ordinance.

In Finance Act, 2020, Section 114A is introduced to make the review profile binding to the following persons:

(a) every person applying for registration under section 181;

(b) every person who earns less than the head tax, “business income”;

(c) everyone whose income is less than the final tax;

(d) any non-profit organization as defined in subsection (36) of section 2;

(e) any trust or welfare fund; or

(f) any other person determined by the Board.

The FBR described a recently introduced section: “The complexity of return forms is an example of the complexity of tax law. However, there is a great need to simplify the return forms without compromising on the details required to ensure the accuracy of the published version. ”

The FBR said that instead of trying to get all the right information on tax returns, a new section could be set up where taxpayer information could be stored so that the taxpayer could take the correct information.

It states that persons who have registered before September 30, 2020, and receive business or income through the final tax, trusts, welfare organizations, non-profit organizations, and other persons defined by FBR are required to submit a profile on or before December 31, 2020, which has not been extended until -March 31, 2021.

Persons who receive their registration after September 30, 2020, are advised to submit that profile within 90 days of registration. In the event that there is a change in the details, those people will update their profile within 90 days of the change of details. The profile contains information relating to revenue in respect of bank accounts, communications used, business premises including all production, storage, or retail outlets operated or leased by the taxpayer, the types of businesses, and other information that may be provided by FBR.

FBR stated that if a person fails to provide or renew a taxpayer profile within a reasonable time or period extended by FBR under Section 214A, that person will not be included in the active taxpayer list for the last tax year ending before the date specified above or the date extended.

However, when filing or updating the profile, such persons will be allowed to be included in the list of active taxpayers in the case of a tax liability of Rs20,000 in the case of a company, Rs10,000 in the case of a corporation and Rs1,000 in the case of an individual.

In addition, the fine for non-filing or non-renewal of the profile is also increased at a rate of Rs2,500 per day non-payment of less than the minimum fine of Rs10,000.

Source: PkRevenue

Tax penalty reduced to half for making false statement

tax penalty

According to Tax Laws (Second Amendment) the Ordinance, of 2021 was announced the day before, the amount of the tax penalty under Section 182 of a misleading or false statement has been reduced to 50 percent from the 100 percent tax balance.

Under Serial No. 10 of Section 182: any person who makes a false or misleading statement to the Inland Revenue Authority either in writing or orally or electronically includes a statement on request, certificate, declaration, notification, return, objection, or other documents including accounted documents made, prepared, provided, filed or provided under this Ordinance, then that person shall pay a fine of twenty-five thousand rand or 50 percent of the amount due in any of the above:

Provided that in the event of an inspection order contemplated under section 120, it shall not be penalized to the extent that the tax deduction occurs due to the taxpayer assuming an objection to the use of this Ordinance in place of taxpayers.

Under recent legislation, a fine for misleading information under Section 114A is prescribed. Section 114A relates to the profile of taxpayers.

Reference: PkRevenue

Taxpayers Need to Update their profile to remain as Filer!

tax profile update

According to Profit.PkistanToday, taxpayers need to update their details by March 31, 2021, to avoid penalties and to be removed from the Active Taxpayers (ATL) list.

The last day to renew the profile was December 31, 2020, extended by the Federal Board of Revenue (FBR) until March 31, 2021, in view of the problems faced by taxpayers.

In terms of the Finance Act, 2020, Section 114A was included in the Income Tax Ordinance, 2001, regarding the taxpayer’s profile. According to the provision, the following persons are required to update their details on the IRIS: every person who applies for registration under Section 181; everyone earning taxable income under the head ‘money from business’; everyone whose income is taxed is the last; any non-profit organization as defined in subsection (36) of Section 2; any trustworthy or welfare organization; and any other person determined by FBR.

Details required to update the taxpayer profile are included: bank accounts; help communication; business premises, including all production, storage, or sales facilities operated or leased by a taxpayer; types of businesses; and other details that may be provided.

The FBR has issued a detailed statement on the matter stating that the difficulty of return forms is an example of the complexity of tax law. “However, there is a great need to simplify return forms without compromising on the details required to ensure that the translation is accurate.”

The FBR said that instead of trying to get all the right information on tax refunds, a new section could be set up where taxpayer details could be identified so that the taxpayer could take the correct information.

“A person who is already registered before September 30, 2020, and who receives business income or income through taxation, trust, welfare organizations, non-profit organizations, and other persons appointed by the board is required to submit a profile on or before December 31, 2020 (extended until March 31, 2021). ”

The FBR further stated that persons who received their registration after September 30, 2020 were proposed to submit the issue within 90 days of registration. In the event of a change in the details, those persons will update their details within 90 days of the change.

“The profile contains information relating to income in respect of bank accounts, communications, business premises including all production, storage or sales facilities operated or leased by the taxpayer, types of businesses and other information as determined by the board.”

FBR stated: “If a person fails to provide or update taxpayer details within a specified date or time as extended by FBR under Section 214A of the Ordinance, that person will not be included in the current active taxpayer list for the tax year ending before the due date or extended date.”

However, when filing or updating the profile, such persons will be allowed to be placed in the ATL upon payment of the other proposed tax of Rs20,000 in the case of a company, Rs10,000 in the case of a corporation (AOPs) and Rs1,000 in the case of a corporation of the individual.

“In addition, a fine of non-renewal or non-renewable profile of Rs2,500 per day for non-payment is subject to a minimum penalty of Rs10,000,” FBR said.

FBR Tax Extension date up to 31st March 2021

tax extension

The Federal Board of Revenue announces the new date for tax extension last Wednesday for taxpayers to update their profiling up to 31st March 2021.

A new section 114A has been added into the Income-tax ordinance 2001 for taxpayers to update their profiles. As per Section 114A, it states:

Section 114A: Taxpayer’s profile.

(1) Subject to this Ordinance, the following persons shall furnish a profile, namely:-

(a) every person applying for registration under section 181;

(b) every person deriving income chargeable to tax under the head, “Income from business”;

(c) every person whose income is subject to final taxation;

(d) any non-profit organization as defined in clause (36) of section 2;

(e) any trust or welfare institution; or

(f) any other person prescribed by the Board.

(2) A taxpayer’s profile-

(a) shall be in the prescribed form and shall be accompanied by such annexures, statements, or documents as may be prescribed;

(b) shall fully state, in the specified form and manner, the relevant particulars of –

(i) bank accounts;

(ii) utility connections;

(iii) business premises including all manufacturing, storage or retail outlets operated or leased by the taxpayer;

(iv) types of businesses; and

(v) such other information as may be prescribed;

(c) shall be signed by the person being an individual, or the person’s representative where section 172 applies; and

(d) shall be filed electronically on the web prescribed by the Board.

(3) A taxpayer’s profile shall be furnished,-

(a) on or before the 31st day of December, 2020 in case of a person registered under section 181 before the 30th day of September, 2020; and

(b) within ninety days registration in case of a person not registered under section 181 before the 30th day of September, 2020.

(4) A taxpayer’s profile shall be updated within ninety days of change in any of the relevant particulars of information as mentioned in clause (b) of sub-section (2).

As per PkRevenue, this is the final date for tax extension, and after the deadline, the tax penalty will be imposed for late submission of tax.

PROPOSAL FOR FORMATION OF DEDICATED DIVISION AT FBR

1- Purpose of Dedicated Division Formation

Existing Structure:
FBR has a complex mechanism for exporters/business/trader facilitation, which is difficult for average user with limited technical capacity. Following systems are in place in FBR: IRIS, E-File Taxpayer Facilitation Portal, IRIS-ADX Application, Centralized Sales Tax & FED Assessment & Processing (CSTAP), Pay-Sys, Risk Management System (RMS), Sales Tax Return Automation System, WEBOC, One Customs Software.

Proposed Solution:
In addition to the existing structure which is not only confusing but non user-friendly as well, there are numerous issues faced by trader/business from initial registration to becoming a taxpayer with FBR. There is a need to establish a dedicated division to:

a) Facilitate the existing taxpayers largely paying 70% of the taxes per annum;
b) Support the foreign prospect companies to be registered in Pakistan to initiate new projects either through joint ventures or establishing their own existence

The proposed division will be reporting to Chairman FBR with user-friendly software and direct & easy communication for clients. The division will have:

a) Competent & suitable HR to be hired from the Market
b) Dedicated and user-friendly web portal having limited to no human interface
c) Digital walk-through for international companies for easy registration process in Pakistan d) Simplifications of procedures and forms
e) Random auditing mechanism through automated system.
f) FBR existing divisions of ‘Integrity Management Cell’ (IMC) for facilitation of taxpayers and unit named ‘Tax Information Processing Unit’ (TIPU) will also be integrated within this division.

2- Operating and maintenance cost

This division will be operating as an integral part of FBR for facilitation of large taxpayers/business. Since a certain percentage of FBR work will be undertaken by this division so FBR needs to allocate annual operating budget for this division, covering salaries of HR, maintenance, hosting and upgrading of software, connectivity, training and facilitation budget, communication and other operational expenses. The same audit requirements would be applicable on this division which is applicable for FBR.

With this new division having HR from the private sector, the employee retention may be an issue for FBR, keeping in view limited vertical growth and restricted remuneration packages under Finance Division for contractual employees. FBR may need to look into this issue and undertake legal amendments in its Act in order to establish this division as a sustainable model.

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%


‘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/