Advance Taxation
CHAPTER
1
Basic concepts of taxation
Contents
1 Operation of the Ordinance and scope of tax
2 Tax year and Return filing dates
3 Mechanism for determination of taxable income
4 Person
5 Residential status
6 Determination of tax liability
7 Whether to form a company or AOP-Tax planning
8 Common rules
9 Circulars, notification, advance ruling and treaties
10 Taxpayer’s registration and Income tax authorities
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the Deputy Commissioner in the Azad Jammu and Kashmir or Gilgit Baltistan may
forward a certificate of recovery to the Commissioner and, on receipt of such
certificate, the Commissioner shall recover the tax referred to in the certificate.
Perusal of the aforesaid provision of law rises following questions in our minds:
What is a tax year
What is taxable income and how it is computed
Who is person
What are specified rates of tax
What is the procedure for levy of tax
These primary questions are answered in the upcoming paragraphs.
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Tax year
Return filing dates
A taxpayer may get permission from Commissioner to adopt special tax year
subject to fulfilment of following conditions laid down in section 74 ibid:
A taxpayer may apply to the Commissioner for change of tax year from normal
tax year to special tax year or from special tax year to normal tax year and the
same can be granted only if the person has shown a compelling need subject
to any conditions that may be imposed by the authority.
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A tax year can be a period of less than twelve months under some special
circumstances. For example in section 117(2), a taxpayer has to file a return on
discontinuance of business for the period commencing on the first day of the tax
year to the date of discontinuance of business, even if it comprises, say 50 days.
This period will be treated as a separate and distinct tax year.
In case of company
With tax year ending any time between On or before the 31st day of December
the first day of January and thirtieth day next following the end of tax year to
of June which the return relates
In any other case On or before the 30th day of September
next following the end of tax year to
which the return relates
Note: Return filing date is also considered as assessment date (Deemed assessment)
in case return filed is complete in all respects as prescribed in section 114.
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Exercise:
(a) Determine the tax year and return filing date in respect of each accounting
periods mentioned below:
(i) 1.09. 2016 to 31.08.2017
(ii) 1.01.2017 to 31.12.2017
(iii) 1.04.2017 to 31.03.2018
(iv) 1.05.2015 to 31.04.2016
(v) 1.07.2015 to 30.06.2016
(b) Determine the financial year in respect of each tax year mentioned below:
(i) Tax year 2017, year end is 30 September
(ii) Tax year 2018, year end is 31 August
(iii) Tax year 2018, year end is 28 February
(iv) Tax year 2016, year end is 31 July
Answer
(a) Tax Years:
For all the three cases (i), (ii) and (iii) mentioned above, relevant tax year will be
2018 i.e. calendar year relevant to normal tax year [1.07.2017 to 30.06.2018) in
which the closing date ( 31.08.2017, 31.12.2017, 31.03.2018) of special year falls.
For case (iv), relevant tax year will be 2016 i.e. calendar year relevant to normal tax
year in which the closing date (31.04.2016) of special tax year falls.
For case (v) mentioned above, relevant tax year will be 2016 i.e. calendar year in
which the closing date (31.06.2016) of normal tax year falls.
Definition of income
Mechanism for determination of taxable income
Where the total deductions allowed to a person for a tax year under a head of
income exceed the total of the amounts derived by the person in that year that are
chargeable to tax under that head, the person shall be treated as sustaining a loss
for that head for that year of an amount equal to excess.
The income of a resident person under a head of income shall be computed by
taking into account amounts that are Pakistan-source income and amounts that
are foreign-source income.
The income of a non-resident person under a head of income shall be computed
by taking into account only amounts that are Pakistan-source income.
In view of aforesaid provisions of law, the equation to determine the taxable
income is a under:
Illustration
Source of Income Resident Non Resident
Pakistan source Taxable Taxable
Foreign source Taxable Not Taxable
Note: The principles for calculating Pakistan and foreign source income under a
particular head are different under the Ordinance. Therefore, while calculating total
income under a particular head, foreign and Pakistan source income should be
separately calculated. Foreign expenses should only be deducted against foreign
income and vice versa. For instance income from other source will be calculated as:
Income from other source = Net (foreign + Pakistan) income from other source
The total income of a person for a tax year shall be the sum of the
Person’s income under all heads of income for the year; and
Person’s income exempt from tax under any of the provisions of Income Tax
Ordinance, 2001.
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agent from any legal action under the law (i.e. expense disallowance and
recovery of default surcharge).
(vi). There is no refund of the non-adjustable tax collected or deducted at source
unless such tax is in excess of the amount of final tax for which the taxpayer
is chargeable and
(vii). An assessment is treated to have been made and the person is not required
to furnish a return of income in respect such income.
Where the tax collected or deducted is final tax under any provision of the Ordinance
and separate rates for filer and non-filer have been prescribed for the said tax, the
final tax shall be the tax rate for filer and the excess tax deducted or collected on
account of higher rate of non-filer shall be adjustable in the return filed for the relevant
tax year
Various incomes which are treated as final tax liability of the person under the
Income Tax Ordinance,2001 are:
(i) Execution of contract by non-resident u/s 152 subject to exercising the option.
(ii) Sale of goods by individual, AOP and trading companies under section 153.
(iii) Services of stitching, dying, printing, washing, sizing and weaving u/s 153.
(iv) Advertisement services by print media u/s 153.
(v) Exports u/s 154.
(vi) Prizes and winnings under section 156.
(vii) Commercial importer under section 148(7).
(viii) Person selling petroleum products to petrol pump operator under section
156A.
(ix) CNG stations under section 234A.
(x) Commission and brokerage under section 233.
(xi) Tax collected on the lease of the rights to collect toll under section 236A.
(xii) Issue of bonus shares under section 236M, 236N.
(xiii) Payment to residents for use of machinery under section 236Q.
Under the minimum tax regime we calculate tax liability under both normal and final
tax regime in the following manner:
FTR = Gross receipts x applicable tax rate A
NTR = (Gross receipts – expenses) x applicable tax rate B
Tax liability under Minimum tax regime will be higher of A or B
Various incomes which are treated as minimum tax under the Income Tax
Ordinance,2001 are:
(i). Tax collected at import stage on import of plastic raw material by industrial
undertaking, edible oil and packing material under section 148(8)).
(ii). Tax collected upto the electricity bill amount of Rs.360,000 per annum for
a person other than company under section 235 on commercial and
industrial consumer
(iii). Tax deduction at source @ 8%/10% from gross amount of service rendered
under section 153 for all persons. However companies in few sectors have
the option to opt out of minimum tax regime.
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4 PERSON
Section overview
Person
Whether to form a company or AOP-Tax planning
Definition: Person
an individual;
a company or association of persons incorporated, formed, organised or
established in Pakistan or elsewhere;
The Federal Government, a foreign government, a political subdivision
of a foreign government or public international organisation
Definition of person includes different entities so these are defined and discussed
hereunder:
Definition: Company
“Company” means:
a company as defined in the Companies Ordinance, 1984
a small company as defined in section 2 of Income Tax Ordinance,2001
a body corporate formed by or under any law in force in Pakistan;
a Modaraba;
a body incorporated by or under the law of a country outside Pakistan
relating to incorporation of companies;
a foreign association, whether incorporated or not, which the Board has,
by general or special order, declared to be a company for the purposes
of this Ordinance;
a Provincial Government; or
a local Government in Pakistan; or
a Co-operative society, a Finance society or any other society
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a non-profit organisation
a trust, an entity and a body of persons established or constituted by or
under any law for the time being in force
“Public company” means —
(a) a company in which not less than fifty per cent of the shares are held by
the Federal Government or Provincial Government;
(b) a company in which not less than fifty per cent of the shares are held by
a foreign Government, or a foreign company owned by a foreign
Government;
(c) a company whose shares were traded on a registered stock exchange in
Pakistan at any time in the tax year and which remained listed on that
exchange at the end of that year; or
(d) a unit trust whose units are widely available to the public and any other
trust as defined in the Trusts Act, 1882 (II of 1882);
For tax year 2018 onwards rate of tax imposed on the taxable income of the public
company other than a banking company will be 30%.
For Banking companies income tax is chargeable at flat rate of 35% for all tax years.
For Modaraba rate of income tax is 25% for financing activities.
Note: A Public unlisted company under the Companies Ordinance, 1984 will be
considered as private company under the Income Tax Ordinance, 2001 unless it
fulfils other criterial of 50% Government holding.
“Unit trust” means any trust under which beneficial interests are divided into units
such that the entitlements of the beneficiaries to income or capital are determined
by the number of units held. In Pakistan all open ended mutual funds are unit trusts.
“Private company” means a company that is not a public company.
For tax year 2018 onwards rate of tax imposed on the taxable income of the private
company will be 30%.
"Small Company" means a company registered on or after the first day of July,
2005, under the Companies Ordinance, 1984 which,-
(i) has paid up capital plus undistributed reserves not exceeding fifty
million rupees;
(ii) has employees not exceeding two hundred and fifty any time during the
year;
(iii) has annual turnover not exceeding two hundred and fifty million
rupees; and
(iv) is not formed by the splitting up or the reconstitution of a company
already in existence;
Rate of tax imposed on the taxable income of the small company is 25%.
Note: A small company can be private or a public company.
"Start-up" To strengthen and promote the local IT industry of Pakistan a concept
of Start-up is introduced through Finance Act, 2017. Start-up means a business of
resident individual, AOP or company that commenced on or after 01 July 2012 and
person is engaged or intends to offer technology driven products or services to any
sector of the economy subject to following conditions:
(i) It is registered with and duly certified by Pakistan Software Export
Board
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(ii) It has turnover of less than Rs. 100 Million in each of last five tax years
Profits and gains of any business fulfilling the above conditions is exempt from tax
in the tax year in which it is certified by PSEB and for following two tax years. Start-
up are also exempt from minimum tax under section 113 and from withholding tax
on receipts from local sales and services under section 153. (Ref: Sec 2(62A), Clause
143 Part I, 11A and 43F Part IV of Second Schedule)
Note: This exemption is available in case of local IT sales. Income from export
of computer software, IT services or IT enabled services is already exempt under
Second Schedule.
Tax credits for reduction in tax rates of companies:
Tax credits are tax reliefs provided under the law to the tax payer. Tax credits are
deducted from tax liability. Further unless specifically stated, tax credits are only
available against income assessable under the normal tax regime. Under the
Income Tax Ordinance, 2001 tax credits for reduction in tax rates are as follows:
(a) Tax credit for enlistment (Sec 65C)
Where a taxpayer being a company opts for enlistment in any registered stock
exchange in Pakistan, a tax credit shall be allowed for the tax year in which the
said company is enlisted and for the following three tax year. Tax credit equal to
20% of the tax payable is allowed for first two tax years and 10% of tax payable
for last two tax years.
(b) Sharia complaint companies already listed on stock exchange (Clause 18B
Part II of Second Schedule)
The rate of tax shall be reduced by 2% in case of a company whose shares are
traded on stock exchange if:
(i) it fulfils prescribed shari’ah compliant criteria approved by State Bank of
Pakistan, Securities and Exchange Commission of Pakistan and the Board;
(ii) derives income from manufacturing activities only;
(iii) has declared taxable income for the last three consecutive tax years; and
(iv) has issued dividend for the last five consecutive tax years.
Further Board through Rule 231H of the Income Tax Rules, 2002 has prescribed
following Shari’ah compliant criteria for a company:
(i) The business of the company shall be Halal i.e. it shall not include
processing or manufacturing of pork, liquor, non-Halal products,
pornographic material or any other activity not permitted by
Shari’ah.
(ii) There should be Riba free financing on the balance sheet of the
company, however the company may be leveraged through Islamic
modes of financing obtained from licensed Islamic financial
institutions.
(iii) All the investments made by the company should be one hundred
percent Shari’ah compliant, therefore, it would not be permissible
for the company to acquire non-Shari’ah compliant instruments or
securities which yield interest or income that is not Halal.
(iv) The company shall be obliged to maintain free float of the company
at thirty percent of the outstanding shares.
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(c) Companies established through foreign direct investment (Clause 18A Part
II of Second Schedule)
The rate of tax shall be reduced to 20% for a company setting up an industrial
undertaking between the first day of July, 2014 to the thirtieth day of June, 2017,
for a period of five years beginning from the month in which the industrial
undertaking is set up or commercial production is commenced whichever is later:
Provided that fifty percent of the cost of the project including working capital is
through owner equity foreign direct investment.
Sec 2(36) “Non-profit organization” means any person other than individual
which is
Tax credit equal to 100% of the tax payable is allowed to non-profit organization
subject to fulfilment of certain conditions mentioned in Section 100C.
Exercise
(a) Briefly state, with reasons, whether or not you consider the below mentioned
companies to be a public company for tax purpose:
(i). PPL is a company incorporated under the Companies Ordinance, 1984 and is
not listed on any stock exchange in Pakistan. 59 per cent of the shares in PPL
are held by BBC Ltd, a company incorporated in United Kingdom. United
Kingdom holds 97% of the shares in BBC Ltd
(ii). XYZ Limited is a public company incorporated under the Companies
Ordinance, 1984 whose shares were traded on the Pakistan Stock Exchange
(PSX) from 01 August 2017 until 29 June 2018 on which date the company was
delisted on the exchange.
(iii). The Provincial Government of NWFP holds 50% of the shares in ABC Ltd, a
public company under the Companies Ordinance, 1984. ABC Ltd is not listed
on any stock exchange in Pakistan.
(iv). BRR is a public company under the Companies Ordinance, 1984. 41% of the
shares are held by the Federal Government, 50% by the Government of Saudi
Arabia and 9% by the individuals and group companies. BRR is not listed on
any stock exchange in Pakistan.
(b) Anderson Inc., a public company incorporated under the law of the United
Kingdom relating to the incorporation of companies, has been operating in Pakistan
for over 50 years. The control and management of the Pakistan branch for the
accounting year ended 31 December 2017 was situated wholly outside Pakistan.
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Required:
Briefly state, with reasons whether Anderson Inc. will be assessed as a company for
Pakistan tax purposes for the relevant tax year.
Answer(a)
(i). A public company for Pakistan tax purposes, inter alia means a company in
which not less than 50% of the shares are held by a foreign government or a
foreign company owned by a foreign government. 59% of the shares in PPL
are owned by BBC Ltd, which is a foreign company but BBC Ltd is not wholly
owned by the United Kingdom (foreign government). Therefore PPL is not a
public company for Pakistan tax purpose.
(ii). A company whose shares are traded on a registered stock exchange in Pakistan
at any time in the tax year and which remained listed on that exchange at the
end of that year is a public company for tax purpose.
Though the shares of XYZ Limited were traded on the Lahore stock exchange
during the tax year 2018, XYZ Ltd did not meet the test of being a public
company for tax purpose since its shares were not listed on the Pakistan stock
exchange on 30 June 2018. XYZ Ltd is therefore not a public company for tax
purpose.
(iii). A company in which not less than fifty per cent of the shares are held by the
Federal Government or Provincial Government is a public company for tax
purpose. Since the Provincial Government of NWFP holds 50 percent of the
shares in ABC Ltd, ABC Ltd is a public company for tax purpose
(iv). A public company for Pakistan tax purposes, inter alia means a company in
which not less than 50% of the shares are held by a foreign government,
therefore, BRR is a public company as 50% of the shares are held by
Government of Saudi Arabia.
(b)
As per section 80, a company also mean a body incorporated by or under the law of
a country outside Pakistan relating to incorporation of companies. Therefore
Anderson Inc., will be treated as company for Pakistan tax purpose.
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5 RESIDENTIAL STATUS
Section overview
Resident taxpayer
Resident and non-resident persons
Resident individual
Resident company
Resident association of persons
Exercise:
Explain the residential status of the following persons for the tax year 2017:
(i). Mr. Raza is working as Director Operations in the Ministry of Tourism. On
15 July 2016 he was posted to Pakistan Embassy in Italy for two years.
(ii). Anderson LLC was incorporated as limited liability Company in UK. The
control and management of its affairs was situated wholly in Pakistan.
However, with effect from 01 November 2016, the entire management and
control was shifted to UK.
(iii). On 01 February 2017, Mr. Sameel was sent to Pakistan by his UK based
company to work on a special project. He left Pakistan on 23 August 2017.
(iv). BBL is a non-listed public company incorporated under the
Companies Ordinance, 1984. All the shareholders of the company are
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Answer
(i). Being an employee of Federal Government, Mr. Raza would be treated as
resident irrespective of number of days he stays in Pakistan.
(ii). A company shall be resident if control and management of the affairs of
the company is situated wholly in Pakistan at any time in the year.
Therefore, company is resident irrespective of the fact that it was
incorporated in UK.
(iii). The stay of Mr. Sameel for the purpose of tax year 2017 is 150 days
(28+31+30+31+30). Since his stay in Pakistan is less than 183 days in tax
year 2017, he is non-resident for tax purposes.
(iv). If a company is incorporated or formed by or under any law in force in
Pakistan, it is treated as a resident company. Such company cannot be
treated as non-resident merely on the basis that the control and
management of the affairs of the company were situated abroad.
Therefore, BBL is a resident company.
(v). It is immaterial where he stayed in Pakistan. No. of days shall be counted
from the day of his arrival in Pakistan to the day of his departure in the
following manner:
Accounting period 01 January 2016 to 31 December 2016 (Tax year 2017)
Month No. of days
February 2016 28
March 2016 31
April 2016 30
May 2016 31
June 2016 30
July 2016 31
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August 2016 2
Total 183
(vi) Since the management and control of affairs of Peshawar LLC was
wholly situated in Pakistan during the tax year 2017, it is a resident
company irrespective of the fact that it was incorporated in UAE.
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6.1 Computation of tax liability and tax rates (Sec-4 read with First Sch.)
Income tax shall be imposed on every person having taxable income for each tax
year at the applicable rates as mentioned in first schedule of the Income Tax
Ordinance, 2001
First Schedule of the Income Tax Ordinance,2001 prescribes different tax rates
for different classes of persons in the following manner:
Tax rates for every individual and association of persons except for salaried taxpayer
If a taxpayer is allowed more than one tax credit for a year, the credits shall be
allowed in the following order:
(i). Second Schedule credits e.g. Reduction in tax liability due to senior citizen
allowance, full time teacher allowance etc.
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Important points
Exercise
Any decision to form a company/AOP should be made after taking into consideration the
following:
Company’s income is taxed at flat rate of 30%. Small company is taxable @ 25%,
whereas AOP’s is taxable at varying rate with maximum rate of 35% on income
above Rs.6 million.
Any business expense in the form of salary or any other remuneration to member
is not allowed as an expense to an AOP, whereas same is fully allowed as an
expense to director/shareholder of the company.
AOP is taxed separately from its members and where AOP has paid tax, the
amount received (distributed by AOP) by members out of the said income is
exempt from tax, however it is added for rate purpose only. On the other hand,
company firstly have to pay 30%/25% tax on its taxable profits and then any
distribution out of its after tax profits is treated as dividend and is subject to further
tax @ 15% in the hands of members.
Exercise
Azeem, Arif and Asif are planning to commence a business venture w.e.f 01 July 2017
selling chemicals to corporate clients. They are however not certain whether the
business venture should be in the form of partnership or a limited company. They
intend to make investment and share profit in the ration of 3:2:1 respectively. Further
in case of limited company they would distribute 30% of the after tax profits as
dividends.
Projected profit and loss account for the tax year 2018 is given as follows:
Particulars Rupees
Sales 15,000,000
Profit before tax has been calculated after deducting salaries and wages of Rs. 500,000,
Rs. 700,000 and Rs. 600,000 to be paid to Azeem, Arif and Asif respectively.
Assume that all other expenses deducted in calculating profit after tax are also
admissible under the Income Tax.
Required
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Under the provisions of the Income Tax Ordinance, 2001 advice Azeem, Arif and Asif
on the preferable structure of their business, whether it should be a partnership or a
limited liability company.
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08 COMMON RULES
Section overview
Currency conversion
Receipt of income
Recouped expenditure
Fair market value
Rules to prevent double derivation and double deductions
Cessation of source of income
Apportionment of deductions
Exercise:
Reimbursement of expenses of Rs.5 million to Hiba (Pvt.) Limited (HPL) by the
parent company. Out of 5 million, 2 million pertains to income which is subject to
final tax regime.
Required: Explain the income tax implications in respect of above transaction.
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Answer
Only Rs. 3 million will be considered as income, whereas expense of Rs. 2 million
which pertains to FTR income will not be considered as income as no expense
would have been allowed in previous tax years.
Exercise:
A motor car with accounting and tax written down value of Rs.400,000 and Rs.
500,000 respectively was transferred to a retiring director as a parting gift by HPL Ltd.
The director disposed of the car to an unrelated person two days after its acquisition
by transfer for Rs. 400,000.
Required: Calculate tax gain/loss on disposal in the hands of HPL.
Answer
The tax loss of Rs. 100,000 on disposal of motor car is computed as under:
Tax written down
value 500,000
Consideration
received (400,000)
100,000
As the motor car was gifted by HPL to its director, the fair market value of the
car is treated as consideration received.
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Answer
Law specifically provides that if there is any income that has been derived by a
person in a tax year from a business, activity, investment or other source that has
either ceased before the commencement of that year or during the year and if that
income would have been taxable had there been no
cessation,then the provision of the tax statute would apply as if there was no cess
ation (Ref: Sec 72)
In other words section 72 deems the business, activity, investment or other source
to have been carried on by the person in the tax year in which the income was
derived despite the cessation of the business
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activity, investment or other source.The above amount shall be offered for tax in
the return under the head “Income from business”
Exercise:
Following information is available as per the records of ABC Limited for Tax
Year 2017:
Particulars Amount
(Rupees)
Gross sales 345,800,000
Cost of sales 245,350,000
Gross Profit 100,450,000
Administration and selling 61,015,000
expenses
Other Income-Brokerage & 4,300,000
Commission
Profit before tax 43,735,000
Additional Information:
(i) Breakup of sale is as follows:
Local sales inclusive of sales tax 164,034,000
Exports 181,766,000
(ii) Cost of sales include Freight of Rs.500,000 in respect of exported goods.
Required:
Under the provisions of the Income Tax Ordinance, 2001 and Rules made
thereunder, compute taxable income of ABC Limited for Tax year 2017.
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Answer
ABC Limited
Computation of taxable income
Tax Year: 2016
Local Commissi
Particulars Sales Export on Total
Scheme of taxation NTR FTR FTR
Freight 500
Circulars
Power to issue notifications
Advance ruling
Agreement for avoidance of double taxation
9.2 Power to issue Notifications by Federal Government and Board (Sec 53)
The Board shall within ninety days of the receipt of application in writing by a non-
resident taxpayer, issue to the taxpayer an advance ruling setting out the
Commissioner‘s position regarding the application of the Income Tax Ordinance,
2001 to a transaction proposed or entered into by the taxpayer.
Where the taxpayer has made a full and true disclosure of the nature of all aspects
of the transaction relevant to the ruling and the transaction has proceeded in all
material respects as described in the taxpayer‘s application for the ruling, the ruling
is binding on the Commissioner with respect to the application to the transaction
of the law as it stood at the time the ruling was issued.
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The advance ruling shall be binding on the Commissioner only in respect of the
specific transaction on which such advance ruling is issued and shall continue to
remain in force unless there is a change in facts or in the law on the basis of which
the advance ruling was pronounced.
The advance ruling shall cease to be binding on the Commissioner, if it is
subsequently found to have been obtained by fraud or misrepresentation of facts
about the nature of the transaction on which advance ruling was issued
Where there is any inconsistency between a circular and an advance ruling,
priority shall be given to the terms of the advance ruling.
9.4 Agreements for avoidance of double taxation (Sec 107)
Pakistan has signed treaties for avoidance of double taxation and prevention of
fiscal evasion in relation to taxes on income with a number of countries.
These treaties generally provide for
(i). Relief from the tax payable under this Ordinance
(ii). The determination of the Pakistan-source income of non-resident persons
(iii). Taxpayer’s residential status i.e. when a foreign company is considered to
have a permanent establishment in Pakistan
(iv). Taxation and tax rates applicable to various income streams
(v). Concessions and exemptions and
(vi). Exchange of information for prevention of fiscal evasion
In case there is conflict between the provisions of the Income Tax Ordinance, 2001
or any other law and those of tax treaty, provisions of tax treaty will apply in so far
as these are beneficial to the non-resident person.
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Taxpayer’s registration
Compulsory registration in certain cases
Taxpayer’s registration by Commissioner
Displaying and quoting national tax number
Active taxpayer’s list and taxpayer card
Income Tax Authorities
Every taxpayer is required to apply for registration. The application shall be made
in the prescribed form and in the prescribed manner.
The Commissioner having jurisdiction over a case may also register a taxpayer in
the prescribed manner if so necessitated by the facts of the case.
Taxpayer’s registration scheme shall be regulated through the rules to be notified
by the Board.
From tax year 2015 and onwards, in case of individuals having Computerized
National Identity Card (CNIC) issued by the National Database and Registration
Authority, CNIC shall be used as National Tax Number.”;
10.2 Compulsory registration in certain cases (Section 181AA,)
Any application for commercial or industrial connection of electricity or natural gas shall
not be processed and such connection shall not be provided unless the person applying
for is registered under FBR.
Every person deriving income from business chargeable to tax who has been
issued with a National Tax Number Certificate shall display the person’s National
Tax Number at a conspicuous place at every place of business of the person and
shall also quote the person’s National Tax Number in the following
circumstances, namely:
(i) in all commercial transactions entered into by the person
(iii) in all returns, statements and other documents required to be furnished under
the Ordinance and in any correspondence with the Commissioner; and
(iv) in all documents relating to the person’s business on the following matters,
namely:-
all new connections of utilities, including water, gas, electricity and
telephone;
the entering into a loan with a banking company or financial institution;
the opening of letters of credit; and
the transfer of urban immovable property
10.5 Active taxpayer’s list & Taxpayer card (Sec-181A, 181B, Rule 81B, 81C)
The Board shall have the power to institute active taxpayers ‘list. Further Board
may make a scheme for introduction of a taxpayer honour card for individual tax
payers, who fulfil a minimum criteria.
A person shall be issued taxpayer card only if the person has filed a return.
Board shall issue Taxpayer card by first of March each year which shall be valid
for a period of one year.
Filer (Sec 2(23A)
Filer means a taxpayer whose name appears in the active taxpayers list issued by
the Board from time to time or is holder of taxpayer’s card.
Non-Filer (Sec 2(35C)
Non filer means a person who is not a filer.
Note: To penalise non filer, higher income tax withholding rates have been
prescribed under the Income Tax Ordinance, 2001. However, non-filer can obtain
refund of excess amount deducted on becoming a filer.
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The Board shall publish Active Taxpayers List (ATL) which shall be made
available on the Board's web portal, by first day of March in each financial year.
ATL shall be updated on every Sunday at 24:00 hours.
A person's name shall be included in ATL, if the person has filed a return under
section 114 or a statement under section 115 for the tax year for which the last
date as specified in section 118 (return filing date) falls during immediately
preceding twelve month.
10.6 Income tax authorities (Section 207)
The income tax law provides a complete organisational set up for levy and recovery of
income tax which are described in section 207 as under:
(a) Board
(b) Chief Commissioner Inland Revenue;
(c) Commissioner Inland Revenue;
(d) Commissioner Inland Revenue (Appeals);
(e) Officer of Inland Revenue i.e.
(i). Additional Commissioner Inland Revenue;
(ii). Deputy Commissioner Inland Revenue;
(iii). Assistant Commissioner Inland Revenue;
(iv). Inland Revenue Officer;
(v). Inland Revenue Audit Officer or any other Officer;
(vi). District taxation officer Inland Revenue
(vii). Assistant Director Audit
(f) Special Audit panel
(g) Superintendent Inland Revenue
(i) Inspector Inland Revenue; and
(j) Auditor Inland Revenue.
Board shall examine, supervise and oversee the general administration of this Ordinance.
All the income tax authorities shall be subordinate to the Board.
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