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RIAZ AHMAD & COMPANY Chartered Accountants

INDEX

DESCRIPTION

PAGE NO.

INTRODUCTION

EXECUTIVE SUMMARY

2–6

INCOME TAX

7 – 64

SALES TAX

65 – 75

FEDERAL EXCISE DUTY

76 – 79

PUNJAB SALES TAX ON SERVICES ACT, 2012

80 – 81

PUNJAB AGRICULTURAL INCOME TAX ACT, 1997

ISLAMABAD CAPITAL TERRITORY (TAX ON SERVICES) ORDINANCE, 2001

SINDH SALES TAX ON SERVICES ACT, 2011

KHYBER PAKHTUNKHWA FINANCE ACT, 2013 - SALES TAX ON SERVICES

CONTACT PARTNERS

FINANCE ACT 2019

RIAZ AHMAD & COMPANY Chartered Accountants

INTRODUCTION This Memorandum has been prepared to facilitate our clients in better understanding of the changes made through Federal and Provincial Finance Acts, 2019 in Income Tax, Sales Tax, Federal Excise Duty and Punjab Agricultural Income Tax. The changes have been explained in a concise manner and insignificant changes of consequential, administrative, procedural or editorial nature have been ignored for the sake of brevity. Included under the heading of Income Tax Ordinance, 2001 is a dedicated portion, titled “General”, which covers complete rates of income tax, schedule of filing of various periodical statements, rates for deduction of income tax at source, filing date of income tax return, computation of advance tax, etc., for convenience and ready reference of our clients. The Federal and Provincial Finance Acts, 2019, unless otherwise stated, shall come into force on 01 July 2019. This Memorandum may be accessed on our web-site: www.racopk.com It is recommended that the text of the Finance Acts, 2019 as published in the Official Gazette and the relevant laws and notifications, wherever applicable should be referred to in considering the interpretation of any provision. This Memorandum contains only general comments. Final decision on any issue should not be taken without detailed consideration and professional advice. This Memorandum should not be published in any manner without the consent of the firm. For professional advice, you may contact our following tax experts:  Sarfraz Mahmood  Muhammad Arshad

 Inaam Ellahi Sheikh  Muhammad Waqas

Lahore Office

 Liaqat Ali Panwar  Pirzada M. Khurram

Karachi Office

Faisalabad Office

LAHORE: 29 July 2019

FINANCE ACT 2019 -1-

 Raheel Arshad  Bilal Ahmad Islamabad Office

RIAZ AHMAD & COMPANY Chartered Accountants

EXECUTIVE SUMMARY Income tax 

Brought forward depreciation, amortization and business losses shall not be set off against income for computing the super tax in cases of insurance businesses, production and exploration of petroleum, extraction of mineral deposits, banking companies and capital gains on listed securities.



Profit on debt earned by every person other than a company, if exceeds Rupees 36 million shall now be charged to tax under normal tax regime instead of fixed tax regime.



Individual or association of persons will also be eligible to claim specified deductions, as allowed in case of a company, if income from property exceeds Rupees 4 million by opting to pay income tax under normal tax regime.



No deduction shall be allowed in respect of commission on supply of products listed in Third Schedule to the Sales Tax Act, if it exceeds 0.2% of gross amount of supplies unless name of the recipient is appearing in the active taxpayers’ list.



Normal useful life of an intangible asset in cases where useful life is not ascertainable has been enhanced from 10 years to 25 years and self generated goodwill or any adjustment arising on accounting treatment, as may be prescribed have been excluded from the definition of intangible.



For computation of gain on disposal of immoveable property, slab rates based on amount of gain and holding periods of the property have been enhanced.



Non-cash gifts other than from grandparents, parents, spouse, brother, sister, son or a daughter shall now be chargeable to tax under the head of ‘Income from Other Sources’.



A person employing fresh graduates shall be entitled to a tax credit in respect of the amount of annual salary paid to such graduates for the tax year.



Rate of tax credit of investment in purchase of plant and machinery for BMR has been reduced to 5% from 10% for tax year 2019. Further, no such tax credit shall be available in respect of such investment made after 30 June 2019.



No person shall purchase immoveable property of value greater than five million rupees or any other asset valuing more than one million rupees otherwise than by crossed cheque or any other crossed banking instrument.



Individual present in Pakistan for a period or periods in aggregate to one hundred and twenty days or more in a tax year and in the four preceding years for aggregate periods of three hundred and sixty five days or more, shall also be a resident individual for a tax year.



Collection or deduction of advance tax, computation of income and tax thereon in the case of a person not appearing on active taxpayers’ list shall now be determined in accordance with the specified rules. The rules further specify hundred percent increase in withholding tax rates, provisional assessment on the basis of concealed income, etc.



In case of supplies made to a dealer who is unregistered under the Sales Tax Act and whose name is not appearing in active taxpayers’ list, seventy-five percent of the dealer's margin shall be added to the income of the person making such supplies and dealers’ margin for this purpose shall be ten percent of the sale price of the manufacturer.

FINANCE ACT 2019

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RIAZ AHMAD & COMPANY Chartered Accountants

EXECUTIVE SUMMARY 

Maximum limit of foreign exchange remitted from outside Pakistan through normal banking channels for exemption from probe has been reduced from ten million rupees to five million rupees in a tax year.



A member of the association of persons, shall be jointly and severally liable for payment of the tax due by the association of persons.



If the Commissioner believes that the person likely to leave Pakistan may be involved in offshore tax evasion or is about to dispose of any such asset, he may freeze any domestic asset of the person for a period of one hundred and twenty days or till the finalization of proceedings.



The tax collected from every importer on import of goods including import of ships by ship breakers shall now be minimum tax instead of final tax. However, tax collected in respect of items specified in section 148(7) shall continue to be adjustable tax.



Tax deductible on profit on debt shall be minimum tax on the profit on debt arising to a taxpayer other than a company or where profit on debt is taxable at fixed slab rates.



Tax deductible on the income of a non-resident person arising from specified contracts shall be minimum tax instead of final tax.



Tax deductible on sale of goods, execution of contracts and on services of stitching, dyeing, printing, embroidery, washing, sizing and weaving shall now be treated as minimum tax. Similarly, tax deducted on payments to sportsperson and to electronic and print media for advertising services shall also be a minimum tax instead of final tax.



Every person paying an amount of royalty to a resident person shall deduct tax from the gross amount payable (including Federal Excise Duty and Provincial Sales Tax, if any) at the rate of 15%.



Payment of refunds may be through income tax refund bonds in lieu of payment through cheque or bank debit advice.



Every person engaged in any business, profession or vocation shall be required to obtain and display a business license as prescribed by the FBR.



Penalties for not filing of return of income within due date, non-filing of wealth statement and others have been revised and enhanced substantially.



A person not filing the return of income within due date shall be included in the active taxpayers’ list on payment of surcharge at (i) twenty thousand rupees in case of a company; (ii) ten thousand rupees in case of an association of persons and (iii) one thousand rupees in case of an individual. Moreover, such person shall not be issued refund, or additional payment for delayed refund.



Any person who fails to furnish particulars or complete or accurate particulars of persons in the withholding tax statement, shall commit an offence punishable with fine or imprisonment not exceeding one year or both.



Any person who fails to declare offshore asset or furnishes inaccurate particulars of an offshore asset and revenue impact of such concealment or furnishing of inaccurate particulars is ten million rupees or more shall commit an offence punishable with imprisonment upto three years or with a fine upto five hundred thousand rupees or both.



Any person who, fails to comply with a notice in respect of filing of foreign income and assets statement shall commit an offence punishable with imprisonment up to one year or with a fine up to fifty thousand rupees or both.

FINANCE ACT 2019

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RIAZ AHMAD & COMPANY Chartered Accountants

EXECUTIVE SUMMARY 

Any enabler who enables, guides or advises any person to design, arrange or manage a transaction or declaration in such a manner which results in offshore tax evasion, shall commit an offence punishable on conviction with imprisonment for a term not exceeding seven years or with a fine up to five million rupees or both.



The FBR has been authorized to publish the names of offshore evaders, in the print and electronic media who have evaded offshore tax equal to or exceeding two and half million rupees and to publish the names of offshore tax enablers, in the print and electronic media who have enabled offshore tax evasion.



FBR shall prescribe rules for initiating criminal proceedings against any income tax authority and officer who willfully and deliberately commits or omits an act which results in undue benefit or advantage to the authority or the officer.



Restriction imposed on purchase of motor vehicle and immovable property by a person not having its name in the active taxpayers’ list (non-filer) has been withdrawn.



Alternate impersonal taxation regime may be designed to minimize personal interaction for low risk and compliant taxpayers.



Tax deducted or required to be collected in respect of brokerage and commission shall now be minimum tax instead of final tax.



Tax collected on the amount of gas bill and on electricity bill of a Compressed Natural Gas Station shall be minimum tax.



Now, advance tax on sale or transfer of immovable property shall not be collected if holding period of the property exceeds five years instead of three years.



Non-adjustable advance tax at the rate of three percent of difference of value of immovable property determined by FBR and the value recorded by the authority registering the transfer of the property has been withdrawn.



Exemption has also been provided to any amount paid to the Armed Forces personnel as internal security allowance and compensation in lieu of bearer allowance.



Any amount paid as donation to the “Layton Rahmatullah Benevolent Trust (LRBT)” and “Akhuwat” has been exempted from tax. Any income derived by “Akhuwat”, “Audit Oversight Board” and “Patient’s Aid Foundation” shall also be exempt from tax.



Exemption from tax on gains on sale of immovable property to a rental REIT scheme has been extended up to 30th day of June 2021.



Exemption has been provided to dividend income derived by a company, if the recipient of the dividend, for the tax year is eligible for group relief.



Rate of withholding tax under section 153(1)(a) in case of dealers and sub-dealers of sugar, cement and edible oil shall be 0.25% of the gross amount of payments.



Rate of minimum tax under section 113 in case of dealers and sub-dealers of sugar, cement and edible oil shall be 0.25% subject to the condition that names of such dealers or sub-dealers appear in the active taxpayers’ lists.

FINANCE ACT 2019

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RIAZ AHMAD & COMPANY Chartered Accountants

EXECUTIVE SUMMARY 

Rate of reduction in tax liability for a full time teacher or a researcher has been reduced from 40% to 25%. Such reduction shall not be available to a full time teacher or a researcher of government training institutions and teachers of medical profession who derive income from private medical practice or who receive share of consideration received from patients.



Provisions of withholding tax under section 153(1)(a) of the Income Tax Ordinance will not be applicable in case of goods transport contractors, if such contractors pay tax at the rate of 3% on payments for rendering or providing carriage services.



Exemption from withholding tax on import has been provided on mobile phones brought in personal baggage under the Baggage Rules, 2006.



Initial allowance at the rate of 15% for buildings has been withdrawn.



From tax year 2020 and onwards, taxable income arising from mark-up income earned from additional investment in Federal Government securities by a bank shall be taxed at the rate of 37.5%.

Sales tax 

“Cottage industry” means a manufacturing concern which does not have industrial gas or electricity connection, is located in a residential area, has labour force of not more than ten workers and its annual turnover from all supplies does not exceed three million rupees.



The retailer whose shop measures one thousand square feet or more in area, has also been included in definition of “Tier-1 retailers”.



Value of supply for toll manufacturing would be the actual consideration received by such manufacturer for value addition carried out in relation to such goods.



In case of supply of electricity by an independent power producer, the amount received on account of energy purchase price only shall be the value of supply.



In case of supply of electric power and gas by a distribution company, the value of supply shall be the total amount billed including price of electricity and natural gas, charges, rents, commissions and all duties and taxes, local, provincial and federal but excluding the amount of late payment surcharge and the amount of sales tax.



Tax through electricity bills shall not be charged from Tier-1 retailers and for this purpose the Commissioner of Inland Revenue shall decide who is either a Tier-1 retailer or not a retailer. Such tax collected shall be deposited directly without adjusting input tax.



Claim of input tax credit attributable to supplies made to unregistered person has been restricted on pro-rata basis, for which sales invoices do not bear the CNIC number or NTN of the buyer.



In case, a Tier-1 retailer does not integrate his retail outlet with FBR’s computerized system for realtime reporting of sales, the adjustable input tax for that tax period shall be reduced by 15%.



Refund of input tax against exports shall be paid at fixed rates and in the manner notified by the FBR. Earlier, such input tax was paid along with duty drawbacks at specified rates.

FINANCE ACT 2019

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RIAZ AHMAD & COMPANY Chartered Accountants

EXECUTIVE SUMMARY



A registered person making a taxable supply shall issue tax invoice containing CNIC or NTN of the unregistered person, excluding supplies made by a retailer where the transaction value inclusive of sales tax amount does not exceed fifty thousand rupees and sale is made to an ordinary consumer. The condition of CNIC or NTN shall be effective from 1st August 2019. However, if it is proved subsequently that CNIC provided by the purchaser was not correct, the liability of tax or penalty shall not arise against the seller if sale was made in good faith.



Relaxation of tax audit of a registered person to be conducted only once in every three years has been withdrawn.



Sales tax return may be revised without permission of the Commissioner if filed within sixty days of filing of original return and either the tax payable therein is more than the amount paid or the refund claimed is less than the amount as claimed under the return sought to be revised.



A shareholder, owning not less than ten per cent of the paid-up capital in the company or business enterprise shall be liable for the payment of tax if any private company or business enterprise is wound up.



Exemption of tax on supply of ginned cotton has been withdrawn and exemption of tax has been provided on supply of cotton seed oil.



S.R.O. 1125(I)/2011 dated 31 December 2011 regarding zero rating for persons doing business in textiles, carpets, leather, sports and surgical goods has been rescinded.

Federal excise duty 



Penalty shall be imposed either in shape of fine up to twenty thousand rupees or imprisonment upto five years or both on a person who sells cigarettes in retail at a price lower than the price printed thereon.



Rate of duty on services in respect of travel by air within the territorial jurisdiction of Pakistan over long routes has been reduced to fifteen hundred rupees from two thousand rupees and over short routes to nine hundred rupees from twelve hundred and fifty rupees.



Duty on steel billets, ingots, ship plates, bars and other long re-rolled products shall be collected under sales tax mode.



The minimum production for steel products shall be determined as per criterion specified in the Forth Schedule.

FINANCE ACT 2019

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RIAZ AHMAD & COMPANY Chartered Accountants

INCOME TAX ORDINANCE, 2001

Active Taxpayers’ List - definition

Section 2(1A)

‘Active Taxpayers’ List’ means list instituted by FBR and includes list issued by the Azad Jammu and Kashmir Central Board of Revenue or Gilgit-Baltistan Council Board of Revenue. Asset move - definition

Section 2(5C)

‘Asset move’ means transfer of an offshore asset to an unspecified jurisdiction by or on behalf of the person who owns, possesses, controls or is the beneficial owner of such offshore asset for the purpose of tax evasion. FBR Refund Settlement Company Limited - definition

Section 2(22C)

‘FBR Refund Settlement Company Limited’ means the company incorporated for the purposes of settlement of income tax refund including payment by issuing refund bonds. ‘filer’ and ‘non-filer’

Sections 2(23A) & 2(35C)

Definitions of ‘filer’ and ‘non-filer’ have been omitted. Offshore asset - definition

Section 2(38AA)

‘Offshore asset’ in relation to a person, includes any moveable or immoveable asset held, any gain, profit or income derived or any expenditure incurred outside Pakistan. Offshore evader - definition

Section 2(38AB)

‘Offshore evader’ means a person who owns, possesses, controls or is beneficial owner of an offshore asset and does not declare or under declares or provides inaccurate particulars of such asset. Offshore enabler - definition

Section 2(38AC)

‘Offshore enabler’ includes any person who enables, assists or advises to plan, design, arrange or manage a transaction or declaration relating to an offshore asset, which has resulted or may result in tax evasion. Specified jurisdiction - definition

Section 2(60A)

‘Specified jurisdiction’ means any jurisdiction which has committed to automatically exchange information under the Common Reporting Standard with Pakistan. Unspecified jurisdiction - definition

Section 2(73A)

‘Unspecified jurisdiction’ means a jurisdiction which is not specified. Super tax for rehabilitation of temporarily displaced persons

Section 4B(2)(iv)

For the purpose of calculating super tax in cases of insurance businesses, exploration and production of petroleum, exploration and extraction of mineral deposits (other than petroleum), banking company and capital gains on listed securities, brought forward depreciation, amortization and business losses shall not be set off against income. Tax on profit on debt

Section 7B(3)

If the amount of profit on debt earned by a person other than a company exceeds Rupees 36 million then the whole amount shall be charged to tax under normal tax regime instead of final tax regime.

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RIAZ AHMAD & COMPANY Chartered Accountants

INCOME TAX ORDINANCE, 2001

Deductions in computing income chargeable under the head ‘Income from Property’

Section 15A(7)

Now, an individual or an association of persons will also be eligible to claim specified deductions, as allowed in case of a company, if income from property exceeds Rupees 4 million and it is opted to pay tax under normal tax regime instead of fixed tax regime. Deductions in computing income chargeable under the head ‘Income from Business’

Section 21(ca)

No deduction shall be allowed in respect of commission paid or payable on supply of products listed in 3 rd Schedule to the Sales Tax Act, if the amount of commission exceeds 0.2% of gross amount of supplies unless name of the recipient of such commission is appearing in the active taxpayers’ list. Intangibles

Section 24(4) & (11)

Normal useful life of an intangible has been enhanced from 10 years to 25 years in cases where such useful life is not ascertainable for the purpose to allow amortization deduction. Further, self generated goodwill or any adjustment arising on accounting treatment, as may be prescribed have been excluded from the definition of intangible. Capital gains

Section 37(3A) & (3B)

Gain arising on disposal of immoveable property shall continue to be charged to tax as separate block of income. Specified slab rates are based on amount of gain. Tax shall be charged @ 5% on gain upto Rupees 5 million, @ 10% on gain upto Rupees 10 million, @ 15% on gain upto Rupees 15 million and @ 20% if gain exceeds Rupees 15 million. Further, for computation of tax gain on disposal of immoveable property being open plot shall be reduced by 25% if holding period of open plot exceeds one year but does not exceed eight years and if the holding period exceeds eight years such gain shall be treated as zero for the purpose of computation of tax. Similarly, gain on immoveable property being a constructed property shall be reduced by 25% if the holding period of the property exceeds one year but does not exceeds four years. No such reduction shall be allowed if holding period of open plot or constructed property does not exceed one year. Income from other sources

Section 39(1)(la)

Any amount or fair market value of any property received without consideration or received as gift other than from grandparents, parents, spouse, brother, sister, son or a daughter shall now be chargeable to tax under the head of ‘Income from Other Sources’. This clause has been added to deal with the gifts in shape of property other than cash. Set off of losses of companies operating hotels

Section 56A

Now, public company as defined in the Companies Act, 2017 and registered in Pakistan or Azad Jammu and Kashmir, as well as Gilgit-Baltistan, operating hotels therein shall be entitled to have the amount of loss set off against the Company’s income in Pakistan, Gilgit-Baltistan or Azad Jammu and Kashmir. Earlier, the benefit was available to all companies registered in Pakistan or Azad Jammu and Kashmir only. Tax credit for persons employing fresh graduates

Section 64C

A person employing any person who has graduated after 01 July 2017 from any institution or university recognized by Higher Education Commission shall be entitled to a tax credit in respect of the amount of

FINANCE ACT 2019

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RIAZ AHMAD & COMPANY Chartered Accountants

INCOME TAX ORDINANCE, 2001

annual salary paid to the fresh graduates for the tax year. New section inserted in this regard states as under: “64C. Tax credit for persons employing fresh graduates.— (1) A person employing freshly qualified graduates from a university or institution recognized by Higher Education Commission shall be entitled to a tax credit in respect of the amount of annual salary paid to the freshly qualified graduates for a tax year in which such graduates are employed. (2) The amount of tax credit allowed under sub-section (1) for a tax year shall be computed according to the following formula, namely:— (A/B) x C where— A is the amount of tax assessed to the person for the tax year before allowance of tax credit under this section; B

is the person's taxable income for the tax year; and

is the lessor of — a) the annual salary paid to the freshly qualified graduates referred to in sub-section (1) in the year; and b) five percent of the person's taxable income for the year;

(3) The tax credit shall be allowed for salary paid to the number of freshly qualified graduates not exceeding fifteen percent of the total employees of the company in the tax year. (4) In this section, “freshly qualified graduate” means a person who has graduated after the first day of July, 2017 from any institution or university recognized by the Higher Education Commission.” Tax credit for investment – (effective retrospectively)

Section 65B

Rate of tax credit in respect of investment in purchase of plant and machinery for the purpose of extension, expansion or balancing, modernization and replacement has been reduced to 5% from 10% of the amount so invested for the tax year 2019. Further, no such tax credit shall be available in respect of such investment made after 30 June 2019. However, carry forward of the credit to be deducted from tax payable shall continue after the tax year 2019 as specified in sub-section (5) of this section. Purchase of assets through banking channel

Sections 75A & 182

By virtue of inserting this overriding provision in the law, no person shall purchase immoveable property of fair market value greater than five million rupees or any other asset having fair market value of more than one million rupees otherwise than by crossed cheque, crossed demand draft or crossed pay order or any other crossed banking instrument showing transfer of amount from one bank account to another bank account. Fair market value will be the higher of the value notified by FBR or value fixed by provincial authority for stamp duty.

FINANCE ACT 2019

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RIAZ AHMAD & COMPANY Chartered Accountants

INCOME TAX ORDINANCE, 2001

In case the transaction is not undertaken in the above manner, such asset shall not be eligible for any allowance under section 22 (depreciation), section 23 (initial allowance), section 24 (amortization of intangibles) and under section 25 (amortization of pre-commencement expenditure). Further, such amount shall not be treated as cost for computation of gain on sale of such asset. In addition to above, the person violating the aforesaid provisions in case of immoveable property shall also pay penalty of five percent of the value of property. Resident individual

Section 82(ab)

Earlier clause (b) of this section, omitted by Finance Act, 2003 has now been added as clause (ab) whereby an individual present in Pakistan for a period or periods in aggregate to one hundred and twenty days or more in a tax year and in the four preceding years for aggregate periods of three hundred and sixty five days or more, shall also be a resident individual for a tax year. Special procedure for certain persons

Section 99C

Under this new section, the Federal Government may prescribe special procedure for scope and payment of tax, record keeping, return filing and assessment of small businesses, construction businesses, medical practitioners, hospitals, educational institutions and any other sector in specified cities or territories. Special provisions relating to persons not appearing in active taxpayersâ€™ list

Section 100BA

Collection or deduction of advance tax, computation of income and tax thereon in the case of person not appearing on active taxpayersâ€™ list shall now be determined in accordance with the rules specified in the Tenth Schedule. The rules specify hundred percent increase in withholding tax rates, provisional assessment on the basis of concealed income, etc., as given in the Tenth Schedule. Tax credit for certain persons

Section 100C

For allowance of hundred percent tax credit under this section, trusts or welfare institutions will have to obtain approval of the Commissioner under section 2(36) with effect from 01 July 2020. Moreover, none of the assets of trusts or welfare institutions confers, or may confer, private benefit to the donors or family, children or author of the trust or his descendents or the maker of the institution or to any other person. In case such private benefit is conferred, the amount of such benefit shall be added to the income of the donor. Report from independent chartered accountant or cost and management accountant

Section 108A

If the Commissioner is of the opinion that a transaction has not been declared at arm's length, he may with prior approval of FBR, obtain report from an independent chartered accountant or cost and management accountant to determine the fair market value of asset, product, expenditure or service at the time of transaction. Where the Commissioner is satisfied with the report of the independent chartered accountant or cost and management accountant, the fair market value of asset, product, expenditure or service determined in the report shall be treated as definite information for the purpose of amendment of assessment.

FINANCE ACT 2019

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RIAZ AHMAD & COMPANY Chartered Accountants

INCOME TAX ORDINANCE, 2001

If the Commissioner is not satisfied, he with prior approval of FBR, may seek such report from another independent chartered accountant or cost and management accountant. Transaction under dealership arrangements

Section 108B

Where a person supplies products listed in the Third Schedule to the Sales Tax Act, 1990 or any other products as prescribed by FBR, under a dealership arrangement with the dealers who are not registered under the Sales Tax Act, 1990 and are not appearing in the active taxpayersâ€™ list under the Income Tax Ordinance, an amount equal to seventy-five percent of the dealer's margin shall be added to the income of the person making such supplies. Dealersâ€™ margin for this purpose shall be ten percent of the sale price of the manufacturer. Unexplained income or assets

Section 111(4)(a) & (c)

Maximum limit of foreign exchange remitted from outside Pakistan through normal banking channels that is encashed in rupees by scheduled bank and a certificate from such bank is produced to avoid probe by the tax authorities has been reduced from ten million rupees to five million rupees in a tax year. Further, by omitting clause (c) of sub-section (4) of this section, exclusion from probe of source of investment in immoveable property has been withdrawn. Return of income

Section 114

Person owning immoveable property with a land area of two hundred and fifty square yards or more was required to furnish return of income. Now, this threshold has been enhanced to five hundred square yards. Mode of furnishing returns and other documents

Section 118(3)

Last date for filing of return of income by salaried person and final tax statement under section 115(4) shall now be 30th day of September instead of 31st day of August. Restriction of proceedings

Section 120B

Where any person declares undisclosed assets, undisclosed expenditure and undisclosed sales under the Assets Declaration Act, 2019 to pay tax, no proceedings shall be undertaken under the Income Tax Ordinance in respect of such declaration. Moreover, particulars of the persons making such declaration or any information received in any such declaration shall be confidential. Collection of tax in the case of private companies and associations of persons

Section 139(5) & (6)

In case any tax payable by an association of persons in respect of any tax year cannot be recovered from the association of persons, every person who was, at any time in that tax year, a member of the association of persons, shall be jointly and severally liable for payment of the tax due by the association of persons. Moreover, any member who pays such tax shall be entitled to recover the tax paid from the association of persons or a share of the tax from any other member.

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RIAZ AHMAD & COMPANY Chartered Accountants

INCOME TAX ORDINANCE, 2001

Assessment of persons about to leave Pakistan

Section 145(5)

According to this new sub-section having overriding effect, if the Commissioner believes, on the basis of information received from any offshore jurisdiction, that a person likely to leave Pakistan may be involved in offshore tax evasion or is about to dispose of any such asset, he may freeze any domestic asset of the person including any asset beneficially owned by the person for a period of one hundred and twenty days or till the finalization of proceedings including but not limited to recovery proceedings whichever is earlier. Imports

Section 148(7)

The tax required to be collected from every importer of goods on the value of goods imported including tax collected on import of ships by ship breakers shall now be minimum tax instead of final tax. However, tax collected in respect of items specified in section 148(7) shall continue to be adjustable tax. Profit on debt

Section 151(3)

Tax deductible on profit on debt shall be minimum tax on the profit on debt arising to a taxpayer other than a company and in case where profit on debt is taxable under section 7B, at fixed slab rates. Payment to non-residents

Section 152(1B) & (4B)

Tax deductible on the income of a non-resident person arising from specified contracts shall be minimum tax instead of final tax. New sub-section (4B) has been inserted in this section whereby the Commissioner may, in case of payment that constitutes part of an overall arrangement of a cohesive business operation, on application made by the person making payment and after making such inquiry, as the Commissioner thinks fit, allow by order in writing, the person to make payment after deduction of tax equal to thirty percent of the tax chargeable on such payment. It is provided that the credit of the tax so deducted shall be available to the permanent establishment of the non-resident accounting for overall profits arising on the overall cohesive business operation. Payments for goods, services and contracts

Section 153

Tax deductible on sale of goods, execution of contract and on services of stitching, dyeing, printing, embroidery, washing, sizing and weaving shall now be treated as minimum tax. Earlier, such deductible tax was final tax on the income of a resident person. Similarly, tax deducted on payments to sportsperson and to electronic and print media for advertising services shall also be a minimum tax instead of final tax. Moreover, tax deductible shall remain minimum tax on rendering or providing services referred to in clause (b) of sub-section (1) and provisos regarding carry forward of minimum tax on specified sectors have been omitted. Payment of royalty to resident persons

Section 153B

New withholding tax provision has been added whereby every person paying an amount of royalty, in full or in part including by way of advance, to a resident person shall deduct tax from the gross amount payable (including Federal Excise Duty and Provincial Sales Tax, if any) at the rate of 15%. Such tax deductible shall be adjustable.

FINANCE ACT 2019

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RIAZ AHMAD & COMPANY Chartered Accountants

INCOME TAX ORDINANCE, 2001

Failure to pay tax collected or deducted

Section 161(3)

The Commissioner has been authorized to amend or further amend the order of recovery if he considers that the order is erroneous in so far it is prejudicial to the interest of revenue. It is provided that such order shall not be amended, unless the person has been provided an opportunity of being heard. Tax collected or deducted as final tax

Section 169(4)

Sub-section (4) has been substituted as under: “(4) Where the tax collected or deducted is final tax under any provision of this Ordinance and hundred percent higher tax rate has been prescribed for the said tax under the Tenth Schedule, the final tax shall be the tax rate prescribed in the First Schedule and the excess tax collected under the Tenth Schedule specified for persons not appearing in the active taxpayers’ list shall be adjustable in case the return is filed before finalization of assessment as provided in rule 4 of the Tenth Schedule.” Payment of refund through income tax refund bonds

Section 171A

This section has been introduced for payment of refunds through optional income tax refund bonds instead of payment through cheque or bank debit advice. Salient features are briefed as under: 1. The income tax refunds payable may also be paid through income tax refund bonds to be issued by FBR Refund Settlement Company Limited, in book-entry form in lieu of payment to be made through issuance of cheques or bank debit advice. 2. The FBR shall issue a promissory note to FBR Refund Settlement Company Limited, incorporating the details of refund claimants and the amount of refund payable to each for issuance of income tax refund bonds. 3. The bonds shall be issued in values in multiples of one hundred thousand rupees. 4. The bonds so issued shall have a maturity period of three years and shall bear annual simple profit at ten percent. 5. The bonds shall be traded freely in the country’s secondary markets. 6. The bonds shall be approved security for calculating the statutory liquidity reserve. 7. The bonds shall be accepted by the banks as collateral. 8. There shall be no compulsory deduction of Zakat against the bonds. 9. After period of maturity, the company shall return the promissory note and the FBR shall make the payment of amount due under the bonds, along with profit due, to the bond holders. 10. The bonds shall be redeemable before maturity only at the option of the FBR along with simple profit payable at the time of redemption in the light of general or specific policy to be formulated by the FBR.

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RIAZ AHMAD & COMPANY Chartered Accountants

INCOME TAX ORDINANCE, 2001

Audit

Section 177(6) & (6A)

The audit process has been substituted. Now, the Commissioner shall, after obtaining taxpayerâ€™s explanation on all the issues raised in the audit, issue an audit report containing audit observations and findings, and after providing an opportunity of being heard to the taxpayer, the Commissioner may, if considered necessary, amend the assessment under sub-section (1) or sub-section (4) of section 122. Business license scheme

Section 181D

Every person engaged in any business, profession or vocation shall be required to obtain and display a business license as prescribed by the FBR. Offences and penalties

Section 182

Minimum penalty for not filing of return of income within due date has been enhanced to Rupees 40,000 from Rupees 20,000. It is further provided that if seventy five percent of the income is from salary and the amount of income under salary is less than five million rupees, the minimum amount of penalty shall be five thousand rupees. The person who fails to furnish wealth statement or wealth reconciliation statement shall pay penalty of 0.1% of taxable income per week or Rupees 100,000 (earlier Rupees 20,000) whichever is higher. If a person is required to be registered under income tax but fails to file application for registration shall now pay penalty of ten thousand rupees instead of five thousand rupees. Penalty of Rupees 30,000 (earlier Rupees 5,000) or three percent of the amount of tax involved whichever is higher shall be paid if any person repeats erroneous calculation in the return for more than one year and pays tax less than the actual tax. Any person who denies or obstructs the access of the Commissioner to premises, place, accounts, documents, computers or stocks shall pay penalty of Rupees 50,000 (earlier Rupees 25,000) or one hundred percent of tax involved whichever is higher. On concealment of income or furnishing inaccurate particulars regarding income, deduction etc., shall pay penalty of one hundred thousand rupees (earlier Rupees 25,000) or amount equal to tax evaded whichever is higher. Penalty of forty thousand rupees (earlier Rupees 25,000) or 10% of the amount of tax whichever is higher shall be paid if any person fails to collect or deduct and pay tax so collected or deducted. In addition to the above amendments, following new penalties have been inserted in the law. OFFENCES

PENALTIES

Any person who purchases immovable property having fair market value greater than Rupees five million through cash or bearer cheque.

Such person shall pay a penalty of five percent of the value of property determined by the FBR or by the provincial authority for the purposes of stamp duty, whichever is higher.

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RIAZ AHMAD & COMPANY Chartered Accountants

INCOME TAX ORDINANCE, 2001

OFFENCES

PENALTIES

Where an offshore tax evader is involved in offshore tax evasion in the course of any proceedings under this Ordinance before any Income Tax authority or the appellate tribunal.

Such person shall pay a penalty hundred thousand rupees or an equal to two hundred per cent of which the person sought to whichever is higher.

Where in the course of any transaction or declaration made by a person an enabler has enabled, guided, advised or managed any person to design, arrange or manage that transaction or declaration in such a manner which has resulted or may result in offshore tax evasion in the course of any proceedings.

Such person shall pay a penalty of three hundred thousand rupees or an amount equal to two hundred per cent of the tax which was sought to be evaded, whichever is higher.

Any person who is involved in asset move from a specified territory to an un-specified territory.

Such person shall pay a penalty of one hundred thousand rupees or an amount equal to one hundred per cent of the tax whichever is higher.

Where a Reporting Financial Institution fails to comply with any provisions of the relevant law.

Such Reporting Financial Institution shall pay a penalty of Rupees 10,000 for each default and an additional Rupees 10,000 each month until the default is redressed.

Where a Reporting Financial Institution files an incomplete or inaccurate report under provisions of the relevant law.

Such Reporting Financial Institution shall pay a penalty of Rupees 10,000 for each default and an additional Rupees 10,000 each month until the default is redressed.

Where a Reporting Financial Institution fails to obtain valid self-certification for new accounts or furnishes false self-certification made by the Reportable Jurisdiction Person

Such Reporting Financial Institution shall pay a penalty of Rupees 10,000 for each default and an additional Rupees 10,000 each month until the default is redressed.

Where a Reportable Jurisdiction Person fails to furnish valid self-certification or furnishes false self-certification

Such Reportable Jurisdiction Person shall pay a penalty of Rupees 5,000 for each default and an additional Rupees 5,000 each month until the default is redressed.

Return not filed within due date

of one amount the tax evade,

Section 182A

Previously, the person failing to file return of income within due date was not eligible to be included in active taxpayersâ€™ list for the year. Now, this provision is relaxed to some extent by providing that the person shall be included in the active taxpayersâ€™ list on filing of return after the due date, if the person pays surcharge at Rupees (i) twenty thousand in case of a company; (ii) ten thousand in case of an association of persons; and (iii) one thousand in case of an individual.

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RIAZ AHMAD & COMPANY Chartered Accountants

INCOME TAX ORDINANCE, 2001

Moreover, such person shall not be issued refund during the period the person is not included in the active taxpayersâ€™ list and not be entitled to additional payment for delayed refund. Further, the period the person is not included in the active taxpayersâ€™ list, shall not be counted for computation of additional payment for delayed refund. Prosecution for non-compliance with certain statutory obligations

Section 191(1)(ca)

Section 192B

This new section has been added whereby any person who fails to declare offshore asset or furnishes inaccurate particulars of an offshore asset and revenue impact of such concealment or furnishing of inaccurate particulars is ten million rupees or more shall commit an offence punishable on conviction with imprisonment upto three years or with a fine upto five hundred thousand rupees or both. Prosecution for non-compliance with notice under section 116A

Section 195A

Any person who, fails to comply with a notice in respect of filing of foreign income and assets statement shall commit an offence punishable on conviction with imprisonment up to one year or with a fine up to fifty thousand rupees or both. Prosecution for enabling offshore tax evasion

Section 195B

Section 216(6B) & (6C)

By adding new sub-sections in this section, the FBR has been authorized to publish the names of offshore evaders, in the print and electronic media who have evaded offshore tax equal to or exceeding two and half million rupees and to publish the names of offshore tax enablers, in the print and electronic media who have enabled offshore tax evasion. Proceedings against authority and persons

Section 216A

Under this new section, the FBR shall prescribe rules for initiating criminal proceedings against any income tax authority and officer of the Directorates General including any person subordinate to the aforesaid authorities or officers of the Directorates General who willfully and deliberately commits or omits an act which results in undue benefit or advantage to the authority or the officer or official or to any other person. When such proceedings are initiated against the authority or officer or official, the FBR shall simultaneously intimate the relevant Government agency to initiate criminal proceedings against such person.

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RIAZ AHMAD & COMPANY Chartered Accountants

INCOME TAX ORDINANCE, 2001

Further, the proceedings under this section shall be without prejudice to any other liability that the authority or officer or official or the person may incur under any other law for the time being in force. Fee and service charges

Section 222A

By virtue of this new section, the Federal Government may subject to such conditions, limitations or restrictions as it may deem fit to impose, levy fee and service charges for valuation or in respect of any other service or control mechanism provided by any formation under the control of the FBR, including ventures of public-private partnership at such rates as may be specified in the notification. Restriction on purchases of certain assets

Section 227C

By omitting this section, restrictions imposed on purchase of motor vehicle, immovable property by the person not having its name in the active taxpayersâ€™ list (non-filer) have been withdrawn. Automated impersonal tax regime

Section 227D

This section has been added to design an alternate impersonal taxation regime whereby personal interaction will be minimized. However, this section shall be applicable only for low risk and compliant taxpayers as may be prescribed. Directorate General of Special Initiative

Section 230G

The new Directorate General of Special Initiative shall consist of a Director General and as many Directors, Additional Directors, Deputy Directors, Assistant Directors and such other officers as the FBR may appoint. The FBR may specify the functions, jurisdiction and powers of the Directorate General of Special Initiative and its officers. Directorate General of Valuation

Section 230H

New Directorate General of Valuation has been introduced which shall consist of a Director General and as many Directors, Additional Directors, Deputy Directors, Assistant Directors and such other officers as the FBR may appoint. The FBR may specify the functions, jurisdiction and powers of the Directorate General of Valuation and its officers. Brokerage and commission

Section 233

Tax deducted or required to be collected in respect of brokerage and commission shall now be minimum tax instead of final tax. CNG stations

Section 234A

Tax collected on the amount of gas bill and on electricity bill of a Compressed Natural Gas Station shall be minimum tax. Earlier, the same was final tax. Advance tax on sale or transfer of immoveable property

Section 236C

Now, advance tax on sale or transfer of immovable property shall not be collected if holding period of the property exceeds five years. Earlier, the limit of holding period of such property was three years. Tax on purchase or transfer of immovable property

Section 236W

Non-adjustable advance tax to be collected at the rate of three percent on the amount of difference of value of immovable property determined by the applicable rate specified by FBR and the value recorded by the authority registering the transfer of the property, has been withdrawn by omitting this section.

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RIAZ AHMAD & COMPANY Chartered Accountants

INCOME TAX ORDINANCE, 2001 – THE FIRST SCHEDULE

THE FIRST SCHEDULE Part I – RATES OF TAX Division I – Rates of Tax for Individuals and Association of Persons Rates of tax for individuals (other than salaried) and association of persons: Sr. No. 1. 2. 3. 4. 5. 6. 7. 8.

Taxable income

Rate of tax

Where the taxable income does not exceed Rs. 400,000 Where taxable income exceeds Rs. 400,000 but does not exceed 600,000 Where taxable income exceeds Rs. 600,000 but does not exceed 1,200,000 Where taxable income exceeds Rs. 1,200,000 but does not exceed 2,400,000 Where taxable income exceeds Rs. 2,400,000 but does not exceed 3,000,000 Where taxable income exceeds Rs. 3,000,000 but does not exceed 4,000,000 Where taxable income exceeds Rs. 4,000,000 but does not exceed 6,000,000 Where taxable income exceeds Rs. 6,000,000

Rs. Rs. Rs. Rs. Rs. Rs.

0% 5% of the amount exceeding Rs. 400,000 Rs. 10,000 + 10% of the amount exceeding Rs. 600,000 Rs. 70,000 + 15% of the amount exceeding Rs. 1,200,000 Rs. 250,000 + 20% of the amount exceeding Rs. 2,400,000 Rs. 370,000 + 25% of the amount exceeding Rs. 3,000,000 Rs. 620,000 + 30% of the amount exceeding Rs. 4,000,000 Rs. 1,220,000 + 35% of the amount exceeding Rs. 6,000,000

Rates of tax for salaried individuals (where income under the head “salary” exceeds seventy-five percent of taxable income): Sr. No. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12.

Taxable income

Rate of tax

Where the taxable income does not exceed Rs. 600,000 Where taxable income exceeds Rs. 600,000 but does not exceed Rs. 1,200,000 Where taxable income exceeds Rs. 1,200,000 but does not exceed Rs. 1,800,000 Where taxable income exceeds Rs. 1,800,000 but does not exceed Rs. 2,500,000 Where taxable income exceeds Rs. 2,500,000 but does not exceed Rs. 3,500,000 Where taxable income exceeds Rs. 3,500,000 but does not exceed Rs. 5,000,000 Where taxable income exceeds Rs. 5,000,000 but does not exceed Rs. 8,000,000 Where taxable income exceeds Rs. 8,000,000 but does not exceed Rs. 12,000,000 Where taxable income exceeds Rs. 12,000,000 but does not exceed Rs. 30,000,000 Where taxable income exceeds Rs. 30,000,000 but does not exceed Rs. 50,000,000 Where taxable income exceeds Rs. 50,000,000 but does not exceed Rs. 75,000,000 Where taxable income exceeds Rs. 75,000,000

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0% 5% of the amount exceeding Rs. 600,000 Rs. 30,000 + 10% of the amount exceeding Rs. 1,200,000 Rs. 90,000 + 15% of the amount exceeding Rs. 1,800,000 Rs. 195,000 + 17.5% of the amount exceeding Rs. 2,500,000 Rs. 370,000 + 20% of the amount exceeding Rs. 3,500,000 Rs. 670,000 + 22.5% of the amount exceeding Rs. 5,000,000 Rs. 1,345,000 + 25% of the amount exceeding Rs. 8,000,000 Rs. 2,345,000 + 27.5% of the amount exceeding Rs. 12,000,000 Rs. 7,295,000 + 30% of the amount exceeding Rs. 30,000,000 Rs. 13,295,000 + 32.5% of the amount exceeding Rs. 50,000,000 Rs. 21,420,000 + 35% of the amount exceeding Rs. 75,000,000

RIAZ AHMAD & COMPANY Chartered Accountants

INCOME TAX ORDINANCE, 2001 – THE FIRST SCHEDULE

Division II – Rates of Tax for Companies The rate of tax for company (other than banking company and a small company) shall be 29% for tax year 2019 and onwards. Division III – Rate of Dividend Tax Now, rate of tax imposed under section 5, on dividend received from a company shall be as follows: (a) 7.5% in case of dividend paid by Independent Power Producers where such dividend is a pass through item under an Implementation Agreement or Power Purchase Agreement or Energy Purchase Agreement and is required to be re-imbursed by Central Power Purchasing Agency (CPPA-G) or its predecessor or successor entity. (b) 15% in mutual funds and cases other than those mentioned in clauses (a) and (c). (c) 25% in case of a person receiving dividend from a company where no tax is payable by such company, due to exemption of income or carry forward of business losses or claim of tax credits. Division IIIA – Rate for Profit on Debt Rates of tax for profit on debt imposed under section 7B shall be as under: Sr. No.

Profit on debt

Rate of tax

Where profit on debt does not exceed Rs. 5,000,000

Where profit on debt exceed Rs. 5,000,000 but does not exceed Rs. 25,000,000 Where profit on debt exceed Rs. 25,000,000 but does not exceed Rs. 36,000,000

15% 17.5% 20%

If profit exceeds Rupees 36 million, the whole amount will be taxed under normal tax regime. Division VIA – Income from Property Revised rates of charge of tax on income from property to be paid under section 15 and withholding tax to be deducted under section 155 with reference to Division V, Part III of First Schedule in case of individual and association of persons are as follows: Sr. No. 1. 2. 3.

Gross amount of rent Where the gross amount of rent does not exceed Rs. 200,000 Where the gross amount of rent exceeds Rs. 200,000 but does not exceed Rs. 600,000 Where the gross amount of rent exceeds Rs. 600,000 but does not exceed Rs. 1,000,000

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Rate of tax Nil 5% of the gross amount exceeding Rs. 200,000 Rs. 20,000 + 10% of the gross amount exceeding Rs. 600,000

RIAZ AHMAD & COMPANY Chartered Accountants

INCOME TAX ORDINANCE, 2001 â€“ THE FIRST SCHEDULE Sr. No. 4. 5. 6. 7. 8.

Gross amount of rent

Rate of tax

Where the gross amount of rent exceeds Rs. 1,000,000 but does not exceed Rs. 2,000,000 Where the gross amount of rent exceeds Rs. 2,000,000 but does not exceed Rs. 4,000,000 Where the gross amount of rent exceeds Rs. 4,000,000 but does not exceed Rs. 6,000,000 Where the gross amount of rent exceeds Rs. 6,000,000 but does not exceed Rs. 8,000,000 Where the gross amount of rent exceeds Rs. 8,000,000

Rs. 60,000 + 15% of the gross amount exceeding Rs. 1,000,000 Rs. 210,000 + 20% of the gross amount exceeding Rs. 2,000,000 Rs. 610,000 + 25% of the gross amount exceeding Rs. 4,000,000 Rs. 1,110,000 + 30% of the gross amount exceeding Rs. 6,000,000 Rs. 1,710,000 + 35% of the gross amount exceeding Rs. 8,000,000

Division VII â€“ Capital Gains on Disposal of Securities The rate of tax under section 37A are as under:

Sr. No.

1. 2. 3. 4. 5.

Tax Years 2018, 2019 and 2020 Securities Securities acquired acquired before 01-07after 2016 01-07-2016

Holding Period

Where holding period of a security is less than twelve months Where holding period of a security is twelve months or more but less than twenty-four months Where holding period of a security is twenty-four months or more but the security was acquired on or after 1st July, 2013 Where the security was acquired before 1st July, 2013 Future commodity contracts entered into by the members of Pakistan Mercantile Exchange

15% 12.5%

15% 15%

7.5%

15%

0% 5%

It has been clarified that the fifth proviso providing that no deduction of capital gains tax if the holding period of security is more than four years is applicable only in case of security issued under a mutual fund or collective investment scheme or a REIT scheme. Division VIII - Tax on Capital Gain on disposal of Immoveable Property Now, rate of tax to be paid under sub-section (1A) of the section 37 shall be as follows: Sr. No.

Amount of gain

Rate of tax

Where the gain does not exceed Rs. 5 million

Where the gain exceeds Rs. 5 million but does not exceed Rs. 10 million Where the gain exceeds Rs. 10 million but does not exceed Rs. 15 million Where the gain exceeds Rs. 15 million

10%

3. 4.

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15% 20%

RIAZ AHMAD & COMPANY Chartered Accountants

INCOME TAX ORDINANCE, 2001 – THE FIRST SCHEDULE Division IX - Minimum tax under section 113 Rate of minimum tax under section 113 has been enhanced as follows: Sr. No.

Person(s)

(a) (b) (c) (d) (e)

(a) (b) (c) (d)

Minimum Tax as percentage of the person’s turnover for the year

Oil marketing companies, Oil refineries, Sui Southern Gas Company Limited and Sui Northern Gas Pipelines Limited (for the cases where annual turnover exceeds rupees one billion); Pakistani Airlines; Poultry industry including poultry breeding, broiler production, egg production and poultry feed production; Dealers or distributors of fertilizers; and Person running an online marketplace as defined in clause (38B) of section 2.

0.75%

Distributors of pharmaceutical products, fast moving consumer goods and cigarettes; Petroleum agents and distributors who are registered under the Sales Tax Act, 1990; Rice mills and dealers; and Flour mills.

0.25%

Motorcycle dealers registered under the Sales Tax Act, 1990.

0.3%

In all other cases.

1.5% Part II – RATES OF ADVANCE TAX

Now, advance tax on imports under section 148 at the rate of 4% shall also be collected from persons importing finished pharmaceutical products that are not manufactured otherwise in Pakistan, as certified by the Drug Regulatory Authority of Pakistan. Part III – DEDUCTION OF TAX AT SOURCE Division I – Advance Tax on Dividend Now, rate of tax to be deducted from dividend under section 150 and 236S shall be as follows: (a) 7.5% in case of dividend paid by Independent Power Producers where such dividend is a pass through item under an Implementation Agreement or Power Purchase Agreement or Energy Purchase Agreement and is required to be re-imbursed by Central Power Purchasing Agency (CPPA-G) or its predecessor or successor entity. (b) 15% in all cases other than mentioned in (a) above.

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RIAZ AHMAD & COMPANY Chartered Accountants

INCOME TAX ORDINANCE, 2001 – THE FIRST AND SECOND SCHEDULES Division IA – Profit on Debt The rate of tax to be deducted under section 151 has been increased from 10% to 15%. However, the rate of tax will be 10% in cases where yield or profit paid is not more than Rupees 500,000. Division III – Payments for Goods or Services By substituting clause (2) of this Division, from now onwards, rate of tax to be deducted under section 153(1)(b) in respect of following services shall be 3% of the gross amount payable: Transport services, freight forwarding services, air cargo services, courier services, manpower outsourcing services, hotel services, security guard services, software development services, IT services and IT enabled services as defined in clause (133) of Part I of the Second Schedule, tracking services, advertising services (other than by print or electronic media), share registrar services, engineering services, car rental services, building maintenance services, services rendered by Pakistan Stock Exchange Limited and Pakistan Mercantile Exchange Limited, inspection, certification, testing and training services. Division IIIB – Royalty paid to resident persons From now onwards, tax at the rate of 15% of the gross amount payable shall be deducted under section 153B on account of royalty paid to resident person. Part IV – DEDUCTION OR COLLECTION OF ADVANCE TAX Division XVII – Advance tax on dealers, commission agents and arhatis, etc. Rate of tax to be collected under section 236J for each “Group or Class” has been increased as follows: Amount of tax (per annum)

Group or Class Group or Class A Group or Class B Group or Class C Any other category

Rs. 100,000 Rs. 75,000 Rs. 50,000 Rs. 50,000

Division XVIII – Advance tax on purchase of immovable property From now onwards, tax under section 236K from buyer shall be collected at the rate of 1% of the fair market value of immovable property. THE SECOND SCHEDULE Part I – EXEMPTIONS FROM TOTAL INCOME Allowances paid to the Armed Forces personnel

Clause (39A)

By amendment in clause (39A), exemption has also been provided to any amount paid to the Armed Forces personnel as internal security allowance and compensation in lieu of bearer allowance.

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RIAZ AHMAD & COMPANY Chartered Accountants

INCOME TAX ORDINANCE, 2001 â€“ THE SECOND SCHEDULE

Exemption for amounts paid as donation

Clause (61)

Any amount paid as donation to the following entities has been exempted from tax by adding following new sub-clauses to clause (61): (lv) Layton Rahmatullah Benevolent Trust (LRBT). (lvi) Akhuwat. Income exempt from tax

Clause (66)

By adding new sub-clauses to clause (66), any income derived by following entities shall also be exempt from tax: (lxvi) Akhuwat (lxvii) Audit Oversight Board (lxviii) Patientâ€™s Aid Foundation Exemption on profit and gains accruing to a person from sale of immovable property to a rental REIT scheme

Clause (99A)

Exemption from tax has been extended to gains on sale of immovable property to a rental REIT scheme up to 30th day of June 2021. Exemption on dividend income derived by a company eligible for group relief

Clause (103C)

By amendment in clause (103C), exemption has been provided to dividend income derived by a company, if the recipient of the dividend, for the tax year is eligible for group relief under section 59B, computed according to the formula given in this clause. Previously, such exemption was available where the company had availed group relief. Exemption on first sale of immovable property

Clause (114B)

Profit and gains accruing to a person being the dependent of a Shaheed belonging to Pakistan Armed Forces or a person who dies while in the service of the Pakistan Armed Forces or the service of Federal or Provincial Government shall be exempt in respect of first sale of immovable property acquired from or allotted by the Federal Government or Provincial Government or any authority duly certified by the official allotment authority, and the property acquired or allotted is in recognition of services rendered by the Shaheed or the person who dies in service. Earlier, this exemption was available as proviso in First Schedule. Exemption to income of specified persons

Clause (145A)

New clause (145A) has been added to provide exemption to any income which was not chargeable to tax prior to the commencement of the Constitution (Twenty-fifth Amendment), 2018 of any individual domiciled or company and association of persons resident in the Tribal Areas forming part of the Provinces of Khyber Pakhtunkhwa and Balochistan under paragraph (d) of Article 246 of the Constitution with effect from the 1st day of June 2018 to the 30th day of June, 2023 (both days inclusive).

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INCOME TAX ORDINANCE, 2001 – THE SECOND SCHEDULE Part II – REDUCTION IN TAX RATES Rate of tax under section 153(1)(a) and under section 113 for dealers and sub-dealers of sugar, cement and edible oil

Clauses (24C) & (24D)

By adding new clause (24C), rate of tax under section 153(1)(a) in case of dealers and sub-dealers of sugar, cement and edible oil shall be 0.25% of the gross amount of payments. Similarly, under clause (24D), rate of tax under section 113 in case of dealers and sub-dealers of sugar, cement and edible oil shall be 0.25% subject to the condition that names of such dealers or sub-dealers as the case may be, appear on the active taxpayers’ lists issued under the provisions of the Sales Tax Act, 1990 and Income Tax Ordinance, 2001. Part III – REDUCTION IN TAX LIABILITY Reduction in tax liability for a full time teacher or a researcher

Clause (2)

Rate of reduction in tax liability for a full time teacher or a researcher mentioned in this clause has been reduced from 40% to 25%. Further, the aforesaid reduction in tax liability shall not be available to a full time teacher or a researcher of government training institutions and teachers of medical profession who derive income from private medical practice or who receive share of consideration received from patients. Reduction in tax liability on income under the head capital gain on disposal of immovable property

Clause (9A)

By adding new clause (9A), tax payable on income chargeable under the head, capital gains on disposal of immovable property has been reduced by fifty percent on the first sale of immovable property acquired or allotted to ex-servicemen and serving personnel of Armed Forces or ex-employees or serving personnel of Federal and Provincial Governments, being original allottees of the immovable property, duly certified by the allotment authority. Part IV – EXEMPTION FROM SPECIFIC PROVISIONS Exemption from provisions of section 153(1)(a)

Clause (43E)

Provisions of section 153(1)(a) are not applicable in case of goods transport contractors subject to the condition that such contractors pay tax at the rate of 2.5% on payments for rendering or providing carriage services. Now, by amendment in this clause, the said rate of tax has been increased from 2.5% to 3%. Exemption from provisions of section 148

Clause (60E)

Exemption from provisions of section 148 regarding withholding tax on imports has been provided on mobile phones brought in personal baggage under the Baggage Rules, 2006.

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INCOME TAX ORDINANCE, 2001 â€“ THE SECOND, THIRD AND FOURTH SCHEDULES Exemption from provisions of section 165(1)(a) to manufacturer, distributor, dealer, wholesaler and banking companies withdrawn

Clauses (81) & (81A)

Previously, under clause (81), manufacturer, distributor, dealer, wholesaler or commercial importer was not required under section 165(1)(a) to furnish name, Computerized National Identity Card Number, National Tax Number, address etc., of retailers from whom advance tax has been collected under section 236H. Similarly, under clause (81A), banking companies were not required to furnish the same information of the persons from whom tax has been collected or deducted under section 151 and 231A. Now, by omission of clauses (81) and (81A), the aforesaid exemption has been withdrawn. Exemption from provisions of section 153(1)(b) withdrawn

Clause (94)

By omitting clause (94), conditional exemption available from provisions of section 153(1)(b), available from first day of July 2015 to thirtieth day of June 2019, for services sectors mentioned in this clause has now been withdrawn. Resultantly, from now onwards, tax shall be deducted on payments on account of such services under section 153(1)(b). Exemption from provisions of section 177 and 214C withdrawn

Clause (105)

Clause (105) was inserted through Finance Act, 2018 wherein exemption from provisions of sections 177 and 214C were provided to a person whose income tax affairs have been audited in any of the preceding three tax years. Now, by omitting this clause the aforementioned exemption has been withdrawn. Exemption from provisions of withholding tax for specified persons

Clause (109A)

Provisions of sections in Division III of Part V of Chapter X and Chapter XII for deduction or collection of withholding tax which were not applicable prior to commencement of the Constitution (Twenty-fifth Amendment) Act, 2018 shall not apply to individual domiciled or company and association of persons resident in the Tribal Areas forming part of the Provinces of Khyber Pakhtunkhwa and Balochistan under paragraph (d) of Article 246 of the Constitution with effect from the 1st day of June, 2018 to the 30th day of June, 2023 (both days inclusive). THE THIRD SCHEDULE PART II â€“ INITIAL ALLOWANCE AND FIRST YEAR ALLOWANCE Initial allowance on building under section 23

Clause (1)

By amendment in clause (1), initial allowance for buildings has been withdrawn. Previously, initial allowance at the rate of 15% was available on addition to building. THE FOURTH SCHEDULE RULES FOR THE COMPUTATION OF THE PROFITS AND GAINS OF INSURANCE BUSINESS Power of Commissioner to examine and amend the amount of income

Rule 6E

By inserting new rule (6E), the Commissioner has been empowered to examine and amend the amount of income as disclosed in the financial statement presented to the Securities and Exchange Commission of Pakistan with respect to commission paid and claimed for losses.

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RIAZ AHMAD & COMPANY Chartered Accountants

INCOME TAX ORDINANCE, 2001 – THE SEVENTH SCHEDULE THE SEVENTH SCHEDULE RULES FOR THE COMPUTATION OF THE PROFITS AND GAINS OF A BANKING COMPANY AND TAX PAYABLE THEREON Taxable income

Rule 1(c), (d) & (h)

Explanation to clause (c) of Rule 1 has been added to clarify that provision for advances and off balance sheet items allowed maximum at the rate of 1 percent of total advances or maximum at the rate of 5 percent of total advances for consumers and small and medium enterprises (SMEs), shall be exclusive of reversals of such provisions. It is further clarified that reversal of “bad debts” classified as “doubtful” are taxable and reversal of “bad debts” classified as “loss” are taxable with effect from tax year 2020 and onwards as the respective provisions have been allowed under this clause. The amount of “bad debts” classified as “sub-standard” or “doubtful” under the Prudential Regulations issued by State Bank of Pakistan, shall not be allowed as expense. It is clarified that Commissioner has power to conduct audit of the income tax affairs under section 177 as under: “Explanation.- For removal of doubt, it is clarified that nothing contained in this Schedule shall be so construed as to restrict power of Commissioner, while conducting audit of the income tax affairs under section 177, to call for record or such other information and documents as he may deem appropriate in order to examine accounts and records to conduct enquiry into expenditure, income, assets and liabilities of a banking company and all provisions of this Ordinance shall be applicable accordingly.” Rate of tax on additional income earned from additional investment in Federal Government securities

Rule 6C

New rule 6C has been inserted which states that from tax year 2020 and onwards, taxable income arising from mark-up income earned from additional investment in Federal Government securities by the bank shall be taxed at the rate of 37.5% instead of 35% for the tax year 2020. Rule 6C states as follows: “6C. Enhanced rate of tax on taxable income from Federal Government securities.-(1) The taxable income arising from additional income earned from additional investment in Federal Government securities for the tax years 2020 and onwards, shall be taxed at the rate of 37.5% instead of the rate provided in Division II of Part I of the First Schedule. (2) A banking company shall furnish a certificate from external auditor along with accounts while efiling return of Income certifying the amount of the money invested in Federal Government securities in preceding tax year, additional investments made for the tax year and mark-up income earned from the additional investments for the tax year. (3) Notwithstanding anything contained in this Ordinance, the Commissioner may require the banking company to furnish details of the investments in Federal Government securities to determine the applicability of the enhanced rate of tax. (4) “Additional income earned” means mark-up income earned from additional investment in Federal Government securities by the bank for the tax year.

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INCOME TAX ORDINANCE, 2001 – THE SEVENTH AND TENTH SCHEDULES (5) “Additional investments” means average investment made in Federal Government securities by the bank during the tax year, in addition to the average investments held during the tax year 2019. (6) The taxable income arising from additional investment under sub-rule (1) shall be determined according to the following formula, namely:Taxable income subject to enhanced rate of tax = A x B/C WhereA is taxable income of the banking company; B is mark-up income earned from the additional investment for the tax year; and C is the total of the mark-up income and non-markup income of the banking company as per accounts.” Computation of income for Super tax under section 4B

Rule 7C

Proviso has been added to rule 7C, which states that brought forward losses, if any, shall be excluded from income computed under this Schedule for the purpose of super tax. THE TENTH SCHEDULE (See section 100BA) RULES FOR PERSONS NOT APPEARING IN THE ACTIVE TAXPAYERS' LIST Rate of deduction of collection of tax

Rule 1

Where tax is required to be deducted or collected from persons not appearing in the active taxpayers' list, the rate of tax shall be increased by hundred percent of the rate specified in the First Schedule to this Ordinance. Persons not required to file return or statement

Rule 2

Where the withholding agent or the person from whom tax is required to be collected or deducted is satisfied that a person not appearing in the active taxpayers' list was not required to file a return of income he shall before collecting or deducting tax furnish to the Commissioner a notice in writing electronically setting out— (a) the name, CNIC or NTN and address of the person not appearing in the active taxpayers' list; (b) the nature and amount of the transaction on which tax is required to be collected or deducted; and (c) reason on the basis of which it is considered that the person was not required to file return of income. The Commissioner, on receipt of such notice shall within thirty days pass an order accepting the contention or directing to the withholding agent to deduct or collect the tax.

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INCOME TAX ORDINANCE, 2001 â€“ THE TENTH SCHEDULE

Provided that in case the Commissioner does not pass any order within thirty days of receipt of notice, the Commissioner shall be deemed to have accepted the contention and approval shall be treated to have been granted. Provisional assessment

Rule 3

Where for a tax year a person's tax has been collected or deducted and the person fails to file return of income for that tax year within the due date the Commissioner shall notwithstanding anything contained in sub-sections (3) and (4) of section 114 within sixty days of the due date of filing the return make a provisional assessment of the taxable income of the person and issue a provisional assessment order specifying the taxable income assessed and tax due thereon. In making the provisional assessment, the Commissioner shall impute taxable income on the amount of tax deducted or collected by treating the imputed income as concealed income. Provided that the provision of section 111 shall be applicable on unexplained income, asset or expenditure in excess of imputed income treated as concealed income under this rule. It is clarified that the imputable income so calculated or concealed income so determined shall not absolve the person so assessed, from requirement of filing of wealth statement, explanation of the nature and source of amounts subject to deduction or collection of tax, selection of audit or subsequent amendment of assessment and all the provisions of the Income Tax Ordinance shall apply. Finalization or abatement of provisional assessment

Rules 4 & 5

The provisional assessment shall be treated as the final assessment order after the expiry of forty-five days from the date of service of order of provisional assessment and the provisions of this Ordinance shall apply accordingly. However, the provisional assessment shall stand abated and shall be taken to be assessment finalized in case the returns of income and wealth statement for the relevant tax year and the preceding tax year along with prescribed forms, statements or documents are filed by the person within a period of forty-five days of receipt of provisional assessment order. It is also provided that in cases where returns have been filed before provisional assessment, such tax deducted or collected shall be adjustable against the tax payable in the return filed for the relevant tax year. Where the provisional assessment has been treated as final assessment, the Commissioner may within thirty days of the final assessment initiate proceedings for imposition of penalties on account of nonfurnishing of return and concealment of income. For the purposes of this Schedule, imputed income means

Rule 6

(a) income for individuals and association of persons which would have resulted in the amount of normal tax equal to the tax collected or deducted for not appearing in the active taxpayersâ€™ list; or (b) income for companies which would have resulted in the amount of normal tax equal to the tax collected or deducted at the higher rate for not appearing in the active taxpayers' list.

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RIAZ AHMAD & COMPANY Chartered Accountants

INCOME TAX ORDINANCE, 2001 â€“ THE TENTH SCHEDULE

Withholding statement

Rule 7

Where the withholding agent fails to furnish in the withholding statement complete or accurate particulars of persons not appearing on active taxpayers' list, the Commissioner shall initiate penalty proceedings against the withholding agent within thirty days of filing of withholding statement. Amendment of assessment

Rule 8

The Commissioner may amend an assessment order where the imputed income is less than the amount on which tax was deducted or collected or on the basis of definite information acquired from an audit or otherwise, the Commissioner is satisfied that (a) any income chargeable to tax has escaped assessment; or (b) total income has been under-assessed, or assessed at a too low rate, or has been the subject of excessive relief or refund; or (c) any amount under a head of income has been misclassified. Notwithstanding the aforesaid amendment provisions, where a provisional assessment has been treated as final assessment or where in response to the provisional assessment, return has been filed within forty five days or where assessment has been amended and the assessment order is considered erroneous in so far it is prejudicial to the interest of revenue, the Commissioner may, after making or causing to be made, such enquiries as he deems necessary, amend the assessment order. Provisions of Ordinance to apply

Rule 9

The provisions of Income Tax Ordinance not specifically dealt with in the aforesaid rules shall apply, mutatis mutandis, in the case of proceedings against the persons not appearing on active taxpayersâ€™ list. Non-applicability of this Schedule

Rule 10

The provisions of this Schedule shall not apply on tax collectible or deductible under the following sections: (a) section 149 - Salary (b) section 152 other than sub-section (1), (1AA), (2), (2A)(b) and (2A)(c) of section 152 - Payments to non-residents (c) section 154 - Exports (d) section 155 - Income from property (e) section 156B - Withdrawal of balance under Pension Fund (f) section 231A - Cash withdrawal from a bank (g) section 231AA - Advance tax on Transaction in Bank (h) section 233AA - Collection of tax by NCCPL (i) section 235 - Electricity consumption (j) section 235A - Domestic electricity consumption (k) section 235B - Tax on steel melters and composite units

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RIAZ AHMAD & COMPANY Chartered Accountants

INCOME TAX ORDINANCE, 2001 â€“ THE TENTH SCHEDULE

(l) section 236 - Telephone and internet users (m) section 236B - Advance tax on purchase of air ticket (n) section 236D - Advance tax on functions and gatherings (o) section 236F - Advance tax on cable operators and other electronic media (p) section 236I - Collection of advance tax by educational institutions (q) section 236J - Advance tax on dealers, commission agents and arhatis etc. (r) section 236L - Advance tax on purchase of international air ticket (s) section 236P - Advance tax on banking transactions otherwise than through cash (t) section 236Q - Payment to residents for use of machinery and equipment (u) section 236R - Collection of advance tax on education related expenses remitted abroad (v) section 236U - Advance tax on insurance premium (w) section 236V - Advance tax on extraction of minerals (x) section 236X - Advance tax on tobacco

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RIAZ AHMAD & COMPANY Chartered Accountants

INCOME TAX ORDINANCE, 2001 – GENERAL Important provisions regarding income tax rates, advance tax, withholding tax rates, filing dates of various periodical statements and return of income, etc. are given in this part for convenience of our clients. INCOME TAX RATES – TAX YEAR 2020 Rates of Tax for Companies Sr. No.

Description

Rate of Tax

1 2 3 4

Modaraba Company [Clause (18), Part II, 2nd Schedule] Company other than a banking company [Clause (i), Division II, Part I, 1st Schedule] Banking Company [(Clause (i), Division II, Part I, 1st Schedule)] Small Company [Clause (iii), Division II, Part I, 1st Schedule]

25% 29% 35% 23%

The rate of tax as specified in Division II of Part I of the First Schedule shall be reduced by 2% in case of a company whose shares are traded on stock exchange if: it fulfils prescribed shari’ah compliant criteria approved by State Bank of Pakistan, Securities and Exchange Commission of Pakistan and the FBR; derives income from manufacturing activities only; has declared taxable income for the last three consecutive tax years; and has issued dividend for the last five consecutive tax years.

(a) (b) (c) (d)

The rate of tax imposed on taxable income of a small company shall be reduced by 1% every year upto tax year 2023. Rate of Super Tax – (Division IIA, Part I, First Schedule) Sr. No.

Person

Rate of super tax (percentage of income) Tax year 2018

Tax year 2019

Banking company

Tax year 2020 4%

Person other than a banking company, having income equal to or exceeding Rs. 500 million

Tax year 2021 4% 0%

MINIMUM TAX UNDER SECTION 113 ON INCOME OF CERTAIN PERSONS - (Division IX, Part I, 1st Schedule) Sr. No. 1.

Minimum Tax as percentage of the person’s turnover for the year

Person(s) (a) (b) (c) (d) (e)

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0.75%

RIAZ AHMAD & COMPANY Chartered Accountants

INCOME TAX ORDINANCE, 2001 – GENERAL 2.

(a) (b) (c) (d)

0.25%

Motorcycle dealers registered under the Sales Tax Act, 1990.

0.3%

In all other cases.

1.5%

Rate of minimum tax u/s 113 in case of dealers and sub-dealers of sugar, cement and edible oil shall be 0.25% subject to the condition that names of such dealers or sub-dealers as the case may be, appear on the active taxpayers’ lists issued under the provisions of the Sales Tax Act, 1990 and Income Tax Ordinance, 2001. [Clause (24D), Part II, 2nd Schedule)] INCOME TAX RATES ON DIVIDEND – (Division III, Part I, First Schedule) The rate of tax imposed under section 5, on dividend received from a company shall be: (a) 7.5% in case of dividend paid by Independent Power Producers where such dividend is a pass through item under an Implementation Agreement or Power Purchase Agreement or Energy Purchase Agreement and is required to be re-imbursed by Central Power Purchasing Agency (CPPA-G) or its predecessor or successor entity. (b) 15% in mutual funds and cases other than those mentioned in clauses (a) and (c). (c) 25% in case of a person receiving dividend from a company where no tax is payable by such company, due to exemption of income or carry forward of business losses or claim of tax credits. Income from dividend received by a banking company shall be taxed @ 35%. [Rule 7B, 7th Schedule] TAX RATES FOR INDIVIDUALS AND ASSOCIATION OF PERSONS  Rates of tax for individuals (other than salaried individuals) and association of persons: Sr. No. 1. 2. 3. 4. 5. 6. 7. 8.

Taxable income

Rate of tax

Where the taxable income does not exceed Rs. 400,000 Where taxable income exceeds Rs. 400,000 but does not exceed Rs. 600,000 Where taxable income exceeds Rs. 600,000 but does not exceed Rs. 1,200,000 Where taxable income exceeds Rs. 1,200,000 but does not exceed Rs. 2,400,000 Where taxable income exceeds Rs. 2,400,000 but does not exceed Rs. 3,000,000 Where taxable income exceeds Rs. 3,000,000 but does not exceed Rs. 4,000,000 Where taxable income exceeds Rs. 4,000,000 but does not exceed Rs. 6,000,000 Where taxable income exceeds Rs. 6,000,000

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RIAZ AHMAD & COMPANY Chartered Accountants

INCOME TAX ORDINANCE, 2001 – GENERAL  Rates of tax for salaried individuals (where income under the head “salary” exceeds seventyfive percent of taxable income): Sr. No. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12.

Taxable income

Rate of tax

REDUCTION IN TAX LIABILITY OF TEACHERS OR RESEARCHERS – [Clause (2), Part III, Second Schedule] The provision to reduce the income tax liability of a full time teacher or a researcher employed in a nonprofit educational or research institution duly recognized by Higher Education Commission, a Board of Education or a University recognized by the Higher Education Commission including government research institution, continues to be available. The tax liability in such cases shall now be reduced by an amount equal to 25% (instead of 40%) of the tax payable on income from salary. However, this reduction in tax liability will not be available to teachers of medical profession who derive income from private medical practice or who receive share of consideration received from patients. ADJUSTMENT OF TAX CREDIT BY EMPLOYER Every responsible person, while deducting tax on the income chargeable under the head salary of employees, shall allow tax credit on charitable donations (section 61), investment in shares and insurance (section 62); and contribution to an approved pension fund (section 63) and make adjustments of tax withheld from employee under other heads during the tax year after obtaining evidences regarding: i) ii) iii)

tax withheld from the employee under this Ordinance during the tax year; any excess deduction or deficiency arising out of any previous deductions; or failure to make deduction during the year.

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RIAZ AHMAD & COMPANY Chartered Accountants

INCOME TAX ORDINANCE, 2001 – GENERAL The employers will, however, be responsible to obtain documentary evidences alongwith declaration from employees on prescribed form “IT-3”, for correct application of relevant provisions of law. The said declaration and evidences are required to be retained by the employer for at least 6 years after the end of the tax year to which they relate. [Section 174(3)] VALUATION OF PERQUISITES, ALLOWANCES AND BENEFITS In case of salaried taxpayers, special allowance and medical allowance are exempt from tax under Clause (39) and Clause (139) respectively of Part I of Second Schedule. However, value of other perquisites, allowances and benefits provided by the employer shall be included in income of the employee in accordance with the Rules 4 to 6 of Part I of Chapter II of Income Tax Rules, 2002 as reproduced below: “4.

Valuation of Accommodation - The value of accommodation provided by an employer to the employee shall be taken equal to the amount that would have been paid by the employer in case such accommodation was not provided. Provided that the value taken for this purpose shall, in any case, not be less than forty-five percent of the minimum of the time scale of the basic salary or the basic salary where there is no time scale. Provided further that where House Rent Allowance is admissible @ thirty per cent, the value taken for the purpose of this rule shall be an amount not less than thirty per cent of minimum of the time scale of basic salary or the basic salary where there is no time scale.

Valuation of conveyance - The value of conveyance provided by the employer to the employee shall be taken equal to an amount as below: (i)

Partly for personal and partly for official use

5% of: (a) the cost to the employer for acquiring the motor vehicle; or (b) the fair market value of the motor vehicle at the commencement of the lease, if the motor vehicle is taken on lease by the employer;

(ii)

For personal use only

10% of: (a) the cost to the employer for acquiring the motor vehicle; or, (b) the fair market value of the motor vehicle at the commencement of the lease, if the motor vehicle is taken on lease by the employer; and

For the purpose of this part, “employee” includes a director of a company.”

INCOME FROM PROPERTY UNDER SECTIONS 15 AND 155 The rate of tax to be paid under section 15 and tax to be deducted under section 155 shall be as follows:

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RIAZ AHMAD & COMPANY Chartered Accountants

INCOME TAX ORDINANCE, 2001 – GENERAL 

For individual and association of persons: Sr. No. 1. 2. 3. 4. 5. 6. 7. 8.

Gross amount of rent

Rate of tax

Where the gross amount of rent does not exceed Rs. 200,000 Where the gross amount of rent exceeds Rs. 200,000 but does not exceed Rs. 600,000 Where the gross amount of rent exceeds Rs. 600,000 but does not exceed Rs. 1,000,000 Where the gross amount of rent exceeds Rs. 1,000,000 but does not exceed Rs. 2,000,000 Where the gross amount of rent exceeds Rs. 2,000,000 but does not exceed Rs. 4,000,000 Where the gross amount of rent exceeds Rs. 4,000,000 but does not exceed Rs. 6,000,000 Where the gross amount of rent exceeds Rs. 6,000,000 but does not exceed Rs. 8,000,000 Where the gross amount of rent exceeds Rs. 8,000,000

Nil 5% of the gross amount exceeding Rs. 200,000 Rs. 20,000 + 10% of the gross amount exceeding Rs. 600,000 Rs. 60,000 + 15% of the gross amount exceeding Rs. 1,000,000 Rs. 210,000 + 20% of the gross amount exceeding Rs. 2,000,000 Rs. 610,000 + 25% of the gross amount exceeding Rs. 4,000,000 Rs. 1,110,000 + 30% of the gross amount exceeding Rs. 6,000,000 Rs. 1,710,000 + 35% of the gross amount exceeding Rs. 8,000,000

In case of an individual or association of persons whose income from property for a tax year exceeds Rs. 4 million, may opt to pay tax at normal rates specified in Division I of Part I of the First Schedule instead of tax rates provided under section 15. 

For Company:

Rate of tax to be deducted under section 155 shall be 15% of the gross amount of rent. Income tax under section 15 shall be charged as per rates under Division II, Part I, First Schedule applicable to a company under normal tax regime. RATE OF TAX ON CAPITAL GAIN ON SALE OF SECURITIES – (Section 37A) Tax Years 2018, 2019 and 2020 Securities Securities acquired before acquired after 01-07-2016 01-07-2016

Sr. No.

Holding Period

Where holding period of a security is less than twelve months

15%

Where holding period of a security is twelve months or more but less than twenty-four months

12.5%

15%

Where holding period of a security is twenty-four months or more but the security was acquired on or after 1st July, 2013

7.5%

15%

Where the security was acquired before 1st July, 2013

Future commodity contracts entered into by the members of Pakistan Mercantile Exchange

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RIAZ AHMAD & COMPANY Chartered Accountants

INCOME TAX ORDINANCE, 2001 – GENERAL - Provided that the rate of tax on cash settled derivatives traded on the stock exchange shall be 5% for the tax year 2018 to 2020. - Provided that in case of debt securities the rate of tax for companies shall be as specified in Division II of Part I of First Schedule. - Provided further that a mutual fund or a collective investment scheme or a REIT scheme shall deduct Capital Gains Tax on redemption of securities at the rates as specified below: Rate of tax

Sr. No.

Category

1. 2.

Individual and association of persons Company

Stock Funds

Other Funds

10% 10%

10% 25%

However, in case of stock fund rate of tax deduction will be 12.5% instead of 10%, if dividend receipts of the fund are less than capital gains. No capital gains tax shall be deducted in case where security is issued under a mutual fund or collective investment scheme or a REIT scheme, if the holding period of the security is more than four years. Moreover, income from capital gains in case of banking company shall be taxed at the rate of 35%. [Rule 7B, 7th Schedule] COMPUTATION OF CAPITAL GAIN ON DISPOSAL OF IMMOVABLE PROPERTY UNDER SECTION 37(1A) AND RATE OF TAX ON CAPITAL GAIN – (Division VIII, Part I, First Schedule) 

Computation of capital gain: Holding period

Taxable capital gain

- Open plots: Where holding period does not exceed one year Where holding period exceeds one year but does not exceed eight years Where holding period exceeds eight years - Constructed property: Where holding period is does not exceed one year Where holding period exceeds one year but does not exceed four years Where holding period exceeds four years 

100% 75% 0% 100% 75% 0%

Rate of tax on capital gain: Sr. No.

Amount of gain

Where the gain does not exceed Rs. 5 million

Where the gain exceeds Rs. 5 million but does not exceed Rs. 10 million

3. 4.

Where the gain exceeds Rs. 10 million but does not exceed Rs. 15 million Where the gain exceeds Rs. 15 million

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Rate of tax 5% 10% 15% 20%

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INCOME TAX ORDINANCE, 2001 – GENERAL Profit and gains on sale of immovable property to a Developmental REIT Scheme with the object of development and construction of residential buildings shall be exempt upto the 30th day of June 2020. [First proviso, Clause (99A), Part I, Second Schedule] Profit and gains on sale of immovable property to a Rental REIT Scheme shall be exempt upto the 30th day of June 2021. [Second proviso, Clause (99A), Part I, Second Schedule] Profits and gains accruing to persons mentioned in proviso to sub-section (1) of section 236C in respect of first sale of immovable property acquired from or allotted by the Federal Government or Provincial Government or any authority duly certified by the official allotment authority and the property acquired or allotted is in recognition of services rendered by the Shaheed or the person who dies in service shall be exempt from tax. [Clause (114B), Part I, Second Schedule] The amount of tax payable on income chargeable under the head, “Capital Gains” on disposal of immovable property shall be reduced by 50% on the first sale of immovable property acquired or allotted to ex-servicemen and serving personnel of Armed Forces or ex-employees or serving personnel of Federal and Provincial Governments, being original allottees of the immovable property, duly certified by the allotment authority. [Clause (9A), Part III, Second Schedule] ADVANCE TAX UNDER SECTION 147 Every taxpayer whose income was charged to tax for the latest tax year under this Ordinance excluding the following shall pay advance tax for the year under section 147 of Income Tax Ordinance, 2001 as reduced by the tax already paid/deducted at source in the year: i) ii)

Dividend received from a company (Section 5) Income of a non-resident from Pakistan-source royalty or fee for technical services, shipping and transport (Sections 6 & 7) Salary income subject to deduction of tax (Section 149) All income where the tax collected or deducted is considered as final tax (Section 168)

iii) iv)

Advance tax in case of an individual, will be calculated in accordance with the following formula: (A/4)-B Where — A

is the tax assessed to the taxpayer for the latest tax year under the Ordinance; and

is the tax paid in the quarter for which a tax credit is allowed under section 168, other than tax deducted on dividend income, salary income or income from property.

Individual whose latest assessed income excluding incomes referred to in items (i) to (iv) above is less than Rupees 1,000,000 is not required to pay advance income tax under section 147 of Income Tax Ordinance, 2001. Where the taxpayer is an association of persons or a company, advance tax will be computed according to the following formula: (A x B / C) – D Where — A

is the taxpayer’s turnover for the quarter

is the tax assessed of the taxpayer for the latest tax year

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INCOME TAX ORDINANCE, 2001 – GENERAL C

is turnover of the taxpayer for the latest tax year

is the total amount of tax paid/deducted in the quarter other than tax collected/deducted which is considered as final tax.

Where the taxpayer fails to provide turnover or the turnover for the quarter is not known as stated in component A above, it shall be taken to be one-fourth of 110% of the turnover of the latest tax year for which return has been filed. The provision of minimum tax u/s 113 and Alternative Corporate Tax u/s 113C will also be taken into account while computing advance tax liability. Adjustable advance tax on capital gain from sale of securities will be computed at following rates: [Section 147(5B)]  

Where holding period of a security is less than 6 months Where holding period of a security is 6 months or more but less than 12 months

2% of the capital gains derived during the quarter 1.5% of the capital gains derived during the quarter

However, provisions regarding advance tax on capital gain from sale of securities are not applicable to individual investors. In case the taxpayer is an association of persons or a company including a banking company, it shall estimate the tax payable by it for the relevant tax year at any time before the 2 nd installment is due. In case the tax payable is likely to be more than the amount that the taxpayer is required to pay under subsection (4), the taxpayer shall furnish to the Commissioner on or before the due date of the 2 nd quarter an estimate of the amount of tax payable by the taxpayer and pay 50% of such amount by the due date of the 2nd quarter of the tax year after making adjustment for the amount, if any, already paid in terms of sub-section (4). The remaining 50% of the estimate shall be paid in two equal installments payable by the due date of the 3rd and 4th quarter of the tax year. Similarly, according to the provisions of sub-section (6), if the tax payable is less than the tax due on the said basis, every taxpayer who is required to pay advance tax, after furnishing the estimates to Commissioner, will pay such estimated amount after adjustment of tax already paid. Where the payable advance tax is estimated at lower side, such estimate of the amount of tax payable shall contain turnover for the completed quarters of the relevant tax year, estimated turnover of the remaining quarters alongwith reasons for any decline in estimated turnover, documentary evidence of estimated expenses or deductions which may result in lower payment of advance tax and the computation of the estimated taxable income of the relevant tax year. In the absence of such details, or if the Commissioner is not satisfied with the documentary evidences provided to him, he may reject the estimate after providing an opportunity of being heard to the taxpayer and the taxpayer shall pay advance tax according to the formula contained in sub-section (4). New company or an association of persons, are required to pay advance income tax even in the first year of their operation. The taxpayer will estimate the amount of advance tax payable on quarterly income basis and thereafter pay such amount after taking into account minimum tax payable under section 113 and Alternate Corporate Tax u/s 113C. If minimum tax payable comes more than the advance tax calculated on the basis of quarterly income, then advance tax will be paid equal to minimum tax calculated under section 113 on aggregated turnover of the quarter after adjustment of the amount already paid during the quarter, if any.

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INCOME TAX ORDINANCE, 2001 – GENERAL Where the advance tax paid on the basis of estimation under sub-section (4A) or (6) of section 147 is less than 90% of the tax chargeable for the relevant tax year, the taxpayer shall be liable to pay default surcharge under section 205(IB) at the rate of 12% per annum on the amount by which the tax paid by him falls short of the 90%. Such default surcharge shall be calculated from 1st day of April in that year to the date on which the assessment is made or the 30 th day of June of the financial year next following whichever is earlier. [Sub-section (1B) of Section 205] As required u/s 147A, provincial sales tax registered person, whose name was not appearing in active taxpayers’ list on 30 June of previous tax year, shall also pay advance tax at the rate of three percent of the turnover declared before the provincial revenue authority. DATE OF PAYMENT OF ADVANCE TAX Tax Payable For Individuals

On or Before Companies and AOPs (excluding Banking Company)

September quarter

15 September

25 September

December quarter

15 December

25 December

15 March

25 March

15 June

March quarter June quarter

Advance tax on capital gain from sale of securities is payable within 21 days after the close of each quarter. [Section 147(5b)] Banking company will be required to pay advance tax under section 147 in twelve installments on or before 15th of every month. [Rule 5(1), 7th Schedule] PAYMENT OF TAX COLLECTED / DEDUCTED (RULE 43 OF INCOME TAX RULES, 2002) Tax collected / deducted by

Deposit into Government treasury

Federal / Provincial Government

On the same day

Other persons

Within 7 days from the end of each week ending on Sunday. In case of remittance abroad to a non-resident through State Bank of Pakistan or other baking company, prior to remitting abroad of the amount from which tax is to be deducted or collected.

DATE OF FILING OF STATEMENTS U/S 165 - [Section 165(2)] Every prescribed person shall furnish or e-file biannual statement under sub-section (1) of section 165 within the time frame set out as follows: Biannual Statement period

Date of Filing

 Half-year ending on the 30 June  Half-year ending on the 31 December

31 July 31 January

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INCOME TAX ORDINANCE, 2001 – GENERAL DATE OF FILING OF ANNUAL STATEMENT U/S 165(6) - [(Rule 44(5) of Income Tax Rules, 2002)] Annual statements will be furnished on or before 31 July of each year by the person deducting tax from salary under section 149. DATE OF FILING OF RETURN OF INCOME, STATEMENT UNDER SECTION 115(4) Category of Taxpayer

Date of Filing of return / statement u/s 115(4)

Companies: [Section 118(2)] 

Having tax year ending between 01 January to 30 June

31 December



Other cases

30 September

Persons other than Companies: [Section 118(3)] 

In case of individual and association of persons

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30 September

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INCOME TAX ORDINANCE, 2001 – GENERAL - SUMMARY OF WITHHOLDING TAX REGIME Section

Nature of Payment / Transactions

148

1.(i) Industrial undertaking importing remeltable steel (PCT Heading 72.04) and directly reduced iron for its own use [Sr. No. 1(i) of Table, Part II, 1st Sch.] (ii) Import of potassic fertilizers in pursuance of Economic Coordination Committee of the Cabinet’s decision No. ECC-155/12/2004 dated 09 December 2004 [Sr. No. 1(ii) of Table, Part II, 1st Sch.] (iii) Import of Urea [Sr. No. 1(iii) of Table, Part II, 1st Sch.] (iv) Manufacturers covered under Notification No. S.R.O. 1125(I)/2011 dated 31 December 2011 and importing items covered under S.R.O. 1125(I)/2011 dated 31 December, 2011 [Sr. No. 1(iv) of Table, Part II, 1st Sch.] (v) Person importing gold [Sr. No. 1(v) of Table, Part II, 1st Sch.] (vi) Person importing cotton [Sr. No. 1(vi) of Table, Part II, 1st Sch.] (vii) Persons importing LNG. [Sr. No. 1(vii) of Table, Part II, 1st Sch.] 2. Import of pulses [Sr. No. 2 of Table, Part II, 1st Sch.]

FINANCE ACT 2019

Withholding / Collection Rate % / Rupees

Responsibility for Deduction / Deposit

Active 1% of import value as increased by customs – duty, sales tax and federal excise duty

2% of import value as increased by customsduty, sales tax and federal excise duty

-do-

2% of import value as increased by customs – duty, sales tax and

4% of import value as increased by customs – duty, sales tax and

Remarks

Non-active

- 41 -

Collector of customs

-do-

Collector of customs

Minimum - except the followings (Sec. 148(7)): (a) raw material, plant, machinery, equipment and parts by an industrial undertaking for its own use. (b) Motor vehicles in CBU condition by manufacturer of motor vehicles. (c) Large import houses. (d) Foreign produced film imported for the purpose of screening and viewing.

RIAZ AHMAD & COMPANY Chartered Accountants

INCOME TAX ORDINANCE, 2001 – GENERAL - SUMMARY OF WITHHOLDING TAX REGIME Section

Nature of Payment / Transactions

Withholding / Collection Rate % / Rupees Active

3. Commercial importers covered under Notification No. S.R.O. 1125(I)/2011 dated 31 December 2011 and importing items covered under S.R.O. 1125(I)/2011 dated the 31 December, 2011[Sr. No. 3 of Table, Part II, 1st Sch.] 4. Persons importing coal [Sr. No. 4 of Table, Part II, 1st Sch.] 5. Import of finished pharmaceutical products that are not manufactured otherwise in Pakistan, as certified by the Drug Regulatory Authority of Pakistan [Sr. No. 5 of Table, Part II, 1st Sch.] 6. Ship breakers on import of ships [Sr. No. 6 of Table, Part II, 1st Sch.] 7. Industrial undertakings not covered under S. Nos. 1 to 6 [Sr. No. 7 of Table, Part II, 1st Sch.] 8. Companies not covered under S. Nos. 1 to 7 [Sr. No. 8 of Table, Part II, 1st Sch.] 9. Persons not covered under S. Nos. 1 to 8 [Sr. No. 9 of Table, Part II, 1st Sch.] Persons importing mobile phones. [Proviso, Part II, 1st Sch.]:

FINANCE ACT 2019

federal excise duty

Responsibility for Deduction / Deposit

Remarks

Non-active federal excise duty

3% of import value as increased by customs – duty, sales tax and federal excise duty 4%

6% of import value as increased by customs – duty, sales tax and federal excise duty 8%

Collector of customs

4.5%

Collector of customs

5.5%

11%

Collector of customs

5.5%

11%

Collector of customs

12%

Collector of customs

- 42 -

Rate of tax in case of commercial importer importing plastic raw material falling under PCT Heading 39.01 to 39.12 shall be 4.5% and 9% in case of active and non-active taxpayer, respectively.

Rate of tax in case of industrial undertaking importing plastic raw material falling under PCT Heading 39.01 to 39.12 for its own use shall be 1.75% and 3.5% in case of active and nonactive taxpayer, respectively.

RIAZ AHMAD & COMPANY Chartered Accountants

INCOME TAX ORDINANCE, 2001 – GENERAL - SUMMARY OF WITHHOLDING TAX REGIME Section

Nature of Payment / Transactions

Withholding / Collection Rate % / Rupees Active

C&F value of mobile phone (in USD):

148A

(Rupees)

140

2.Exceeding 30 & up to 100

730

1,460

3.Exceeding 100 & up to 200

930

1,860

4.Exceeding 200 & up to 350

970

1,940

5.Exceeding 350 & up to 500

3,000

6,000

6.Exceeding 500

5,200

10,400

149(1)

(3)

Purchase of locally produced edible oil by manufacturers of cooking oil and vegetable ghee. Basic salary and taxable allowances

Directorship fee or fee for attending board meeting or such fee by whatever name called

FINANCE ACT 2019

Average rate

20%

Remarks

Non-active

(Rupees)

1. Up to 30

Responsibility for Deduction / Deposit

20%

- 43 -

Person making the payment

Final

Employer

Adjustable. Tax shall not be deducted where the taxable income does not exceed Rupees 600,000. [Division I, Part I, 1st Sch.] - Tax deducted at source of the employee, short / excess tax deducted from salary, tax credits under sections 61, 62, 63 etc., can be adjusted by the employer. [Sec. 149(1)]. - Payment of salary more than Rupees 15,000 should be through crossed cheques or direct transfer of funds to the employee’s bank account. [Sec. 21(m)]

Employer / responsible person for making payment

Adjustable

RIAZ AHMAD & COMPANY Chartered Accountants

INCOME TAX ORDINANCE, 2001 – GENERAL - SUMMARY OF WITHHOLDING TAX REGIME Section

Nature of Payment / Transactions

150

i – Dividend paid by Independent Power Producers where such dividend is a pass through item under an Implementation Agreement or Power Purchase Agreement or Energy Purchase Agreement and is required to be reimbursed by Central Power Purchasing Agency (CPPA-G) or its predecessor or successor entity. [Division I, Part III, 1st Sch.] ii – other than mentioned in (i) above

150A

151(1): (a) (b)

Return on investment in Sukuks - Company - Individual and AOP: (i) Return on investment more than 1 million rupees (ii) Return on investment less than 1 million rupees Yield on an account, deposit or a certificate under the National Saving Scheme or post office saving account Profit on a debt, being an account or deposit maintained with the Banking company or financial institution

FINANCE ACT 2019

Withholding / Collection Rate % / Rupees Active 7.5%

Responsibility for Deduction / Deposit

Remarks

Non-active

15%

Every person paying dividend

Final - Following are exempt: - any income derived from inter-corporate dividend within the group companies entitled to group taxation under section 59AA subject to condition that return of the group has been filed for the tax year. [Cl. (103A), Part I, 2nd Sch.] - Payment to approved Pension fund, recognized provident fund, approved superannuation fund or an approved gratuity fund or REIT Scheme, etc. [Cl. (47B), Part IV, 2nd Sch.] - Tax shall not be deducted in case of dividend paid to Transmission Line Projects under Transmission Line Policy 2015. [Clause (12A), Part IV, 2nd Sch.]

-do15%

30%

15%

30%

12.5%

25%

10%

20%

15% 15%

Special purpose vehicle, Company

- Adjustable against tax imposed under section 5AA. - Tax shall not be deducted in case of The Second Pakistan International Sukuk Company Limited and The Third Pakistan International Sukuk Company Limited. [Cl. (95) & (96), Part IV, 2nd Sch.]

30%

Every person payment

Minimum - Except where taxpayer is a company or profit on debt is taxable under section 7B.

30%

Banking company financial institution

- 44 -

making or

If the yield or profit paid is Rupees 500,000 or less, the rate of tax shall be 10% and 20% in

RIAZ AHMAD & COMPANY Chartered Accountants

INCOME TAX ORDINANCE, 2001 â€“ GENERAL - SUMMARY OF WITHHOLDING TAX REGIME Section

Nature of Payment / Transactions

(c)

Profit on any security other than that referred in Clause (a), issued by Federal Government, Provincial Government or local Government. Profit on bond, certificate, debenture, security or instrument of any kind to any person other than financial institution

(d)

152 (1)

Royalty or fee for technical services to non-resident

FINANCE ACT 2019

Withholding / Collection Rate % / Rupees

Responsibility for Deduction / Deposit

Active 15%

Non-active

30%

Federal Government, Provincial Government or local Government

15%

30%

Banking company, financial institution, etc.

15%

30%

Every person payment

- 45 -

making

Remarks

case of active and non-active taxpayer, respectively. [Div. IA, Pt. III, 1st Sch.]. No tax will be deducted in following cases: - Yield or profit on investment in Bahbood Saving Certificates or Pensioners Benefit Account and Shuhada Family Welfare Account. [Cl. (36A), Part IV, 2nd Sch] - If monthly installment in monthly income Savings Accounts Scheme does not exceed Rs. 1,000 - [Cl. (59)(iv)(b), Part IV, 2nd Sch.]. - Any yield from National Saving Schemes of Directorate of National Savings where investment was made on or before 30 June 2001 and any income derived from Mahana Amdani Account where monthly installment does not exceed Rupees 1,000 shall continue to remain exempt and any person paying such yield or income shall not deduct tax u/s 151. The recipient of such receipt or income is not required to produce exemption certificate in this regard [S. 239(14)] - Tax shall not be deducted in case of The Second Pakistan International Sukuk Company Limited and The Third Pakistan International Sukuk Company Limited. [Cl. (95) & (96), Part IV, 2nd Sch.] Final

RIAZ AHMAD & COMPANY Chartered Accountants

INCOME TAX ORDINANCE, 2001 â€“ GENERAL - SUMMARY OF WITHHOLDING TAX REGIME Section

Nature of Payment / Transactions

(1A)

Payment to non-resident persons on account of certain contracts

(1AA)

Withholding / Collection Rate % / Rupees

Responsibility for Deduction / Deposit

Remarks

Active 7%

Non-active

Every person payment

making

Minimum

Payments to non-resident on account of insurance or re-insurance premium

10%

Every person payment

making

Minimum

(1AAA)

Payment for advertisement services to non-resident media person relaying from outside Pakistan [Cl. (3) Div II, Part III, Ist Sch.]

10%

Every person payment

making

Final

(1C)

Payment of fee for offshore digital services to a non-resident person on behalf of any resident or a permanent establishment of a non-resident in Pakistan

Every banking company or financial institution making payment

Final

(2)

Payment to non-resident other than amount to which sub-section (1), (IA), (IAA), (IAAA) or (1C) above applies

20%

40%

Every person payment

making

Adjustable

(2)

Payment to non-resident having no PE in Pakistan, in respect of profit on debt [Cl. (5A), Part II, 2nd Sch.]

10%

20%

Every person payment

making

Final - Subject to proviso of clause (5A) of Part II of 2nd Schedule

4% 4.5%

Every person payment

making

4% 4.5% 2%

Every person payment

making

Adjustable No tax shall be deducted in case where the sale of goods is made by importer of the goods and tax u/s 148 in respect of such goods has been paid and the goods are sold in same condition as they were when imported. Minimum

(2A)(a)

(2A)(b)

Payment to PE for sale of goods: - In case of company - In other cases i) Payment to PE for transport services ii) Payment to PE for other services:

FINANCE ACT 2019

- 46 -

Minimum

RIAZ AHMAD & COMPANY Chartered Accountants

INCOME TAX ORDINANCE, 2001 – GENERAL - SUMMARY OF WITHHOLDING TAX REGIME Section

Nature of Payment / Transactions

152A 153 (1)(a)

Responsibility for Deduction / Deposit

Remarks

Active

Non-active

8% 10%

16% 20%

10% 7%

20% 14%

Payment for foreign produced commercial for advertisement

20%

40%

Every prescribed person making payment

Final

-Sale of rice, cotton seed oil or edible oils [Div III, Part III, 1st Sch.]

1.5%

Every prescribed person making payment

Minimum (Adjustable for manufacturing company and listed company)

Every prescribed person making payment

Minimum (Adjustable for manufacturing company and listed company)

(2A)(c)

Withholding / Collection Rate % / Rupees

In case of company In other case

Payment to PE in any other case - In case of sportsperson - In other cases

-Sale of other goods (except fast moving consumer goods sold by distributors): [Div III, Part III, 1st Sch.] - in case of companies - in case of other taxpayers -Sale of fast moving consumer goods by distributors: - in case of companies - in case of other taxpayers

FINANCE ACT 2019

4% 4.5%

8% 9%

2% 2.5%

4% 5%

- 47 -

Every person payment

making

Every person payment

making

Adjustable

Gross amount payable for sale of goods shall include the sales tax. [S.153(1)] Tax will not be deducted on account of payments made for:  Sale of goods not exceeding Rs. 75,000 in a financial year  Services not exceeding Rs. 30,000 in a financial year. Provided that where the total payments in a financial year, exceed Rs. 75,000 /

RIAZ AHMAD & COMPANY Chartered Accountants

INCOME TAX ORDINANCE, 2001 â€“ GENERAL - SUMMARY OF WITHHOLDING TAX REGIME Section

Nature of Payment / Transactions

-Sale of cigarettes and pharmaceutical products by distributors of such products and by large distribution houses subject to the fulfillment of conditions u/s 148(7). [Cl. (24A), Part II, 2nd Sch.] Local sales, supplies to taxpayers as per clause (45A) of Part IV of 2nd Schedule.

(1)(b)

Withholding / Collection Rate % / Rupees

FINANCE ACT 2019

Remarks

Active 1%

Non-active

Every prescribed person making payment

Minimum (Adjustable for manufacturing company and listed company)

Every person payment

Minimum

Rendering or providing of services: [Cl. (2), Div III, Part III, 1st Sch.] - Transport services, freight forwarding services, air cargo services, courier services, manpower outsourcing services, hotel services, security guard services, software development services, IT services and IT enabled services as defined in clause (133), Part I, 2nd Sch., tracking services, advertising services (other than by print or electronic media), share registrar services, engineering services, car rental services, building maintenance services, services rendered by Pakistan Stock Exchange Limited and Pakistan Mercantile Exchange Limited, inspection, certification, testing and training services.

Responsibility for Deduction / Deposit

making

Every prescribed person making payment 3%

Minimum

- 48 -

30,000 as stated above, the taxpayer will deduct tax from the payments including the payments made earlier without deduction of tax during the same financial year. Where the recipient of the payment for services receives the payment through an agent or the third person by whatever name called, the agent or the third person shall be treated to have been paid the service charges or fee by the recipient and the recipient shall collect tax along with the payment received. [Proviso 153(1)].

RIAZ AHMAD & COMPANY Chartered Accountants

INCOME TAX ORDINANCE, 2001 â€“ GENERAL - SUMMARY OF WITHHOLDING TAX REGIME Section

Nature of Payment / Transactions

- electronic and print media for advertising services: - in case of companies - in case of other taxpayers

(1)(c)

(2)

153B

154(1) (2)

- other services: - in case of companies - in case of other taxpayers Services provided to taxpayers as per clause (45A) of Part IV of 2nd Schedule Execution of a contract (Residents) [Cl. (3), Div III, Part III, 1st Sch.] - in case of companies - in case of other taxpayers - in case of sportsperson

Withholding / Collection Rate % / Rupees Active

Non-active

1.5% 1.5%

3% 3%

8% 10% 1%

16% 20% 2%

Responsibility for Deduction / Deposit

Remarks

Minimum

Minimum Every person making payment Every prescribed person making payment

Minimum

Every exporter or export house

Minimum

Minimum -Adjustable for listed companies) [Sec153(3)]

7% 7.5% 10% 1%

14% 15% 20% 2%

Payment of royalty to resident persons

15%

30%

Every person payment

making

Adjustable â€“ Tax will be deducted on gross amount payable (including FED and Provincial sales tax, if any.)

Realization of foreign exchange on account of export of goods by exporter

Every authorized dealer in foreign exchange

Commission due commission agent

Every authorized dealer in Foreign Exchange

Final. Minimum tax, if the taxpayer opts not to be subject to final tax at the time of filing of return. -do-

Payments made by every exporter or an export house to a resident person or permanent establishment in Pakistan, on account of rendering of services of stitching, dyeing etc. [Cl. (3), Division IV, Part III, 1st Sch.]

FINANCE ACT 2019

indenting

- 49 -

RIAZ AHMAD & COMPANY Chartered Accountants

INCOME TAX ORDINANCE, 2001 – GENERAL - SUMMARY OF WITHHOLDING TAX REGIME Section

Nature of Payment / Transactions

(3)

Sale of goods to an exporter under an inland back-to-back L/C Export of goods by an industrial undertaking – Export Processing Zone

(3A)

Withholding / Collection Rate % / Rupees Non-active

Every banking company

-do-

Export Processing Zone Authority

-do-

Direct exporter, export house Collector of customs

-do-

Indirect exporter

(3C)

Clearing of goods

155

Payment in full or part (including advance) on account of rent of immovable property (including rent of furniture and fixture and services relating to such property) Individuals and Association of Persons where the gross amount of rent is: Rs. 200,001 – Rs. 600,000 Rs. 600,001 – Rs. 1,000,000 Rs. 1,000,001 – Rs. 2,000,000 Rs. 2,000,001 – Rs. 4,000,000

FINANCE ACT 2019

Remarks

Active 1%

(3B)

Up to Rs. 200,000

Responsibility for Deduction / Deposit

-do-

Prescribed persons as mentioned in subsection (3) of section 155 Adjustable

Nil 5% of the amount exceeding Rs. 200,000 Rs. 20,000 + 10% of the amount exceeding Rs. 600,000 Rs. 60,000 + 15% of the amount exceeding Rs. 1,000,000 Rs. 210,000 + 20% of the amount exceeding Rs. 2,000,000

- 50 -

RIAZ AHMAD & COMPANY Chartered Accountants

INCOME TAX ORDINANCE, 2001 – GENERAL - SUMMARY OF WITHHOLDING TAX REGIME Section

Nature of Payment / Transactions

Rs. 4,000,001 – Rs. 6,000,000

Withholding / Collection Rate % / Rupees

Rs. 6,000,001 – Rs. 8,000,000

Rs. 1,110,000 + 30% of the amount exceeding Rs. 6,000,000

Over Rs. 8,000,000

Rs. 1,710,000 + 35% of the amount exceeding Rs. 8,000,000 15%

15%

- Payment of prize on a prize bond or cross word puzzle. - Payment on winning from a raffle, lottery, prize on winning a quiz, prize offered by companies for promotion of sales.

15%

30%

20%

40%

156A

Commission paid or discount allowed to petrol pump operator

12%

24%

156B

Withdrawal of balance under pension fund: (a) Withdrawn before the retirement age

FINANCE ACT 2019

Remarks

Non-active Active Rs. 610,000 + 25% of the amount exceeding Rs. 4,000,000

Company

156

Responsibility for Deduction / Deposit

Adjustable - Tax shall not be deducted in case of The Second Pakistan International Sukuk Company Limited and The Third Pakistan International Sukuk Company Limited. [Cl. (96), Part IV, 2nd Sch.] Every person payment Every person payment

Average rate [Sec. 12(6)] of tax for the last 3 years or tax rate for the year whichever is less

- 51 -

making

Final

Where the prize is not in cash, the person while giving the prize shall collect tax on the fair market value of the prize. [Sec.156(2)]

making

Final

Every person selling petroleum products

Final

Pension fund manager

Adjustable - Tax will not be deducted: i) in case of disability ii) on share of the nominated survivor of the deceased person iii) invested in an approved income payment plan

RIAZ AHMAD & COMPANY Chartered Accountants

INCOME TAX ORDINANCE, 2001 – GENERAL - SUMMARY OF WITHHOLDING TAX REGIME Section

Nature of Payment / Transactions

(b) Withdrawn if in excess of 50% of accumulated balance at or after the age of retirement

Withholding / Collection Rate % / Rupees Active

Responsibility for Deduction / Deposit

Non-active - do -

iv) paid to life insurance company for purchase of approved annuity plan [Provisos to sec. 156B(a) and 156B(b)]

TRANSITIONAL ADVANCE TAX

231A

231AA

Remarks

Advance tax under this chapter shall not be collected or deducted from the Federal Government, Provisional Government, foreign diplomat or a diplomatic mission in Pakistan or a person who produces a certificate from the Commissioner that his income during the tax year is exempt.

Cash withdrawal from a bank

0.6%

Banking company

Adjustable tax – Tax will not be collected, if cash withdrawal does not exceed Rs. 50,000 in aggregate from all bank accounts in a single day. However, if cash amount withdrawn exceeds Rs. 50,000 in a day, tax will be deducted on the whole amount withdrawn. [Circular No. 9 of 2008 dated 15-08-2008]. - Tax shall not be deducted in case of The Second Pakistan International Sukuk Company Limited and The Third Pakistan International Sukuk Company Limited. [Cl. (95) Part IV, 2nd Sch.] - No tax will be collected in respect of cash withdrawal made from a “Branchless Banking (BB) Agent Account” utilized to render branchless banking services to customers. [Cl. (101), Pt. IV, 2nd Sch.]

Sale of various banking instruments against cash, receipt of cash on cancellation of these instruments and

0.6%

Banking company, nonbanking financial institution, exchange

Adjustable – No tax will be collected where

FINANCE ACT 2019

- 52 -

sum total of the transaction does not exceed Rupees 25,000 in a day.

RIAZ AHMAD & COMPANY Chartered Accountants

INCOME TAX ORDINANCE, 2001 – GENERAL - SUMMARY OF WITHHOLDING TAX REGIME Section

Nature of Payment / Transactions

transfer of any sum against cash through online transfer, telegraphic transfer, mail transfer or any other mode of electronic transfer. 231B (1)

(1A)

(2)

Registration of a new locally manufactured motor vehicle: upto 850 cc 851 cc to 1000 cc 1001 cc to 1300 cc 1301 cc to 1600 cc 1601 cc to 1800 cc 1801 cc to 2000 cc 2001 cc to 2500 cc 2501 cc to 3000 cc Above 3000 cc

Leasing of motor vehicle

Transfer of registration or ownership of a motor vehicle: upto 850 cc 851 cc to 1000 cc 1001 cc to 1300 cc

FINANCE ACT 2019

Withholding / Collection Rate % / Rupees Active

(Rupees) 7,500 15,000 25,000 50,000 75,000 100,000 150,000 200,000 250,000

5,000 7,500

Remarks

Non-active

(Rupees) 15,000 30,000 50,000 100,000 150,000 200,000 300,000 400,000 500,000

Responsibility for Deduction / Deposit company, authorized dealer of foreign exchange.

- Tax shall not be deducted in case of The Second Pakistan International Sukuk Company Limited and The Third Pakistan International Sukuk Company Limited. [Cl. (95) Part IV, 2nd Sch.]

Motor vehicle registration authority of Excise and Taxation Department

Adjustable - No advance tax shall be collected at the time of registration of a motor vehicle after five years from the date of first registration in case the vehicle is acquired from the Armed Forces of Pakistan or from a foreign diplomats or a diplomatic mission in Pakistan or from the Federal or Provincial Government. - Tax will not be deducted if a person produces evidence that tax while transfer of registration or ownership in case of locally manufactured or tax u/s 148 in the case of imported vehicle was collected from the same person in respect of the same vehicle. Adjustable – Tax will not be collected in case of light commercial vehicles leased under Prime Minister’s Youth Business Loan Scheme. [Cl. (102), Pt. IV, 2nd Sch.]

Leasing company, scheduled bank, investment bank, nonbanking financial institutions, development finance institution and modaraba. Excise and Taxation Department

10,000 15,000

- 53 -

Adjustable - Tax will not be collected if vehicle is transferred after five years from the date of first registration in Pakistan. - Rate of tax to be collected shall be reduced by 10% each year from the date of first

RIAZ AHMAD & COMPANY Chartered Accountants

INCOME TAX ORDINANCE, 2001 – GENERAL - SUMMARY OF WITHHOLDING TAX REGIME Section

(3)

233

233A(1)

Nature of Payment / Transactions

1301 cc to 1600 cc 1601 cc to 1800 cc 1801 cc to 2000 cc 2001 cc to 2500 cc 2501 cc to 3000 cc Above 3000 cc Sale of motor vehicle: Engine Capacity upto 850 cc 851 cc to 1000 cc 1001 cc to 1300 cc 1301 cc to 1600 cc 1601 cc to 1800 cc 1801 cc to 2000 cc 2001 cc to 2500 cc 2501 cc to 3000 cc Above 3000 cc Payment on account of brokerage or commission made to a person: (i) Advertising agents (ii) Life insurance agents where commission received is less than Rs. 0.5 million per annum (iii) Commission agents (other than (i) and (ii) above and export indenting commission agents) Collection of tax by a Stock Exchange of Pakistan on commission earned by its members on purchase and sales of shares

FINANCE ACT 2019

Withholding / Collection Rate % / Rupees Active 12,500 18,750 25,000 37,500 50,000 62,500 (Rupees) 7,500 15,000 25,000 50,000 75,000 100,000 150,000 200,000 250,000

10% 8%

12%

Responsibility for Deduction / Deposit

Remarks

Non-active

25,000 37,500 50,000 75,000 100,000 125,000 (Rupees) 15,000 30,000 50,000 100,000 150,000 200,000 300,000 400,000 500,000

registration in Pakistan. [Cl. (2), Div. VII, Pt. IV, 1st Sch.]

Manufacturer of motor vehicle

Federal Government, Provincial Government, Local Government, a Company or an AOP (termed as principal)

20% 16%

24%

This section is inapplicable w.e.f 01 March 2019 vide Finance Supplementary (Second Amendment) Act, 2019

- 54 -

Adjustable

Minimum – In case of payment to advertising agent, directly or through electronic or print media the principal shall deduct tax on the amount equal to “A x 15/85”. Where A is the amount paid or to be paid to electronic or print media for advertising services (excluding commission) on which tax is deductible u/s 153(1)(b).

RIAZ AHMAD & COMPANY Chartered Accountants

INCOME TAX ORDINANCE, 2001 â€“ GENERAL - SUMMARY OF WITHHOLDING TAX REGIME Section

233(AA)

234

Nature of Payment / Transactions

- Profit or mark-up or interest earned by member, margin financer, or security lender

Withholding / Collection Rate % / Rupees Active

Non-active

10%

Advance tax will be collected at the time of collecting motor vehicle tax: (1) In the case of goods transport vehicles

(2) In the case of passenger transport vehicles plying for hire with registered seating capacity of: a) Four or more persons but less than ten persons b) Ten or more persons but less than twenty persons c) Twenty persons or more (3) Other private motor vehicles with engine capacity of: a) up to 1000 cc b) 1001 - 1199 cc c) 1200 - 1299 cc d) 1300 - 1499 cc

FINANCE ACT 2019

Rs. 2.50 per kg. of the laden weight

Rs. 5 per kg. of the laden weight

Rupees per seat per annum 50 100 100

200

300

600

(Rupees) 800 1,500 1,750 2,500

(Rupees) 1,600 3,000 3,500 5,000

- 55 -

Responsibility for Deduction / Deposit

Remarks

NCCPL

Adjustable â€“ No tax shall be collected on any mutual fund subject to certain conditions as specified in sub-clause (2) of clause (57) of Part I, 2nd Schedule

Motor vehicle tax Collecting Authority

Adjustable No advance tax after 10 years from the date of first registration in Pakistan on vehicle with registered laden weight less than 8120 Kgs. [ S. 234(4)]. In case of laden weight 8120 Kgs. or more, tax will be collected Rs. 1,200 and Rs. 2,400 per annum in case of active and nonactive taxpayer, respectively. [Cl. (1A), Div. III, Pt. IV, 1ST Sch.] Advance tax on passenger transport vehicles with registered seating capacity of ten or more persons, shall not be collected after a period of 10 years from 1st day of July of the year of make of the vehicle. [S. 234(3)]. In case of motor cars used for more than 10 years in Pakistan, no advance tax shall be collected after a period of 10 years. [S. 234(2A)]

RIAZ AHMAD & COMPANY Chartered Accountants

INCOME TAX ORDINANCE, 2001 – GENERAL - SUMMARY OF WITHHOLDING TAX REGIME Section

Nature of Payment / Transactions

e) 1500 - 1599 cc f) 1600 – 1999 cc g) 2000 cc and above (4) Where the motor vehicle tax is collected in lump sum: a) up to 1000 cc b) 1001 - 1199 cc c) 1200 - 1299 cc d) 1300 - 1499 cc e) 1500 - 1599 cc f) 1600 – 1999 cc g) 2000 cc and above 234A

Advance tax shall be collected on the amount of gas bill of a Compressed Natural Gas (CNG) station.

235

Rate of collection of advance tax on electricity bill of commercial or industrial consumers, where the gross amount of bill: (a) does not exceed Rs. 400 (b) Rs. 401 – 600 (c) Rs. 601 – 800 (d) Rs. 801 - 1,000 (e) Rs. 1,001 - 1,500 (f) Rs. 1,501 - 3,000 (g) Rs. 3,001 - 4,500 (h) Rs. 4,501 - 6,000 (i) Rs. 6,001 - 10,000

FINANCE ACT 2019

Withholding / Collection Rate % / Rupees Active 3,750 4,500 10,000 (Rupees) 10,000 18,000 20,000 30,000 45,000 60,000 120,000 4%

80 100 160 300 350 450 500 650

Remarks

Non-active

7,500 9,000 20,000 (Rupees) 20,000 36,000 40,000 60,000 90,000 120,000 240,000 8%

(Rupees)

Responsibility for Deduction / Deposit

(Rupees) 80 100 160 300 350 450 500 650

- 56 -

The person preparing gas consumption bill

Minimum

The person preparing electricity bills

Tax collected from CNG stations shall be minimum tax. [Sec. 234A(3)] No tax shall be collected from the taxpayers who are registered as exporter or manufacturers of carpets, leather and articles thereof, surgical goods, sports goods and textile and articles thereof. [Cl (66) Part IV, 2nd Sch.]. No advance tax shall be collected from a person who produces a certificate from Commissioner that his income during the tax year is exempt from tax. [S. 235(3)] As per section 235(4), tax collected will be:

RIAZ AHMAD & COMPANY Chartered Accountants

INCOME TAX ORDINANCE, 2001 â€“ GENERAL - SUMMARY OF WITHHOLDING TAX REGIME Section

Nature of Payment / Transactions

(j) Rs. 10,001 - 15,000 (k) Rs. 15,001 - 20,000 (l) Exceeding Rs. 20,000: - Commercial consumers - Industrial consumers 235A

Rate of collection of advance tax on the amount of electricity bill of domestic consumer where the amount of bill inclusive of sales tax and all incidental charges is: (i) Rupees 75,000 or more (ii) Less than Rupees 75,000

235B

Rate of advance tax to be collected from steel melters and composite steel units, registered for the purpose of chapter XI of Sales Tax Special Procedure Rules, 2007 for electricity consumed for the production of steel billets, ingots and mildsteel (MS Products) excluding stainless steel.

236

Advance tax shall be collected on account of the following: a) in case of telephone subscriber (other than mobile phone subscriber) where the amount of monthly bill exceeds Rs. 1,000

FINANCE ACT 2019

Withholding / Collection Rate % / Rupees Active 1,000 1,500 12% 5%

7.5% 0%

Remarks

Non-active

1,000 1,500

- In case of company, adjustable. - In case of other than Company: - minimum tax up to bill of Rs. 360,000 per annum - adjustable if monthly bill exceeds Rupees 30,000

12% 5% The person preparing electricity bill

Adjustable

The person preparing electricity bill

Tax collected shall be deemed to be deducted under sub-section (1) of section 153 on the payment for local purchase of scrap. Tax collected shall be non-adjustable and credit of tax shall not be allowed to any person.

The person preparing telephone or internet bills / issuing or selling prepaid card

Adjustable

7.5% 0%

Rs. 1 per unit of electricity consumed for such production

10% of the amount of bill.

Responsibility for Deduction / Deposit

exceeding

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RIAZ AHMAD & COMPANY Chartered Accountants

INCOME TAX ORDINANCE, 2001 – GENERAL - SUMMARY OF WITHHOLDING TAX REGIME Section

Nature of Payment / Transactions

b) in case of subscriber of internet, mobile telephone and prepaid internet or telephone card

236A

Collection of advance tax at the time of sale by public auction or auction by a tender

236B

Collection of advance tax on purchase of domestic air ticket.

236C

Advance tax on sale or transfer of immovable property

FINANCE ACT 2019

Withholding / Collection Rate % / Rupees

Responsibility for Deduction / Deposit

Remarks

Non-active Active 12.5% of the amount of bill or sales price of internet prepaid card or prepaid telephone card or sale of units through any electronic medium or whatever form.

10%

20%

5% of the gross amount of air ticket.

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Any person making sale by public auction or auction by a tender

Adjustable – Tax collected on lease of the right to collect tolls shall be final. [236A(3)] - Tax shall not be deducted in case of The Second Pakistan International Sukuk Company Limited and The Third Pakistan International Sukuk Company Limited. [Cl. (95) Part IV, 2nd Sch.]

The airline issuing air ticket

Adjustable - No tax shall be collected from routes of Balochistan coastal belt, Azad Jammu and Kashmir, Federally Administrated Tribal Areas, Gilgit Baltistan and Chitral

The person responsible for registering, recording or attesting the transfer, including the person responsible for registering or attesting transfer for local authority, housing authority, housing society, co-operative society and registrar of properties

Adjustable – Tax collected shall be minimum tax if immovable property is acquired and disposed of within the same tax year. - No tax shall be collected if immovable property is held for a period exceeding five years. - No tax shall be collected irrespective of holding period, if the seller is dependent of a Shaheed belonging to Pakistan Armed Forces or a person who dies while in the service of the Pakistan Armed Forces or the Federal or Provincial Government in respect of first sale of immovable property acquired from or allotted

RIAZ AHMAD & COMPANY Chartered Accountants

INCOME TAX ORDINANCE, 2001 â€“ GENERAL - SUMMARY OF WITHHOLDING TAX REGIME Section

236D(1)

Nature of Payment / Transactions

(i) Advance tax on functions and gatherings other than functions of marriage

Withholding / Collection Rate % / Rupees Active

Non-active

5% of the bill ad valorem or Rs. 20,000 per function whichever is higher

(iii) Advance tax on functions of marriage other than than cities mentioned at serial (ii) above

5% of the bill ad valorem or Rs. 10,000 per function whichever is higher

In case where food, service or any other facility is provided by any other person

236F(1)

Advance tax on cable operators and other electronic media shall be as follows:

FINANCE ACT 2019

Remarks

by the Federal Government or Provincial Government or any authority duly certified by the official allotment authority or the property acquired or allotted is in recognition of or for services rendered by the Shaheed or the person who dies in service.

(ii) Advance tax on functions of marriage in Islamabad, Lahore, Multan, Faisalabad, Rawalpindi, Gujranwala, Bahawalpur, Sargodha, Sahiwal, Shekhupura, Dera Ghazi Khan, Karachi, Hyderabad, Sukkur, Thatta, Larkana, Mirpur Khas, Nawabshah, Peshawar, Mardan, Abbotabad, Kohat, Dera Ismail Khan, Quetta, Sibi, Loralai, Khuzdar, Dera Murad Jamali and Turbat.

(2)

Responsibility for Deduction / Deposit

Prescribed person as mentioned in clause (b) of sub-section (4) of section 236D

Adjustable

-do-

Adjustable â€“ In following cases, rate of tax shall be 5% of bill ad valorem or Rs. 5,000 per function whichever is higher: - Function of marriage in a marriage hall, marquee or a community place with the total function area less than 500 square yards - Function of marriage in multi storied premises, with the largest total function area on one floor less than 500 square yards

- 59 -

-do-

Adjustable

-do-

Adjustable

Pakistan Electronic Media Regulatory Authority (PEMRA)

Adjustable

RIAZ AHMAD & COMPANY Chartered Accountants

INCOME TAX ORDINANCE, 2001 â€“ GENERAL - SUMMARY OF WITHHOLDING TAX REGIME Section

Nature of Payment / Transactions

Withholding / Collection Rate % / Rupees

Responsibility for Deduction / Deposit

Active Tax on License fee (Rupees)

Non-active

7,500 10,000 25,000 5,000 5,000 30,000 40,000 50,000 75,000 87,500 175,000 262,500 437,500 700,000 875,500

10,000 15,000 30,000 12,000 40,000 35,000 45,000 75,000 100,000 150,000 200,000 300,000 500,000 800,000 900,000

(2) Advance tax in case of IPTV, FM Radio, MMDS, Mobile TV, Mobile Audio, Satellite TV Channel and Landing Rights

20% of permission fee or renewal fee

PEMRA

(3) Advance tax from TV channel on which foreign TV drama serial or a play in any language, other than English, is screened or viewed.

50% of permission fee or renewal fee

PEMRA

License Category

H H-I H-II R B B-1 B-2 B-3 B-4 B-5 B-6 B-7 B-8 B-9 B-10

FINANCE ACT 2019

Tax on Renewal (Rupees)

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Remarks

RIAZ AHMAD & COMPANY Chartered Accountants

INCOME TAX ORDINANCE, 2001 – GENERAL - SUMMARY OF WITHHOLDING TAX REGIME Section

Nature of Payment / Transactions

236G(1)

Advance tax on sales to distributors, dealers and wholesalers: - Fertilizers - Other than fertilizers

236H(1)

Advance tax on sale to retailer: - Electronics - Others

Withholding / Collection Rate % / Rupees Active

Non-active

0.7% 0.1%

1.4% 0.2%

1% 0.5%

2% 1%

Responsibility for Deduction / Deposit

Remarks

Manufacturer, commercial importer

Adjustable - Tax shall be collected in respect of following sectors: Electronic, sugar, cement, iron and steel products, fertilizer, motorcycles, pesticides, cigarettes, glass, textile, beverages and paint of foam sector.

Manufacturer, distributors, dealer, wholesaler or commercial importer

Adjustable - Tax credit for the tax collected under sections 236G(1) and 236H(1) shall be allowed in computing the tax due by the distributor, dealer, wholesaler / retailer on the taxable income for the tax year in which the tax was collected.

236HA

Advance tax on sale of petroleum products to a petrol pump operator or distributor where operator or distributor is not allowed a commission or discount

0.5% of exdepot sale price

1% of exdepot sale price

Every person selling petroleum products

Final

236I(1)

Collection of advance tax by educational institutions

The person preparing fee voucher or challan

Adjustable – Tax shall not be collected from a person on an amount which is paid by way of scholarship or where annual fee does not exceed two hundred thousand rupees. -No tax shall be collected from a non-resident where;  copy of passport is provided as an evidence to the educational institution that during previous tax year, his stay in Pakistan was less than one hundred eighty-three days;  a certificate is furnished that he has no Pakistan source income; and

FINANCE ACT 2019

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RIAZ AHMAD & COMPANY Chartered Accountants

INCOME TAX ORDINANCE, 2001 â€“ GENERAL - SUMMARY OF WITHHOLDING TAX REGIME Section

Nature of Payment / Transactions

Withholding / Collection Rate % / Rupees Active

Responsibility for Deduction / Deposit

Remarks

Non-active

ď‚ˇ the fee is remitted directly from abroad through normal banking channel to the bank account of the educational institution -Tax shall also not be collected on the amount which is refundable.

236J(1)

Advance tax on dealers, commission agents and arhatis etc. Group: Group or Class A Group or Class B Group or Class C Any other category

236K(1)

Advance tax on purchase or transfer of immovable property

FINANCE ACT 2019

Market committee

Adjustable

Adjustable - Tax shall also not be collected from a scheme introduced by the Federal Government, or Provincial Government or an Authority under a Federal or Provincial law for expatriate Pakistanis provided that the mode of payment by the expatriate Pakistanis in the said scheme or schemes shall be in the foreign exchange remitted from outside Pakistan through normal banking channels. - Tax shall not be deducted in case of The Second Pakistan International Sukuk Company Limited and The Third Pakistan International Sukuk Company Limited. [Cl. (95) & (96), Part IV, 2nd Sch.] - Advance tax shall be collected on installments by any person responsible for collecting

Tax (per annum) (Rupees) (Rupees) 100,000 75,000 50,000 50,000 1% of fair market value

100,000 75,000 50,000 50,000 2% of fair market value

- 62 -

RIAZ AHMAD & COMPANY Chartered Accountants

INCOME TAX ORDINANCE, 2001 – GENERAL - SUMMARY OF WITHHOLDING TAX REGIME Section

Nature of Payment / Transactions

Withholding / Collection Rate % / Rupees Active

Non-active

Responsibility for Deduction / Deposit

Remarks

payments in installments for purchase or allotment of any immovable property from the allotee or transferee where the transfer is to be effected after making payment of all installments. [Section 236K(3)]

236L

Advance tax on purchase of international air tickets: - First / Executive class - Others excluding Economy - Economy

Rupees per person 16,000 12,000 -

Airline issuing air ticket

Adjustable

236P

Advance tax on banking transactions otherwise than through cash

0.6%

Every banking company

Adjustable – No tax shall be collected, if sum of all transactions mentioned in this section does not exceed Rupees 50,000, in aggregate from all bank accounts in a day. However, if amount exceeds Rs. 50,000 in a day, tax will be collected on the whole amount. -Tax shall not be collected in case of transactions or payments made for Federal, Provincial or local Government taxes.

236Q

Payments to residents for use of machinery and industrial, commercial and scientific equipment

10%

Every prescribed person making payment

Final – Tax shall not be collected in case of agricultural machinery and machinery leased by a leasing company, an investment bank or a modaraba or a scheduled bank or a development finance institution in respect of assets owned by the leasing company or an investment bank or a modaraba or a scheduled bank or a development finance institution.

FINANCE ACT 2019

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RIAZ AHMAD & COMPANY Chartered Accountants

INCOME TAX ORDINANCE, 2001 â€“ GENERAL - SUMMARY OF WITHHOLDING TAX REGIME Section

Nature of Payment / Transactions

236R

Advance tax on education expenses remitted abroad

236S

Dividend in specie

236U

Advance tax on insurance premium: - General insurance premium - Life insurance premium exceeding Rs. 0.3 million in aggregate per annum - Others

Withholding / Collection Rate % / Rupees Active 5%

Responsibility for Deduction / Deposit

Remarks

Non-active

As stated above in Section 150

Banks, financial institutions, foreign exchange companies or any other person responsible for remitting foreign currency abroad

Adjustable against the income of the person remitting payment of education related expenses

Every person making payment of dividend

Final

Every company

Adjustable - Tax shall not be collected by an insurance company from premiums under Crop Loan Insurance Scheme (CLIS) and Livestock Insurance Scheme (LIS) [Cl. (100), Part IV, 2nd Sch.]

insurance

4% 1%

Provincial authority

Adjustable

236V

Advance tax on extraction of minerals

236X

Advance tax on tobacco

Pakistan Tobacco Board or its contractors

Adjustable

236Y

Advance tax on person remitting amounts abroad by transactions through debit card, credit card or prepaid card

Banking company

Adjustable

FINANCE ACT 2019

- 64 -

RIAZ AHMAD & COMPANY Chartered Accountants

SALES TAX Cottage industry

Section 2(5AB)

Definition of “Cottage industry” has been substituted, now it means a manufacturing concern which (a) does not have an industrial gas or electricity connection; (b) is located in a residential area; (c) does not have a total labour force of more than ten workers; and (d) annual turnover from all supplies does not exceed three million rupees. Retail price

Section 2(27)

By virtue of amendment in definition of “retail price”, now an importer, in case of imported goods mentioned in the Third Schedule, shall also fix retail price for the purpose of sales tax at import stage. Previously such fixation of retail price was vested with manufacturers only. Tier-1 retailers

Section 2(43A)

The retailer whose shop measures one thousand square feet or more in area has also been included in definition of “Tier-1 retailers”. Value of supply

Section 2(46)

Now, in case of imported goods (excluding goods specified in the Third Schedule), value of supply shall be determined under section 25 of the Customs Act, 1969 including the amount of customs-duties and central excise duty. In case of manufacture of goods belonging to another person, value of supply would be the actual consideration received by such manufacturer for value addition carried out in relation to such goods. In case of supply of electricity by an independent power producer, the amount received on account of energy purchase price only shall be the value of supply and the amount received on account of capacity purchase price, energy purchase price premium, excess bonus, supplemental charges, etc., shall not be included in the value of supply. In case of supply of electric power and gas by a distribution company, the value of supply shall be the total amount billed including price of electricity and natural gas, as the case may be, charges, rents, commissions and all duties and taxes, local, provincial and federal but excluding the amount of late payment surcharge and the amount of sales tax. Scope of tax

Section 3(1B), (2), (7), (9) & (9A)

Tax shall be levied and collected on goods specified in the newly introduced Tenth Schedule, in the mode and manner specified therein: (a) on the production capacity of plants, machinery, undertaking, establishments or installation, producing or manufacturing such goods, or (b) on fixed basis, from any person who is in a position to collect such tax due to the nature of the business and different rates may be so prescribed for different regions or areas. In case of import of goods specified in the Third Schedule, tax shall be charged at the rate of seventeen percent of retail price and in case of import of goods specified in the Eighth Schedule, tax shall be charged at the rate specified therein. Moreover, retail price of such imported goods shall also be legibly, prominently and indelibly printed or embossed by the importer on each article, packet, container, package, cover or label.

FINANCE ACT 2019

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RIAZ AHMAD & COMPANY Chartered Accountants

SALES TAX Eleventh Schedule has been introduced which prescribes the rate of tax to be withheld by the buyer or by the person or class of person as withholding agent. As per amended sub-section (9), from now onwards, tax through monthly electricity bills as specified in this sub-section shall not be charged from Tier-1 retailers. It is also provided that Commissioner of Inland Revenue shall issue order to the electricity supplier regarding exclusion of the person who is either a Tier1 retailer or not a retailer. Moreover, the tax collected under this sub-section shall be deposited by the electricity supplier directly without adjusting against his input tax. Sub-section (9A) has been substituted whereby the Tier-1 retailers shall pay sales tax at the rate as applicable to the goods sold under relevant provisions of this Act or notification issued thereunder. Provided that the customers of a Tier-1 retailer shall be entitled to receive a cash back of up to five percent of the tax involved. Date, manner and extent of such receipt may be prescribed by the FBR. Provided further that from such date, mode and manner, as prescribed by the FBR, all Tier-1 retailers shall integrate their retail outlets with FBRâ€™s computerized system for real-time reporting of sales. Determination of tax liability

Section 7(2)(i)

In case of supply of electricity or gas, only those registered persons shall be entitled to claim input adjustment if respective electricity or gas bill contains his registration number and the address where the connection is installed. Levy and collection of tax on specified goods on value addition

Section 7A(2)

In respect of the goods or class of goods specified in the Twelfth Schedule, the minimum value addition tax, against the value added by the registered person shall be payable at the rate and by the registered persons or the class of registered persons specified therein subject to the conditions, limitations, restrictions and procedure specified therein. Tax credit not allowed

Section 8(1)(m)

Clause (m) restricting claim of input tax on import of scrap compressor (PCT heading 7204.4940) has been substituted. Newly substituted clause (m) restricts claim of input tax credit attributable to supplies that have been made to unregistered person on pro-rata basis, for which sales invoices do not bear the CNIC number or NTN as the case may be, of the buyer as stipulated in section 23. Adjustable input tax

Section 8B(6)

In case a Tier-1 retailer does not integrate his retail outlet with FBRâ€™s computerized system for real-time reporting of sales, during a tax period or part thereof, the adjustable input tax for whole of that tax period shall be reduced by 15%. Refund of input tax

Section 10(1)

From now onwards, the refund of input tax against exports shall be paid at fixed rates and in the manner notified by the FBR. Earlier, such input tax was paid along with duty drawbacks at specified rates. Tax invoices

Section 23(1)

A registered person making a taxable supply shall issue a serially numbered tax invoice at the time of supply of goods containing particulars in Urdu or English language, namely:- (a) name, address and registration number of the supplier; (b) name, address and registration number of the recipient and CNIC or NTN of the unregistered person, excluding supplies made by a retailer where the transaction value

FINANCE ACT 2019

- 66 -

RIAZ AHMAD & COMPANY Chartered Accountants

SALES TAX inclusive of sales tax amount does not exceed fifty thousand rupees, if sale is being made to an ordinary consumer. For the purpose of this clause, ordinary consumer means a person who is buying goods for his own consumption and not for the purpose of resale or processing. The condition of CNIC or NTN shall be effective from 1st August 2019; Moreover, description shall include count, denier, and construction in case of textile yarn and fabric. It is also provided that if it is proved subsequently that CNIC provided by the purchaser was not correct, the liability of tax or penalty shall not arise against the seller, in case of a sale made in good faith. Access to record, documents, etc.

Section 25

The proviso, stating that tax audit of a registered person under this section shall be conducted only once in every three years has been omitted. Return

Section 26(3)

A new proviso has been inserted whereby the sales tax return may be revised without permission of the Commissioner subject to the conditions that revised return is filed within sixty days of filing of return and either the tax payable therein is more than the amount paid or the refund claimed therein is less than the amount as claimed under the return sought to be revised. Offences and penalties

Section 33

By amendment in section 33, penalty in case of late filing of return has been increased. Now, where any person fails to furnish a return within the due date, such person shall pay a penalty of ten thousand rupees (earlier five thousand rupees). In case a person files a return within ten days of the due date, he shall pay a penalty of two hundred rupees (earlier one hundred rupees) for each day of default. Proceedings against authority and persons

Section 33A

Under this new section, the FBR shall prescribe rules for initiating criminal proceedings against any authority including any officer or official subordinate to the aforesaid authority who willfully and deliberately commits or omits an act which results in undue benefit or advantage to the authority or the officer or official or to any other person. Where such proceedings are initiated against the authority or officer or official, the FBR shall simultaneously intimate the relevant Government agency to initiate criminal proceedings against such person. Liability for payment of tax in case of private companies or business enterprises

Section 58

Previously, if any private company or business enterprise is wound up and any tax chargeable on the company or business enterprise, whether before or in the course, or after its liquidation, in respect of any tax period cannot be recovered from the company or business enterprise, every person who was an owner or partner or director, was jointly and severally liable for the payment of such tax. Now, liability for payment of such tax has been extended to a shareholder, owning not less than ten per cent of the paid-up capital in the company or business enterprise. Moreover, any director or partner who pays such tax shall be entitled to recover the tax paid from the company or a share of the tax from any other director or partner. Similarly, where the shareholder who pays tax shall be entitled to recover the tax paid from the company or from any other shareholder, owning not less than ten percent of the paid-up capital, in proportion to the shares owned by that other shareholder.

FINANCE ACT 2019

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RIAZ AHMAD & COMPANY Chartered Accountants

SALES TAX Fee and service charges

Section 76

The Federal Government may, subject to such conditions, limitations or restrictions levy fee and service charges for valuation, in respect of any other service or control mechanism provided by any formation under the control of the FBR, including ventures of public-private partnership, at such rates as may be specified in the notification. THE THIRD SCHEDULE After serial No. 37, following new serial numbers have been inserted to charge sales tax at retail price on certain goods: Sr. No. 38. 39. 40. 41. 42. 43. 44. 45. 46. 47. 48. 49.

Description Household electrical goods, including air conditioners, refrigerators, deep freezers, televisions, recorders and players, electric bulbs, tube-lights, electric fans, electric irons, washing machines, and telephone sets Household gas appliances, including cooking range, ovens, geysers and gas heaters. Foam or spring mattresses and other foam products for household use Paints, distempers, enamels, pigments, colours, varnishes, gums, resins, dyes, glazes, thinners, blacks, cellulose lacquers and polishes sold in retail packing Lubricating oils, brake fluids, transmission fluid, and other vehicular fluids sold in retail packing Storage batteries excluding those sold to automotive manufacturers or assemblers Tyres and tubes excluding those sold to automotive manufacturers or assemblers Motorcycles Auto rickshaws Biscuits in retail packing with brand name Tiles Auto-parts, in retail packing, excluding those sold to automotive manufacturers or assemblers THE SIXTH SCHEDULE (EXEMPTIONS) TABLE - 1 (IMPORTS OR SUPPLIES)

Exemption of tax on following items has been withdrawn: 

Products of milling industry falling under PCT heading 1102.1000 (other than wheat and meslin flour) and fat filled milk sold in retail packing bearing brand name or a trademark.



Silver and gold in unworked condition falling under PCT headings 7106.1000, 7106.9110, 7106.9190, 7108.1100, 7108.1210 and 7108.1290.



Vessels for breaking up falling under PCT heading 89.08



Supply of electricity and natural gas to hospitals run by Federal or Provincial Government or charitable operating hospitals of fifty beds or more or the teaching hospitals of statutory universities of two hundred or more beds.

Moreover, exemption of tax already available to uncooked poultry meat (PCT heading 02.07) has now been specified as exemption to uncooked poultry meat whether or not fresh, frozen or otherwise, preserved or packed.

FINANCE ACT 2019

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RIAZ AHMAD & COMPANY Chartered Accountants

SALES TAX Following new entries have been inserted to allow exemption on import or supply thereof: Sr. No.

Description

PCT Headings

151. (a) Supplies; and (b) imports of plant, machinery, equipment for installation in tribal areas and of industrial inputs by the industries located in the tribal areas, as defined in the Constitution of Islamic Republic of Pakistan,as made till 30th June, 2023, to which the provisions of the Act or the notifications issued thereunder, would have not applied had Article 247 of the Constitution not been omitted under the Constitution (Twenty-fifth Amendment) Act, 2018.

Respective heading

152. Supplies of electricity, as made from the day of assent to the Constitution (Twenty-fifth Amendment) Act, 2018, till 30th June, 2023, to all residential and commercial consumers in tribal areas, and to such industries in the tribal areas which were set and started their industrial production before 31st May, 2018, but excluding steel and ghee or cooking oil industries.

2716.0000

153. Steel billets, ingots, ship plates, bars and other long re-rolled profiles, on such imports and supplies by the manufacturer on which federal excise duty is payable in sales tax mode.

Respective headings

TABLE – 2 (LOCAL SUPPLIES ONLY) Exemption of tax on supply of ginned cotton has been withdrawn. Exemption of tax has been provided on supply of cotton seed oil (PCT heading 1512.2100 and 1512.2900). THE EIGHT SCHEDULE SPECIAL TAX RATES FOR SPECIFIED GOODS

Following serial numbers have been substituted for special tax rate purposes: Sr. No.

Description

PCT Headings

14.

Milk and cream, concentrated or containing added sugar or other sweetening matter

26 (xx)

Rate

Conditions

0402.1000 & 0402.2000

10%

Sold in retail packing under a brand name

Soya bean seed

1201.1000

10% [Previously 6%]

On import by solvent extraction industries, subject to the condition that no refund of input tax shall be admissible

Laser land leveler comprising of laser transmitter, laser receiver, control box, rigid mast pack, with or without scrapper [Previous description was ‘Laser land leveler’ only]

Respective heading

FINANCE ACT 2019

- 69 -

RIAZ AHMAD & COMPANY Chartered Accountants

SALES TAX Sr. No. 56

Description Potassium chlorate (KCLO3)

PCT Headings Respective headings

Rate

Conditions

17% alongwith Rs. 70 [Previously Rs. 65] per kilogram

Import and supply thereof. Provided that rate of Rs. 70 [Previously Rs. 65] per kilogram shall not apply on imports made by and supplies made to organizations under the control of Ministry of Defence Production.

Facility of reduced rate of tax on Reclaimed lead, Rapeseed (Respective headings), sunflower seed and canola seed (PCT headings 1205.0000, 1206.0000) and White crystalline sugar (PCT headings 1701.9910, 1701.9920) has been withdrawn. After serial No. 58, following new entries have been inserted, to be taxed at reduced rate: Sr. No.

Description

PCT Headings

Rate

Condition

1102.2000, 1102.9000, 1103.1100, 1103.1300, 1103.1900, 1104.2200, 1104.2300, 1104.2900 & 1104.3000

10%

If sold in retail packing under a brand name or trademark

1901.9090

10%

If sold in retail packing under a brand name or trademark

61. Silver, in unworked condition

7106.1000, 7106.9110 & 7106.9190

62. Gold, in unworked condition

7108.1100, 7108.1210 & 7108.1290

59. Products of milling industry except wheat and meslin flour

60. Fat filled milk

63. Articles of jewellery, or parts thereof, of precious metal or of metal clad with precious metal.

FINANCE ACT 2019

71.13

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1.5% of No input tax adjustment to be value of allowed except of the tax paid gold, plus on gold 0.5% of value of diamond, used therein, plus 3% of making charges

RIAZ AHMAD & COMPANY Chartered Accountants

SALES TAX Sr. No.

Description

PCT Headings

Rate

Condition

64. Prepared food, foodstuff and sweetmeats supplied by restaurants, bakeries, caterers and sweetmeat shops

Respective headings

7.5%

Supplies only, subject to condition that no input tax shall be adjusted

65. Ginned cotton

Respective headings

10%

66. Supplies as made from retail outlets as are integrated with FBRâ€™s computerized system for real-time reporting of sales

Respective Headings

14%

67. LNG imported for servicing CNG sector and local supplies thereof

2711.1100, 2711.2100

68. Frozen prepared or preserved sausages and similar products of poultry meat or meat offal

1601.0000

69. Meat and similar products of prepared frozen or preserved meat or meat offal of all types including poultry, meat and fish

1602.3200, 1602.3900, 1602.5000, 1604.1100, 1604.1200, 1604.1300, 1604.1400, 1604.1500, 1604.1600, 1604.1900, 1604.2010, 1604.2020 & 1604.2090

if supplied goods are finished fabric, and locally manufactured finished articles of textile and textile made-ups and leather and artificial leather subject to the condition that they have maintained 4% value addition during the last six months

THE NINTH SCHEDULE [SUB-SECTION (3B) OF SECTION 3 - SCOPE OF TAX]

Serial No. 2 of the Table has been substituted as follows: Sr. No. 2.

Description/Specification of Goods Cellular mobile phones or satellite phones to be charged on the basis of import value per set, or equivalent value in rupees in case of supply by the manufacturer, at the rate as indicated against each category:

FINANCE ACT 2019

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Sales tax on import or local supply

Sales tax at registration of IMEI

RIAZ AHMAD & COMPANY Chartered Accountants

SALES TAX Sr. No.

Description/Specification of Goods

Sales tax on import or local supply

Sales tax at registration of IMEI

Rs. 135 Rs. 1,320 Rs. 1,680 Rs. 1,740 Rs. 5,400 Rs. 9,270

A. Not exceeding US$ 30 B. Exceeding US$ 30 but not exceeding US$ 100 C. Exceeding US$ 100 but not exceeding US$ 200 D. Exceeding US$ 200 but not exceeding US$ 350 E. Exceeding US$ 350 but not exceeding US$ 500 F. Exceeding US$ 500

THE TENTH SCHEDULE [SUB-SECTION (1B) OF SECTION 3 - SCOPE OF TAX] Tax on bricks, falling in PCT heading 6901.1000, shall be paid on a fixed basis, on monthly return, at the rates specified in the table below: Sr. No.

Tax payable per month

Region or area

Lahore, Rawalpindi and Islamabad districts

Rs. 12,500

Attock, Chakwal, Jehlum, Mandi Bahauddin, Sargodha, Gujrat, Sialkot, Narowal, Gujranwala, Hafizabad, Sheikhupura, Kasur, Nankana Sahib, Chiniot, Faisalabad, Jhang, Toba Tek Singh, Okara and Sahiwal districts

Rs. 10,000

Khushab, Mianwali, Bhakar, Layyah, Muzaffarghar, Dera Ghazi Khan, Rajanpur, Multan, Lodhran, Khanewal, Vehari, Bahawalpur, Pakpattan, Bahawalnagar, Rahim Yar Khan districts; and Sindh, Khyber-Pakhtunkhwa and Baluchistan provinces

Rs. 7,500

THE ELEVENTH SCHEDULE [SUB-SECTION (7) OF SECTION 3 - SCOPE OF TAX] Following are the rates of withholding tax to be withheld by the buyer or by the person or class of person as withholding agent. Previously these were covered in Sales Tax Special Procedure (Withholding) Rules, 2007. Sr. No.

Withholding agent

Supplier category

Rate or extent of deduction

(a) Federal and provincial government departments; autonomous bodies; and public sector organizations (b) Companies as defined in the Income Tax Ordinance, 2001

Registered persons

1/5th of Sales Tax as shown on invoice

(a) Federal and provincial government departments; autonomous bodies; and public sector organizations (b) Companies as defined in the Income Tax Ordinance, 2001 Federal and provincial government departments; autonomous bodies; and public sector organizations

Person registered as a wholesaler, dealer or distributor

1/10th of Sales Tax as shown on invoice

Unregistered persons

Whole of the tax involved or as applicable to supplies on the basis of gross value of supplies

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SALES TAX Sr. No.

Withholding agent

Supplier category

Rate or extent of deduction

Companies as defined in the Income Tax Ordinance, 2001

Unregistered persons

5% of gross value of supplies

Registered persons advertisement services

Person providing advertisement services

Whole of sales tax applicable

Registered persons purchasing cane molasses.

Unregistered persons

Whole of sales tax applicable

recipient

The above rates of withholding tax or deduction by the withholding agents shall not be applicable to the specified goods and supplies: (a) Electrical energy; (b) Natural gas; (c) Petroleum products as supplied by petroleum production and exploration companies, oil refineries, oil marketing companies and dealers of motor spirit and high-speed diesel; (d) Vegetable ghee and cooking oil; (e) Telecommunication services; (f) Goods specified in the Third Schedule; (g) Supplies made by importers who paid value addition tax on such goods at the time of import; and (h) Supplies made by an Active Taxpayer to another registered persons with exception of advertisement services. THE TWELFTH SCHEDULE [SUB-SECTION (2) OF SECTION 7A â€“ TAX ON SPECIFIED GOODS ON VALUE ADDITION] A minimum value addition tax shall be charged at the rate of three percent ad valorem in addition to normal sales tax chargeable under section 3 on all imported taxable goods. Previously, these were covered in Sales Tax Special Procedure Rules, 2007. Charging of aforementioned value addition tax will be subject to following procedure and conditions: 1. The value addition tax under this Schedule shall not be charged on: (i) Raw materials and intermediary goods meant for use in an industrial process which are subject to customs duty at a rate less than 16% ad valorem under First Schedule to the Customs Act, 1969; (ii) The petroleum products falling in Chapter 27 of Pakistan Customs Tariff as imported by a licensed Oil Marketing Company for sale in the country; (iii) Registered service providers importing goods for their in-house business use for furtherance of their taxable activity and not intended for further supply; (iv) Cellular mobile phones or satellite phones; (v) LNG / RLNG; (vi) Second hand and worn clothing or footwear (PCT Heading 6309.000); (vii) Gold, in un-worked condition; and (viii) silver, in un-worked condition. 2. The value addition tax paid at import stage shall form part of input tax, and the importer shall deduct the same from the output tax due for the tax period, subject to limitations and restrictions under the Act, for determining his net liability. The excess of input tax over output tax shall be carried forwarded to the next tax period as provided in section 10 of the Act. 3. In no case, the refund of excess input tax over output tax, which is attributable to tax paid at import stage, shall be refunded to a registered person. 4. The registered person, if also dealing in goods other than imported goods, shall be entitled to file refund claim of excess carried forward input tax for a period as provided in section 10 or in a notification issued there under by the FBR after deducting the amount attributable to the tax paid at import stage i.e. sum of amounts paid during the claim period and brought forward to claim period. Such deducted amount may be carried forward to subsequent tax period.

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SALES TAX S.R.O. 691(I)/2019 DATED 29 JUNE 2019 (EFFECTIVE FROM 01 JULY 2019) PVC and PMC materials exported by air or via land route to Afghanistan and through Afghanistan to Central Asian Republic were not covered under zero-rating vide S.R.O. 190(I)/2002 dated 02 April 2002. Now, by amendments through this notification zero-rating has been allowed on such exports. S.R.O. 692(I)/2019 DATED 29 JUNE 2019 (EFFECTIVE FROM 01 JULY 2019) S.R.O. 648(I)/2013 has been amended and thereby further tax at the rate of 3% shall not be charged on taxable supplies made to Government, semi-government and statutory regulatory bodies and on supply of white crystalline sugar (PCT heading 1701.9910 and 1701.9920). S.R.O. 693(I)/2019 DATED 29 JUNE 2019 (EFFECTIVE FROM 01 JULY 2019) Amendment has been made in S.R.O. 509(I)/2013 dated 12 June 2013. Now, levy of extra tax at the rate of 5% shall not be applicable in case of supply of electric power to Government, semi-government and statutory regulatory bodies. S.R.O. 694(I)/2019 DATED 29 JUNE 2019 (EFFECTIVE FROM 01 JULY 2019) Vide this S.R.O., the FBR has rescinded its following notifications:  S.R.O. 68(I)/2006 dated 28 January 2006 (adjustment of input tax on supply of oil extracted from imported rapeseed)  S.R.O. 480(l)/2007 dated 09 June 2007 (Sales Tax Special Procedures Rules, 2007)  S.R.O. 660(l)/2007 dated 30 June 2007 (Sales Tax Special Procedures (Withholding) Rules, 2007)  S.R.O. 769(l)/2009 dated 04 September 2009 (conditional zero rating on import and supply of polyethylene and polypropylene)  S.R.O. 398(l)/2015 dated 08 May 2015 (tax rate for LNG imported for servicing CNG sector and fertilizer produced by using imported LNG)  S.R.O. 1125(l)/2011 dated 31 December 2011 (zero rated / reduced tax rates for persons doing business in textile, carpets, leather, sports and surgical goods sectors). Moreover, in order to resolve the issue of increased sales tax refunds of exporters due to withdrawal of zero-rating on inputs, the scope of Expeditious Refund System is proposed to be extended with automated payment on generated RPOs. Main features of the newly proposed Chapter V-A in Sales Tax Rules, 2006 are as under (Sales Tax circular No. 01 of 2019): Filing and Processing of refund claims - The data provided in the monthly return shall be treated as data in support of refund claim and no separate electronic data shall be required to be provided. The amount specified in column 29 of the return, as prescribed in the form STR-7, shall be considered as amount claimed, once the return has been submitted along with all prescribed annexes thereof: Provided that the claimant will be able to submit his return without Annex-H and the same may be filed separately at any time but not later than one hundred and twenty days of submission of the return without Annex-H. The date of submission of Annex-H shall be considered as the date of filing of refund claim. Provided further that the period of one hundred and twenty days, as aforesaid, may be extended for a period not exceeding sixty days, by the Commissioner having jurisdiction, for reasons to be recorded in writing on the basis of an application made by the claimant.

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SALES TAX Risk management in refund processing - After submission of refund claim, in the aforesaid manner, the same shall be processed by Risk Management System (RMS). Based on the parameters in RMS, a refund claim shall be routed to the processing module referred to as Fully Automated Sales Tax e-Refund (FASTER). The claims that do not fulfil RMS parameters for processing through FASTER module shall be routed for processing under Chapter V of the Sales Tax Rules, 2006. Processing in FASTER module - The claims routed to FASTER module shall be electronically processed. The data in the refund claim shall be scrutinized and verified by the system and the payable refund amount shall be determined on the basis of input consumed in exports or supplies. The refund payment order (RPO) of the amount found admissible shall be generated and the same shall be electronically communicated direct to the State Bank of Pakistan, within seventy-two hours of submission of claim, for onward advice to the respective banks for credit into the notified account of the claimant. Provided that in case of refund claim of a commercial exporter, the payment of such refund shall be made after the realization of export proceeds. Provided further that the part of the refund claim that is not verified or not found admissible shall be subjected to system validation checks every week and RPO shall be generated for the amount found valid during each validation check. After every validation process, the information regarding RPO generated, if any, as well as the objections shall be communicated by the system to the refund claimant and also to the concerned RTO or LTU for information. RPO so generated shall be communicated to the State Bank of Pakistan for payment in the aforesaid manner. After eight validation checks, including the initial one, if any amount still remains un-cleared, the same shall then be processed under STARR module as referred to in Chapter V. S.R.O. 697(I)/2019 DATED 29 JUNE 2019 (EFFECTIVE FROM 01 JULY 2019) The FBR has fixed the minimum value of supply for following locally produced goods: Sr. No. 1. 2. 3. 4. 5.

Goods

Value

Steel Bars Steel Billets Steel Ingots/bala Ship plates Other re-rollable iron and steel scrap

Rs. Rs. Rs. Rs. Rs.

83,000 74,000 72,000 72,000 47,000

per per per per per

metric metric metric metric metric

ton ton ton ton ton

S.R.O. 698(I)/2019 DATED 29 JUNE 2019 (EFFECTIVE FROM 01 JULY 2019) SALES TAX RULES, 2006 Certain rules regarding application for registration have been substituted. Moreover, rules under new Chapter XIV-D â€œWITHHOLDING OF SALES TAX BY THE RECIPIENT OF SUPPLYâ€? have been inserted for the purpose of deduction and deposit of sales tax under Eleventh Schedule to the Act and Islamabad Capital Territory (Tax on Services) Ordinance, 2001, etc.

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FEDERAL EXCISE DUTY Duties specified in the First Schedule to be levied

Section 3(5A)

New concept of monthly minimum production in respect of goods, specified in the Fourth Schedule has been introduced. Minimum production for a month shall be determined on the basis of a single or more inputs as consumed in the production process and if minimum production so determined exceeds the actual supplies for the month, such minimum production shall be treated as quantity supplied during the month and the liability to pay duty shall be discharged accordingly. Offences, penalties, fines, and allied matters

Section 19(2)(d)

This sub-section has been substituted to impose penal provisions on a person who sells cigarettes in retail at a price lower than the retail price plus the amount of sales tax as printed thereon. The penalty may attract either fine up to twenty thousand rupees or imprisonment upto five years or both. Proceedings against authority and persons

Section 19A

Under this new section, the FBR shall prescribe rules to initiate criminal proceedings against its officials who willfully and deliberately commit or omit an act that results in undue benefit or advantage to the authority or officials or to any other person. Fee and service charges

Section 49

The Federal Government may levy fee and service charges for valuation, in respect of any other service or control mechanism provided by any formation under the control of the FBR, including ventures of public-private partnership. FIRST SCHEDULE TABLE â€“ I (EXCISABLE GOODS) Description and duty on the following goods have been substituted as follows: Sr. No.

Heading / subheading No.

Description of goods

Edible oils excluding deoxidized soybean

Vegetable ghee and cooking oil (a) in retail packing

15.07 to 15.18 Respective heading

(b) not in retail packing

Rate of duty Seventeen percent ad val [Previously 16%] Seventeen percent of retail price [Previously 16%] Seventeen percent ad val [Previously 16%]

Aerated waters

2201.1020

Thirteen percent of retail price [Previously 11.5%]

Aerated waters, containing added sugar or other sweetening matter or flavored

2202.1010

Thirteen percent of retail price [Previously 11.5%]

Aerated waters if manufactured wholly from juices or pulp of vegetables, food grains or fruits and which do not contain any other ingredient, indigenous or imported, other than sugar, coloring materials, preservatives or additives in quantities.

Respective headings

Thirteen percent of retail price [Previously 11.5%]

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FEDERAL EXCISE DUTY Sr. No.

Heading / subheading No.

Description of goods

Rate of duty

Un-manufactured tobacco

24.01

Ten rupees [Previously Rupees 300] per kilogram

Locally produced cigarettes if their on-pack printed retail price exceeds five thousand nine hundred and sixty rupees [Previously Rupees 4,500] per thousand cigarettes.

24.02

Rupees five thousand two hundred [Previously Rupees 4,500] per thousand cigarettes

10.

Locally produced cigarettes if their on-pack printed retail price does not exceed five thousand nine hundred and sixty rupees [Previously exceeds Rupees 2,925 but does not exceed Rupees 4,500] per thousand cigarettes Portland cement, aluminous cement, slag cement, super sulphate cement and similar hydraulic cements, whether or not coloured or in the form of clinkers

24.02

Rupees one thousand six hundred and fifty [Previously Rupees 1,840] per thousand cigarettes

25.23

Two rupees [Previously Rupees 1.50] per kilogram

2711.1100

Ten rupees per Million British Thermal Unit (MMBTu) [Previously Rupees 17.18 per hundred cubic meters]

13.

31.

Liquefied Natural Gas

55.

Imported motor cars, SUVs and other motor vehicles, excluding auto rickshaws, principally designed for the transport of persons (other than those of headings 87.02), including station wagons and racing cars: (a) of cylinder capacity up to 1000cc (b) of cylinder capacity from 1001cc to 1799cc (c) of cylinder capacity 1800cc to 3000cc (d) of cylinder capacity exceeding 3000cc

87.03

Locally manufactured or assembled motor cars, SUVs and other motor vehicles, excluding auto rickshaws principally designed for the transport of persons (other than those of headings 87.02), including station wagons and racing cars: (a) of cylinder capacity up to 1000cc (b) of cylinder capacity from 1001cc to 2000cc (c) of cylinder capacity 2001cc and above

87.03

55B.

2.5% ad val. 5% ad val. 25% ad val. 30% ad val.

2.5% ad val. 5% ad val. 7.5% ad val.

Following new entries have been inserted: Sr. No. 57.

Description of goods Fruit juices, syrups and squashes, waters containing added sugar or sweetening matter etc. excluding mineral and aerated waters

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Heading / subheading No.

Rate of duty

Respective headings

Five percent of retail price.

RIAZ AHMAD & COMPANY Chartered Accountants

FEDERAL EXCISE DUTY Sr. No. 58.

Description of goods

Heading / subheading No.

Rate of duty

Steel Billets, ingots, ship plates, bars and other long re-rolled products

Respective headings

Seventeen percent ad val.

Entries No. 10a and 54 of Table-I relating to duty at the rate Rupees 1,250 per thousand cigarettes on locally produced cigarettes if their on-pack printed retail price does not exceed two thousand nine hundred and twenty-five rupees per thousand cigarettes falling under respective heading 24.02 and duty at the rate of Rupees 0.40 per Kg. on oilseeds have been omitted. TABLE – II (EXCISABLE SERVICES) Facilities for travel

Sr. No. 3(a)

Rate of duty on services provided or rendered in respect of travel by air of passengers within the territorial jurisdiction of Pakistan (PCT heading 9803.1000) over long routes has been reduced to fifteen hundred rupees from two thousand rupees and over short routes has been reduced to nine hundred rupees from twelve hundred and fifty rupees. SECOND SCHEDULE (Goods on which duty is collectible under sales tax mode with entitlement for adjustment with sales tax and vice versa) Following new item has been inserted to collect duty under sales tax mode: Sr. No. 4.

Description of Goods

Heading / subheading Number

Steel Billets, ingots, ship plates, bars and other long re-rolled products

Respective headings

THIRD SCHEDULE - (CONDITIONAL EXEMPTIONS) TABLE – II (Services) Telecommunication services (PCT 98.02)

Sr. No. 2(i) & (ii)

By omitting entry 2(i) of Table-II, exemption from duty available to internet services whether dialup or broadband including email services, Data Communication Network services (DCNs) and value added data services, has been withdrawn. Moreover, by amending entry No. 2(ii) of this Table, exemption from duty available to international leased lines or bandwidth services provided by foreign satellite companies has been withdrawn. THE FOURTH SCHEDULE - (Minimum Production) (SUB-SECTION 5A OF SECTION 3) A new schedule has been inserted to introduce the concept of minimum production for steel products as reproduced below: “The minimum production for steel products shall be determined as per criterion specified against each in the Table below:

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RIAZ AHMAD & COMPANY Chartered Accountants

FEDERAL EXCISE DUTY Table Sr. No.

Product

Production criteria

Steel billets and ingots

Steel bars and other re-rolled long profiles of steel Ship plates and other re-rollable scrap

One metric ton per 700 kwh of electricity consumed One metric ton per 110 kwh of electricity consumed 85% of the weight of the vessel imported for breaking

Procedure and conditions: i.

Both actual and minimum production, and the local supplies shall be declared in the monthly return. In case, the minimum production exceeds actual supplies for the month, the liability to pay duty shall be discharged on the basis of minimum production: Provided that in case, in a subsequent month, the actual supplies exceed the minimum production, the registered person shall be entitled to get adjustment of excess duty on account of excess of minimum production over actual supplies: Provided further that in a full year, as per financial year of the company or registered person, or period starting from July to June next year, in other cases, the duty actually paid shall not be less than the liability determined on the basis of minimum production for that year and in case of excess payment no refund shall be admissible: Provided also that in case of ship-breaking, the liability against minimum production, or actual supplies, whichever is higher, shall be deposited on monthly basis on proportionate basis depending upon the time required to break the vessel.

ii.

The payment of FED on ship plates in aforesaid manner does not absolve ship breakers of any tax liability in respect of items other than ship plates obtained by ship-breaking.

iii.

The melters and re-rollers employing self-generated power shall install a tamperproof meter for measuring their consumption. Such meter shall be duly locked in room with keys in the custody of a nominee of the Commissioner Inland Revenue having jurisdiction. The officers Inland Revenue having jurisdiction shall have full access to such meter.

iv.

The minimum production of industrial units employing both distributed power and self-generated power shall be determined on the basis of total electricity consumption.â€?

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PUNJAB SALES TAX ON SERVICES ACT, 2012 Tax credit not allowed

Section 16B(1)(g) & (h)

Registered person shall not be entitled to claim input tax incurred with respect to goods and services liable to sales tax at a rate lesser than 15%. Determination of minimum tax liability

Section 24A

An officer of the Authority has been empowered to determine the minimum tax liability where a registered person fails to file a return. Offences and penalties

Section 48(2)

Penalties have been inserted for certain offences which include failure or refusal to issue sales tax invoice, failure to intimate changes in; (i) particulars of registration, (ii) business and branch offices addresses (iii) business bank accounts within fourteen days and failure to issue electronic invoice. Monitoring or tracking by electronic or other means

Section 59B(2A)

The Authority has been empowered to devise, implement and declare mandatory an electronic invoicing system for issuance of tax invoices by a registered person or class of registered persons or a service or a class of services. Appeal to the Appellate Tribunal

Section 66(1)

Any person including an officer not below the rank of Additional Commissioner aggrieved by any order passed by: (i) the Commissioner (Appeals) or (ii) the Commissioner or (iii) Authority, may prefer an appeal within 30 days of receipt of such decision before the Appellate Tribunal. Recovery of arrears of tax

Section 70(1)(c)

The officer of the Authority already has powers to attach any personâ€™s bank accounts by a notice in writing to any bank and recover the amount of tax payable. Now, the officer has also been authorized to recover such amount without attachment of bank accounts. AMENDMENTS IN SECOND SCHEDULE The basis of taxation of following taxable services have been changed as follows: Sr. No. 15.

54.

Description

Rate of tax

(i) Services provided by property developers, builders, promoters excluding actual purchase value or documented cost of land.

8% without input tax adjustment or 16% with input tax adjustment [Previously was Rupees 100 per square yard for land development and Rupees 50 per square feet for building construction]

(ii) Affordable housing services provided under Government sponsored housing programs.

5% without input tax adjustment or 16% with input tax adjustment

Facilities for travel originating from Punjab by air for domestic and international travel excluding Hajj, Umrah, diplomats and supernumerary crew.

5% without input tax adjustment [Previously rate of tax was per ticket]

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PUNJAB SALES TAX ON SERVICES ACT, 2012 Following new taxable services have been brought into tax net: Sr. No.

Particulars of Services

Classification

Rate of tax

Respective headings Respective headings

16%

64.

Dress designing and stitching services.

65.

Rental of bulldozers, excavators, cranes, construction equipment, scaffolding, framework and shuttering, generators, storage containers, refrigerator, shelf or rack renting, etc.

66.

Services in respect of treatment of textile, leather but not limited to dyeing services, edging and cutting, cloth treating, water proofing, embroidery, engraving, fabric bleaching, knitting, leather staining, leather working, pre-shrinking, colour separation services, pattern printing and shoe making services. Apartment house management, real estate management and services of rent collection.

Respective headings

16%

Respective headings

16%

(i) Medical consultation / visit fee exceeding Rupees 1,500 per consultation / visit of doctors, medical practitioners and specialists. (ii) Bed / room charges of hospitals exceeding Rupees 6,000 per day per bed / room.

9815.1000 and other Respective headings

5% without input tax adjustment

67. 68.

16%

Moreover, services of interior designers and services provided in field of amusement parks, arcades and other recreation facilities have also been included in taxable services subject tax at the rate of 16%.

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RIAZ AHMAD & COMPANY Chartered Accountants

PUNJAB AGRICULTURAL INCOME TAX ACT, 1997 The First Schedule and Second Schedule have been entirely substituted and tax rates have been increased substantially by the Act as given below: THE FIRST SCHEDULE [Section 3(1)] Sr. No. (1)

Rate of tax per acre

Description Slab of total cultivated land, computed rate of tax per acre as irrigated land, by treating one acre of irrigated land as equal to two acre of unirrigated land, excluding mature orchards. (i) Not exceeding 12½ acres

Nil

(ii) Exceeding 12½ acres but not exceeding 25 acres

Rs. 300

(iii) Exceeding 25 acres but not exceeding 50 acres

Rs. 400

(iv) Exceeding 50 acres

Rs. 500

(2) Mature orchards: (i) Irrigated

Rs. 600

(ii) Unirrigated

Rs. 300 THE SECOND SCHEDULE [Section 3(3)]

RATES OF TAX ON TOTAL AGRICULTURAL INCOME The rate of tax on total agricultural income shall be as under: Sr. No.

Description

Rate of tax

(1)

Where the total income does not exceed Rs. 400,000

(2)

Where the total income exceeds Rs. 400,000 but does not exceed Rs. 800,000

Rs. 1,000

(3)

Where the total income exceeds Rs. 800,000 but does not exceed Rs. 1,200,000

Rs. 2,000

(4)

Where the total income exceeds Rs. 1,200,000 but does not exceed Rs. 2,400,000

5% of the amount exceeding Rs. 1,200,000

(5)

Where the total income exceeds Rs. 2,400,000 but does not exceed Rs. 4,800,000

Rs. 60,000 plus 10% of the amount exceeding Rs. 2,400,000

(6)

Where the total income exceeds Rs. 4,800,000

Rs. 300,000 plus 15% of the amount exceeding Rs. 4,800,000

Provision of minimum tax of Rupees 2,000 on amount exceeding Rupees 800,000 should have been made part of the above table. Last date for filing of agricultural income tax return is 30th day of September next following the income year. (Rule 5)

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RIAZ AHMAD & COMPANY Chartered Accountants

ISLAMABAD CAPITAL TERRITORY (TAX ON SERVICES) ORDINANCE, 2001 By amendment in the Schedule, the rate of tax on call centres has been reduced to 17% from 18.5% and following new services have been brought into tax net: Sr. No. 43. 44. 45. 46. 47. 48.

49. 50. 51. 52. 53. 54. 55. 56. 57. 58.

Description Advertisement on hoarding boards, pole signs and signboards, and websites or internet Services provided by landscape designers Sponsorship services Services provided or rendered by legal practitioners and consultants Services provided by accountants and auditors Service provided or rendered by Stockbrokers, future brokers and commodity brokers, money exchanger, surveyors, outdoor photographers, event photographers, videographers, art painters, auctioneers (excluding value of goods) and registrar to an issue

Services provided by race clubs: Entry / admission and other services Services provided or rendered by corporate law consultants Visa processing services, including advisory or consultancy services for migration or visa application filing services Debt collection services and other debt recovery services Supply chain management or distribution (including delivery) services Services provided or rendered by persons engaged in inter-city transportation or carriage of goods by road or through pipeline or conduit Ready mix concrete services Public relation services Training or coaching services other than education services Cleaning services including janitorial services, collection of waste and processing of domestic waste

PCT heading

Rate of tax

9802.9000

16%

9814.4000 9805.9100 9815.2000 9815.3000 9819.1000, 9819.2000, 9819.5000, 9819.7000, 9819.8000, 9819.9100, 9819.9500 and 9819.9090

16% 16% 16%

16%

9815.9000

16%

9822.2000, 9822.3000 and 9822.9000

16% 16% 16%

16%

Further, all the provisions of the Sales Tax Act, 1990, and rules made and notifications, orders and instructions issued there under shall, mutatis mutandis, apply to the collection and payment of tax under this Ordinance in so far as they relate to: a) b) c) d) e) f)

manner, time and mode of payment, registration and de-registration; keeping of records and audit; enforcement and adjudication; penalties and prosecution; and all other allied and ancillary matters.

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RIAZ AHMAD & COMPANY Chartered Accountants

SINDH SALES TAX ON SERVICES ACT, 2011 Special procedures and tax withholding provisions

Section 13(3)

Withholding agents have been made personally liable to pay amount of tax and default surcharge in case of failure either to withhold or deposit of tax withheld. Records

Section 26(1)

Registered person is now also required to maintain records of tax invoices, debit and credit notes issued and received and records of custom documents (GDs), etc. Audit proceedings

Section 28

The Auditor SRB has been empowered to conduct the audit of a registered person. Further, an Officer of SRB, with permission of the Commissioner, can conduct audit in the place of business or the office of registered person directing him to produce the records and documents as indicated in notice. Offences and penalties

Section 43(2A) & (2B)

Following penalties have been added in this section: 1. The person shall pay a penalty of twenty-five thousand rupees on first default and fifty thousand rupees for each subsequent default if the person fails or refuses to issue tax invoice. 2. On failure to comply with e-invoicing system, the person shall pay a penalty upto one hundred thousand rupees but not less than twenty-five thousand rupees. In case of three consecutive defaults, the place of business shall liable to be sealed in the aforesaid both cases. Procedure in appeal

Section 58(4)

The power of Commissioner (Appeals) to grant stay against recovery of tax demand has been enhanced from 60 days to 120 days in aggregate. Moreover, the Commissioner (Appeals) may now grant stay of the whole or any part of the due amount of sales tax. Recovery of arrears of tax

Section 66(1)

Recovery proceedings by any officer of SRB shall not be initiated until the expiry of period of 30 days from the date of assessment order. SECOND SCHEDULE (Taxable services) The following services have been brought into tax net under the Act: Tariff heading

Description

Rate of Tax

9806.6

Renting of machinery, equipment, appliances and other tangible goods

13%

9812.7000 and respective headings 9821.2000 9846.0000 to 9855.0000

FINANCE ACT 2019

Other specified telecommunication services, etc.

19.5%

Indoor sports and games centers

13%

- Cab aggregator, - warehouse or depot for storage or cold storage, training, - actuarial, - mining of minerals and allied and ancillary, - site preparation and clearance and excavation and earth moving and demolition, - waste collection, transportation, processing and management, - vehicle parking and valet, - electric power transmission, - insurance agents services, respectively.

13%

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KHYBER PAKHTUNKHWA FINANCE ACT, 2013 – SALES TAX ON SERVICES Definitions

Section 2(37)(b) & (55A)

The definition of ‘place of business’ has been broadened to include any economic activity carried on through virtual presence or a website or a web-portal or through any other form of e-commerce by whatever name called. The term ‘unregistered’ has been defined to mean a person who is liable to be registered under the Act but is actually not registered and does not hold Khyber Pakhtunkhwa Sales Tax Registration Number (KNTN). Application of principles of origin and reverse charge in certain situations

Section 20(2)

The recipient of taxable services if registered, is now required to deduct the amount of tax to the extent as prescribed by regulations and pay the same to Government. Previously, the registered person was required to deduct the whole amount of tax in respect of services received. Scope of tax and allied matters

Section 26(4)

A new proviso has been inserted to disallow claim of input tax, if payment of a transaction exceeding Rupees 50,000 (excluding payment for utility bill) is not made through a crossed cheque drawn in favor of service provider or through any other banking instrument from the business bank account of the service recipient to the business bank account of service provider. Offences and penalties

Section 64(2)

Where a person fails to withhold or withholds but fail to deposit the tax shall be liable to pay penalty of twenty-five thousand rupees or 5% of the tax involved, whichever is higher. Substitution of First and Second Schedules The Act has entirely substituted the First Schedule and Second Schedule of the Khyber Pakhtunkhwa Finance Act, 2013. Nature / classification of services and tax rates thereon have been revised substantially. Further, the Act has also outlined principles of application and interpretation of Second Schedule and all allied matters in detail which shall be binding and followed as integral part of the Second Schedule.

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RIAZ AHMAD & COMPANY Chartered Accountants

CONTACT PARTNERS For further explanations, please contact following partners: LAHORE:

Principal Office

Mr. Sarfraz Mahmood FCA, FITM, FICS

10-B, Saint Mary Park Main Boulevard, Gulberg-III LAHORE-54660 Phones : (042) 35718137-9 Fax : (042) 35718136 E-Mail : racolhr@racopk.com

Syed Mustafa Ali FCA Mr. Muddassar Mehmood FCA, ACA (England & Wales) Mr. Mubashar Mehmood FCA Mr. Atif Anjum FCA

Other offices at: ISLAMABAD:

2-A, ATS Centre, 30-West Fazal-e-Haq Road, Blue Area ISLAMABAD Phones : (051) 2274121-22 Fax : (051) 2278859 E-Mail : racoisd@racopk.com

Mr. Raheel Arshad FCA

FAISALABAD:

560-F, Raja Road, Gulistan Colony FAISALABAD-38000 Phones : (041) 8861042, 8863644 Fax : (041) 8863611 E-Mail : racofsd@racopk.com

Mr. Liaqat Ali Panwar FCA, FITM, FICS

KARACHI:

108-109, Park Avenue, Block-6, P.E.C.H.S. Shahrah-e-Faisal KARACHI-75400 Phones : (021) 34310826-7, Fax : (021) 34313951 E-Mail : racokhi@racopk.com

Mr. Inaam Ellahi Sheikh FCA, FCA (England & Wales)

Website

www.racopk.com

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Mr. Bilal Ahmad ACA

Mr. Muhammad Waqas ACA