Saturday, 28 January 2023
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TAXATION

Significant progresses in corporate taxes

Currently, the Government of Pakistan has introduced amendments in the following areas, taking into account the extraordinary economic conditions caused by the Covid 19 epidemic.

Developments in Tax Laws |

Fixed tax regime introduced for builders and developers. Also, reduction made in tax rates applicable on immovable property capital gains. 

For Capital gains on disposal of immovable property distinction with reference to ‘open plots’ and ‘constructed properties’ removed.

Presumptive tax regime for resident shipping businesses (on tonnage basis), extended up to June 30, 2030. 

Reduced rate facility of 3% for withholding of tax on certain specified services currently available to resident companies also now available to Permanent Establishment of a non-resident person. Minimum tax also made applicable to PEs of non-resident persons.

Restriction introduced viz. deduction of foreign profit on debts of certain foreign controlled resident companies in Pakistan during a tax year.

Payments to non-resident persons in respect of dividend, royalty, fee for technical services, insurance, re-insurance & profit & debt now excluded from requirement of 100% enhanced withholding (with conditions), even if they are non filers.

Restrictions introduced on claim of various deductions/tax credits (e.g lease rentals, sales to unregistered persons, depreciation, tax credit on enlistments).

Reduced rate of withholding tax facility @ 3% previously available for specific services now also available to other categories [warehousing services, services rendered by asset management companies, data services provided under license issued by the Pakistan Telecommunication Authority, Telecommunication infrastructure (tower) services]. 

Rates of advance tax on import of goods rebuilt, with rates of 1% & 2% made applicable for raw materials & capital goods imported for own use, and rate of 5.5% introduced for finished goods. 

Developments in Tax Laws |

Automation of certain operations |

centralized income tax refund office.

automated scrutiny of tax returns.

automated computation of ‘turnover’.

electronic access to records by Commissioner.

Audit proceedings electronically.

real time integration of taxpayers’ records.

Automation of certain operations |
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A d v e r t i s e m e n t

Concept of taxpayers profile introduced |

Concept of ‘taxpayers profile’ introduced. Non compliance may leads to penalties and inactive status of taxpayer. 

Concept of taxpayers profile introduced |

Concept of Agreed assessments |

‘Agreed assessments’ introduced. FBR also empowered to calculate taxable income on the basis of ‘ratios’. Where a taxpayer, in response to a notice, intends to settle his case, he may file offer of settlement in the prescribed form before the assessment before committee, in addition to filing reply to the Commissioner.

Concept of Agreed assessments |
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Other developments by FBR |

From January 1, 2021 electronic filing of appeal with Commissioner Inland Revenue (Appeals) has been launched.

Requirements regarding furnishing of information by banking companies to FBR, further amended. Banking companies are now required to provide bank account holders statement, credit card payments statement, cash withdrawal statement, etc.

Taxpayers can now apply to obtain status of “Green Field Industrial Undertaking”, to take exemptions on account of tax ability of profits earned, with certain conditions.

Amendments made for taking exemption/ reduce rate certificate regarding tax deduction from payments made to non-residents. The requirement to attach certain documents (i.e. affidavit, certificate of residence, copy of contract, copy of invoice, any other document/information) is now compulsory to apply for exemption.

Specific business sectors are now required to install electronic real time invoicing systems. And software for online real time integration of their businesses units with tax authorities.

Other developments by FBR |

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