Taxable period
The tax year for company tax return is starting from 1 July through 30 June. However, tax authorities have powers to allow a special year-end.
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Company tax returns
All companies are required to file an income tax return each year by 31 December. For the preceding financial year (1 July through 30 June) by accounting for business income on an accrual basis. If the special year granted by the tax authorities ends between 1 July and 31 December, then the tax return is required to be filed by 30 September following the year-end.
Persons subject to final tax regime were required to file a statement prescribed in the law in lieu of income tax return. The concept of statement in lieu of return has now been omitted with such persons now required to file a return income. The FBR is to prescribe returns for different classes of income or persons including those covered by final tax regime. Tax authorities can require a person whose name is not appearing in the ATL to file income tax return for any of the last ten years.
Filing of a revised return requires prior approval of the Commissioner of income tax. With subject to certain limitations and conditions. The Commissioner of income tax is also empowered to grant approval for revision of return due to omission or wrong statement. Now, time limit for notifying annual income tax return form under the Income tax Ordinance, 2001 has also been introduced.
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Payment of due taxes
Companies have to pay advance tax under section 147 of the Income Tax Ordinance, 2001 on the basis of tax liability of the immediately preceding tax year in respect of their income (excluding final tax regime income sources). The advance tax is to be paid after adjusting the withholding / advances taxes (excluding relating to Final tax regime).
Advance tax, payable in four quarterly installments on or before 25 September, 25 December, 25 March, and 15 June in each financial year. Adjustment for advance tax paid under section 147 in a tax year, allowed against tax liability of that year. In case of banking companies, such quarterly advance income tax is payable on a monthly basis.
The rest of the tax liability payable at the time of filing the return of income under section 137 of Income Tax Ordinance, 2001 as admitted income tax. Advance income tax and withholding income tax are adjustable against the tax payable with the return of income. FBR now empowered to explain a procedure for filing and calculating of turnover for the quarter through an automated system.
Process of tax audit
The Federal Board of Revenue (FBR) authorized to prescribe criteria for selection of audit of taxpayers who have filed their income tax returns for a tax year. Cases selection through computer ballot separately for income tax, sales tax, and federal excise duty. Currently, composite tax audit also introduced. The income tax returns then scrutinized by FBR, and related documents and information noticed to provide. After examination of returns and related information show-cause notices circulated. In case of disagreement with tax authorities, the taxpayer has the right to submit appeals before appellate forums.
A specific procedure has been provided for ‘automated initial scrutiny’ by FBR system within six months of filing of income tax return for any arithmetical & clerical errors. In case no such adjustment made within six months by the system, then there will be acceptance of the taxpayer’s declared version.
An ‘agreed assessment’ concept introduced also. A taxpayer if wants to settle a case may submit application of settlement before the committee. In case of agreement, taxpayer can deposit the tax due after passing an amendment order. Taxpayer in this case shall lose his right to appeal. This is not available in case of involvement of concealment of income or where the interpretation of question of law is involved having effect on other cases.
The tax authority has right of access to taxpayers’ premises, place, accounts, documents or computer, if required, in case of any proceedings. Tax officers allowed to conduct audit proceedings through video links or any other electronic medium.
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Law of limitations
An audit of the income tax return filed by a company, FBR can initiate audit within five years of the end of the financial year in which the income tax return is filed.
Non resident company can apply for advance rulings
A non-resident company which has no operations in Pakistan through a permanent establishment (PE). It can apply to FBR to issue an advance ruling. It will give the FBR’s stance regarding application of the income tax provisions. The tax ruling issued, bounds to FBR.
Intention of Federal board of revenue (FBR)
The Tax authorities have mainly intention on the following topics:
Withholding taxes.
Issue of Transfer pricing.
Expenditure & business Relationship.
Advance tax payments.
Payment of due taxes within the time.
Audit of income tax returns filed.
Tax compliance by taxpayers.
Recovery of tax arrears.
Source | Income Tax Return | Company Income Tax Return | How to Become Active tax filer in FBR | Extension in Date of Income Tax Return Filing | Tax Audits | Tax Assessment |
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