Subject to
Separate Charge,
Final Tax,
and
Fixed Tax
Regimes
of
Income Tax
TAXPAYER‘S FACILITATION GUIDE
Brochure – IR-IT-05 / Updated April, 2014
Our Mission
Enhance the capability of the tax system to collect due
taxes through application of modern techniques,
providing taxpayer assistance and by creating a
motivated, satisfied, dedicated and professional
workforce
Our Values
Integrity
Professionalism
Teamwork
Courtesy
Fairness
Transparency
Responsiveness
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Brochure –IR-IT-05 updated June, 2012 Income subject to Separate Charge, Final Tax and Fixed Tax
Facilitation and Taxpayer’s Education Wing (FATE)
No deduction is allowed for any expenditure Dividend received is subject to deduction of tax at
incurred in deriving such income; source by the person making the payment of
dividend, as explained in our brochure
The amount of the such income is not “Collection and Deduction of Tax at Source”.
reduced by –
– Any deductible allowance; or As general rule, the tax deducted at source from
– The set off of any loss; dividend is non-adjustable tax deducted at
The final tax payable is not reduced by any source and the dividend subject to deduction of
tax credit allowed (foreign tax credit or tax tax at source or the dividend which is exempt
credits on donations, investments etc.); from deduction of tax at source, is chargeable to
tax, if not otherwise exempt, as income subject
The liability of the recipient of such income is to separate charge.
discharged to the extent that –
– In the case of shipping and air The only exception to the above general rule is
transport income, the tax is paid in that in case of a company, the tax deducted at
accordance with section 143 or section source from Dividend is an adjustable tax
144 of the Ordinance (explained deducted at source and the dividend subject to
hereinafter); or deduction of tax or dividend which is exempt from
– In any other case, the final tax payable deduction of tax at source, is chargeable to tax, if
has been deducted at source (please see not otherwise exempt, as ‗income from other
our brochure ―Collection and deduction sources‘.
of Tax Source”); and
If the recipient of such income has no other
source of income than:
– An statement under section 115 of the
Ordinance is required to be furnished by
such person in lieu of a return of income
as required under section 114 (Please
see our brochure ―Obligations to furnish
tax declarations‖); and
– An assessment is treated to have been
made under section 120 of the Ordinance
(Self Assessment).
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Brochure –005 Collection and Deduction of Tax at Source
Facilitation and Taxpayer’s Education Wing (FATE)
Taxation of royalty income in the hands of non- Taxation of fee for technical services income in
residents is governed by Section 6, 8 and 152 of the hands of non-residents is governed by
the Income Tax Ordinance, 2001. Section 6, 8 and 152 of the Income Tax
Ordinance, 2001.
Royalty received by a non-resident person is
subject to final tax at the rate of 15% of gross “Fee for technical services‖ received by a non-
amount of royalty or applicable reduced rate of resident person is subject to final tax at the rate
tax as per tax treaty with the country of such non- of 15% of the gross amount of fee for technical
resident. services or applicable reduced rate of tax as per
tax treaty with the country of such non-resident .
If the property or right giving rise to the royalty is
effectively connected with a permanent If the services giving rise to fee for technical
establishment in Pakistan of the non-resident, services is rendered through a permanent
then such royalty is excluded from the ambit of establishment in Pakistan of the non-resident,
the income subject to separate charge and is then such fee for technical services is excluded
chargeable to tax under the head ‗income from from the ambit of the income subject to
business‘ as taxable income. separate charge and is chargeable to tax under
the head ‗income from business‘ as taxable
Royalty received by a non-resident is subject to income.
deduction of tax at source by the person making
the payment of royalty, as explained in our Fee for technical services received by a non-
brochure “Collection and Deduction of Tax at resident is subject to deduction of tax at source
Source”. by the person making the payment of fee for
technical services, as explained in our brochure
As a general rule, the tax deducted at source from “Collection and Deduction of Tax at Source”.
royalty paid to non-resident is non-adjustable
tax deducted at source and the royalty subject As a general rule, the tax deducted at source from
to deduction of tax at source or the royalty which fee for technical services paid to non-resident
is exempt from deduction of tax at source is is non-adjustable tax deducted at source and
chargeable to tax, if not otherwise exempt, as the fee for technical services subject to
income subject to separate charge. deduction of tax at source or the fee for technical
services which is exempt from deduction of tax at
The only exception to the above general rule is source, is chargeable to tax, if not otherwise
where the royalty is in respect of a property or exempt, as income subject to separate charge.
right effectively connected with a permanent
establishment in Pakistan of the non-resident. The only exception to the above general rule is
In which case the tax deducted at source from where the fee for technical services is in respect
such royalty in an adjustable tax deducted at of a property or right effectively connected with a
source and such royalty subject to deduction of permanent establishment in Pakistan of the
tax at source or such royalty exempt from non-resident, then the tax deducted at source
deduction of tax at source is chargeable to tax, if from such fee for technical services is an
not otherwise exempt, under the head ‗income adjustable tax deducted at source and such fee
from business‘ as taxable income. for technical services subject to deduction of tax
at source or such fee for technical services
exempt from deduction of tax at source is
chargeable to tax, if not otherwise exempt, under
the head ‗income from business‘ as taxable
income.
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Brochure –IR-IT-05 updated June, 2012 Income subject to Separate Charge, Final Tax and Fixed Tax
Facilitation and Taxpayer’s Education Wing (FATE)
Shipping income of non-residents payment of the final tax due on its shipping
income subject to separate charge.
Taxation of shipping income in the hands of non-
residents is governed by Section 7, 8 and 143 of Port clearance
the Income Tax Ordinance, 2001.
The Collector of Customs or other authorized
Shipping income received by a non-resident is officer in this behalf is empowered to withhold port
subject to final tax at the rate of 8% of the gross clearance to a ship owned or chartered by a non-
amount of the shipping income. resident person until:
Obligations of the Master of a Ship: The Collector or officer is satisfied that final
tax due on the non-resident person‟s
File a return – The master of a ship is shipping income subject to separate
required to furnish to the Commissioner a charge has been paid; or
return, in the form prescribed by Rule 37, of
the non-resident person‟s shipping income Arrangements for the payment of such tax
subject to separate charge; have been made to the satisfaction of the
Commissioner.
Due time of furnishing of return – The
return required to be furnished by the master The non-resident owner or charterer of a ship is
of a ship is due before the departure of the not relived from its liability to pay the final tax due
ship and in the manner as applicable to the on its shipping income subject to separate
return of income, etc. However, electronic charge that is not paid by the master of a ship.
transmission of the return by the master of a
ship is mandatory.
Processing of return
Air transport income of non-residents charge is not paid within 3 months of the service
of notice by the Commissioner on the ‗responsible
Taxation of air transport income in the hands of person‘, the Commissioner is empowered to notify
non-residents is governed by Section 7, 8 and to the authority responsible for granting air port
144 of the Income Tax Ordinance, 2001. clearance of the final tax due from such
responsible person and thereafter, such authority
Air transport income received by a non- can withheld air port clearance to any air craft
resident is subject to final tax at the rate of 3% of owned or chartered by the ‗responsible person‘,
the gross amount of the air transport income. unless the final tax due is paid.
Processing of return
“Income subject to final tax” are those, which Taxation of income arising from import of goods,
are subject to collection or deduction of tax at subject to final tax, is governed by section 148
source as explained in our brochure “Collection and 169 of the Income Tax Ordinance, 2001.
and Deduction of Tax at Source” and the tax so
collected or deducted at source is treated as final As a general rule (see exceptions), the tax
tax on the income arising from such transactions collected at source at the time of import of goods
is classified as income subject to final tax. The is non-adjustable tax deducted at source and
tax collected or deducted on such transactions is the income arising from import of goods subject to
commonly known as non-adjustable tax collection of tax at source is chargeable to tax, if
collected or deducted at source. The taxation of not otherwise exempt, as income subject to final
income subject to final tax is governed by tax.
Section 169 of the Income Tax Ordinance, 2001.
The rates of final tax are as under:
All transactions subject to collection or deduction
of tax at source do not fall under income subject Nature of goods imported Rate of final tax
to final tax. Different set of rules apply for each
nature of income, which are discussed in detail in Pulses 2% of the value
this brochure. Fibers 1% of the value
Yarns 1% of the value
Where the tax collected or deducted at source is Fabrics 1% of the value
not treated as final tax the income arising from Gold 1% of the value
such transactions is chargeable to tax under the Silver 1% of the value
respective heads of income (Salary, Property, Mobile telephone sets 1% of the value
Business, Capital Gains or Other Sources) and Urea fertilizer 1% of the value
forms part of the taxable income. The tax Goods covered by the Zero 1%
collected or deducted on such transactions is Rating Regime of the Sales
commonly known as adjustable tax collected or Tax notified vide SRO
deducted at source. 638(I)/2005 dated 27th June,
2005 as amended from time
Following rules apply to the income subject to to time
final tax: Phosphatic fertilizer imported 1%
in pursuance of Economic
Such income is not chargeable to tax under Coordination Committee of
any head of income in computing the taxable the cabinet‘s decision No.
income; ECC-155/12/2004 dated the
9th December, 2004
No deduction is allowed for any expenditure Old and used automotive As per Customs
incurred in deriving the income; vehicles of Asian makes SRO 577(I)/2005
meant for transport of persons dated June 06,
The amount of the income is not reduced by – 2005.
– Any deductible allowance; or All other goods 5%
– The set off of any loss;
The tax deducted or collected is not reduced “Value” means the value of goods as determined
by any tax credit; under section 25 of the Customs Act, 1969, as if
the goods were subject to ad valorem duty
There is no refund of the non-adjustable tax increased by the Customs-Duty, Sales Tax and
collected or deducted at source unless Federal Excise Duty, if any, payable in respect of
such tax is in excess of the amount of final the import of the goods
tax for which the taxpayer is chargeable; and
Exceptions to the above general rule is in respect
An assessment is treated to have been made
of import of certain specified goods, in which case
and the person is not required to furnish a
the tax collected at source from import of such
return of income in respect such income.
goods is an adjustable tax collected at source
and the income arising from import of such goods
Transactions, which are subject to collection or
subject to collection of tax at source is chargeable
deduction of tax at source and fall under the
to tax, if not otherwise exempt, under the head
income subject to final tax, are discussed
‗income from business‘ as taxable income.
below:
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Brochure –005 Collection and Deduction of Tax at Source
Facilitation and Taxpayer’s Education Wing (FATE)
Raw material, including edible oil and An account or deposit maintained with a
packing material, imported by an industrial banking company or financial institution;
undertaking for its own use;
any security issued by the Federal
Plant, machinery, equipment and parts Government or a Provincial Government or a
imported by an industrial undertaking for Local Government; and
its own use;
Any bond, certificate, debenture, security or
Fertilizer imported by manufacturer of instrument of any kind paid by Banking
fertilizer; Company, Financial Institution, Company
as defined in the Companies Ordinance,
Motor vehicles in CBU (completely build up 1984, a Body Corporate formed by or under
unit) condition imported by manufacturer of any law in force in Pakistan or a Finance
motor vehicles; and Society
Any goods imported by large import houses The rate of final tax is 10% of the amount of
full filling the following conditions: profit on debt.
(i) Has a paid up capital of more than Rs.
250 million; Profit on debt received by a non-resident
(ii) Has imports exceeding Rs.500 million person is dealt with under ―Other payments to
during the tax year; non-residents‖.
(iii) Owns total assets exceeding Rs. 350
million at the close of the Tax Year; Exception to the above general rule is in respect
(iv) Is a single object company; of profit on debt received by a company, in
(v) Maintains computerized records of which case the tax deducted at source from profit
imports and sales of goods; on debt is an adjustable tax collected at source
(vi) Maintains a system for issuance of and the income arising from profit on debt
100% cash receipts on sales; subject to deduction of tax at source is chargeable
(vii) Presents its accounts for tax audit every to tax, if not otherwise exempt, under the head
year; ‗income from other sources‘ or ‗income from
(viii) Is registered with Sales Tax business‘, as the case may be, as taxable
Department; and income.
(ix) Makes sales of industrial raw material to
manufacturer registered for sales tax Execution of contracts by non-residents
purposes;
Taxation of income arising from execution of
Profit on debt contracts of certain specified contracts by non-
resident, subject to final tax, is governed by
Taxation of income arising from profit on debt, section 152 and 169 of the Income Tax
subject to final tax, is governed by section 150 Ordinance, 2001.
and 169 of the Income Tax Ordinance, 2001.
As a general rule (see exception), where the non-
As a general rule (see exception), the tax resident opts in for final tax, the tax deductible at
deducted at source at the time of payment of source at the time of payment against execution of
profit on debt is non-adjustable tax deducted specified contracts by non-resident is non-
at source and the income arising from profit on adjustable tax deducted at source and the
debt subject to deduction of tax at source is income arising from execution of specified
chargeable to tax, if not otherwise exempt, as contracts by non-resident subject to deduction
income subject to final tax. of tax at source is chargeable to tax, if not
otherwise exempt, as income subject to final
Profit on debt (interest/yield/profit) received by a tax.
resident person from the following debts
(investments, etc.) falls under the ambit of final The rate of final tax is 6% of the gross amount
tax: received (including advances).
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Brochure –IR-IT-05 updated June, 2012 Income subject to Separate Charge, Final Tax and Fixed Tax
Facilitation and Taxpayer’s Education Wing (FATE)
The option for treating the tax deducted at source taxed as part of income of permanent
as final tax has be made in writing within three establishment under respective head (Reference
months from the commencement of the tax year section 152(1BB), (2AA), Finance Act, June,
and once such option is exercised it can not be 2012).
revoked for three years.
Any other amounts (profit on debt) received by
The specified contracts referred to above are: a non-resident
in which case the tax deducted at source from The tax deducted at source at the time of payment
sale of such goods is an adjustable tax collected against services of stitching, dying, printing,
at source and the income arising from sale of embroidery, washing, sizing and weaving to a
such goods subject to deduction of tax at source resident or a permanent establishment in
is chargeable to tax, if not otherwise exempt, Pakistan of non-resident is non-adjustable tax
under the head ‗income from business‘ as taxable deducted at source and the income arising from
income. payments received against services of stitching,
dying, printing, embroidery, washing, sizing and
“Manufacturer‖ means, a person who is engaged in weaving subject to deduction of tax at source is
production or manufacturing of goods, which includes- chargeable to tax, if not otherwise exempt, as
(i) any process in which an article singly or in combination
with other articles, material, components, is either
income subject to final tax.
converted into another distinct article or product is so
changed, transferred, or reshaped that it becomes The rate of final tax is 0.50% of the gross amount
capable of being put to use differently or distinctly; or for providing such services.
(ii) a process of assembling, mixing, cutting or preparation
of goods in any other manner.
Media services by non-residents
Execution of contracts Taxation of income arising from media services by
non-resident, subject to final tax, is governed by
Taxation of income arising from execution of section 152 (Finance Act, 2012) replaces section
contracts by a resident (permanent establishment 153A) and 169 of the Income Tax Ordinance,
deleted by Finance Act, 2012) subject to final tax, 2001 (see Finance Act, 2012, for sea 152 (IAAA),
is governed by section 153 and 169 of the Income 153A and 154).
Tax Ordinance, 2001.
The tax deducted at source at the time of payment
As a general rule (see exception), the tax against media services to a non-resident is non-
deducted at source at the time of payment against adjustable tax deducted at source and the
execution of contracts to a resident or a income arising from payments received against
permanent establishment in Pakistan of non- media services by non-resident subject to
resident is non-adjustable tax deducted at deduction of tax at source is chargeable to tax, if
source and the income arising from payments not otherwise exempt, as income subject to final
received against execution of contracts subject to tax.
deduction of tax at source is chargeable to tax, if
not otherwise exempt, as income subject to final The rate of final tax is 10% of the gross amount
tax. for providing such services.
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Brochure –IR-IT-05 updated June, 2012 Income subject to Separate Charge, Final Tax and Fixed Tax
Facilitation and Taxpayer’s Education Wing (FATE)
The rate of final tax is 5% of the foreign exchange Export of goods (others)
proceeds of the indenting commission.
Taxation of income arising from export of goods
Indirect export realization (others – mainly export to Afghanistan), subject to
final tax, is governed by section 154 and 169 of
Taxation of income arising from indirect export the Income Tax Ordinance, 2001.
of goods, subject to final tax, is governed by
section 154 and 169 of the Income Tax The tax collected at the time of export of goods is
Ordinance, 2001. non-adjustable tax deducted at source and the
income arising from export of goods subject to
The tax deductible at source at the time of indirect collection of tax at source is chargeable to tax, if
export realization against indirect export of not otherwise exempt, as income subject to final
goods is non-adjustable tax deducted at tax.
source and the income arising from indirect
export realizations against indirect export of The rate of final tax is 1% of the gross value of
goods subject to deduction of tax at source is goods exported.
chargeable to tax, if not otherwise exempt, as
income subject to final tax. Prizes and winnings
Indirect export of goods means sale of goods: Taxation of income arising from prizes and
To an exporter under an inland back-to-back winnings, subject to final tax, is governed by
letter of credit or any other arrangement as section 156 and 169 of the Income Tax
prescribed by the Board for this purpose; Ordinance, 2001.
and
By an indirect exporter (defined under Sub- The tax deductible at source at the time of
Chapter 7 of Chapter XII of the Customs payment of prizes and winnings is non-
Rules, 2001) to a Direct Exporter and Export adjustable tax deducted at source and the
House registered under the Duty and Tax income arising from prizes and winnings subject
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Brochure –IR-IT-05 updated June, 2012 Income subject to Separate Charge, Final Tax and Fixed Tax
Facilitation and Taxpayer’s Education Wing (FATE)
to deduction of tax at source is chargeable to tax, The rates of final tax are as under:
if not otherwise exempt, as income subject to
final tax. On commission of advertising 5%
agents
Prizes and winnings covered under the income
subject to final tax are: On all other brokerage and 10%
commission
Prize on a prize bond;
Prize or winnings from a raffle, lottery, quiz or
crossword puzzle; Goods transport vehicles
Prize offered by companies for promotion of
sale; and Taxation of income arising from plying and hiring
Fair market value of the prize or winnings if it of goods transport vehicles, subject to final tax, is
is not paid in cash governed by section 234 and 169 of the Income
The rates of final tax are as under: Tax Ordinance, 2001.
On prize on a Prize Bond and 10% The tax collected at source at the time of payment
winnings from Crossword Puzzle of motor vehicle tax (token tax) is non-adjustable
tax deducted at source and the income arising
On all other prizes and winnings 20% from plying and hiring of goods transport vehicles
subject to deduction of tax at source is chargeable
Commission or discount on petroleum to tax, if not otherwise exempt, as income
products subject to final tax.
Taxation of income arising from commission or The rates of final tax are as under:
discount on petroleum products received by petrol
pump operators, subject to final tax, is governed Goods transport vehicles with Rs. 1,200
by section 156A and 169 of the Income Tax laden weight of 8120 for each
Ordinance, 2001. kilograms or more after a such
period of ten years from the vehicle
The tax deductible at source at the time of date of first registration of the
payment of commission or discount to petrol vehicle in Pakistan
pump operators is non-adjustable tax deducted
at source and the income arising from On all other goods transport Re. 1 per
commission or discount on petroleum products vehicles kg of the
received by petrol pump operators subject to registered
deduction of tax at source is chargeable to tax, if laden
not otherwise exempt, as income subject to final weight for
tax. each such
vehicle
The rate of final tax is 10% of the
commission/discount allowed to petrol pump Natural Gas Consumption (CNG Stations)
operators.
Taxation of income arising from sale of
Brokerage and commission compressed natural gas (CNG), subject to final
tax, is governed by section 234A and 169 of the
Taxation of income arising from brokerage and Income Tax Ordinance, 2001.
commission, subject to final tax, is governed by
section 233 and 169 of the Income Tax The tax collected at source at the time of payment
Ordinance, 2001. of natural gas consumption bill by CNG Stations is
non-adjustable tax collected at source and the
The tax deductible at source at the time of income arising from sale of CNG subject to
payment of brokerage and commission is non- deduction of tax at source on consumption of
adjustable tax deducted at source and the natural gas is chargeable to tax, if not otherwise
income arising from brokerage and commission exempt, as income subject to final tax.
subject to deduction of tax at source is chargeable
to tax, if not otherwise exempt, as income The rate of final tax is 4% of the amount of
subject to final tax. natural gas bill.
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Brochure –IR-IT-05 updated June, 2012 Income subject to Separate Charge, Final Tax and Fixed Tax
Facilitation and Taxpayer’s Education Wing (FATE)
Following example will illustrate the effects and The taxpayer has an option to notify the
calculations: concerned Commissioner by the due date of
furnishing the return, that he/she has elected for
Salary for the year: the arrears of salary to be taxed as a separate
Excluding retirement or block of income at the rates of income tax that
termination benefits (RTB) Rs. 1,000,000 would have been applicable if such arrears were
Retirement or termination received in the tax year in which the services
benefits (RTB) received Rs. 5,000,000 were rendered (fixed tax) [Sub-section (7) and (8)
of section 12 of the Income Tax Ordinance, 2001].
Calculation of income tax, if not electing
Following example will illustrate the effects and
Excluding Including calculations:
RTB RTB
(Rupees) (Rupees) Salary for the year:
Chargeable / total Excluding arrears Rs. 1,000,000
/taxable income 1,000,000 6,000,000 Arrears (of last 2 years) Rs.
Income tax rate 9% 19% 200,000 for each year Rs. 400,000
Income tax on above 90,000 1,140,000
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Brochure –005 Collection and Deduction of Tax at Source
Facilitation and Taxpayer’s Education Wing (FATE)
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Brochure –IR-IT-05 updated June, 2012 Income subject to Separate Charge, Final Tax and Fixed Tax
Facilitation and Taxpayer’s Education Wing (FATE)
Where the turnover Rs.25,000 plus 0.5% fixed tax at the rate of 2% of purchase price of
exceeds of the turnover locally produced edible oil.
Rs.5,000,000 but exceeding
does not exceed Rs.5,000,000 [Clause (13C) of Part II of 2nd Schedule to the
Rs.10,000,000 Income Tax Ordinance, 2001]
Where the turnover Rs.50,000 plus 0.75% Business income of resident from shipping
exceeds Rs. of the turnover business
Rs.10,000,000 exceeding
Rs.10,000,000 Business income of a resident from business of
shipping is subject fixed tax as under:
[Section 113B of the Income Tax Ordinance,
2001] • Amount equivalent to One US $ per gross
registered tonnage per annum in respect of
A retailer opting for fixed tax is not entitled to ships and all floating crafts including tugs,
claim any adjustment of adjustable tax collected dredgers, survey vessels and other
or deducted at source under any head during specialized craft purchased or bare-boat
the year. chartered and flying Pakistan flag; and
―Retailer‖ means a person selling goods to • Amount equivalent to fifteen US cents per
general public for the purpose of consumption; ton of gross registered tonnage per chartered
voyage but not exceeding one US $ per ton of
“Turnover‖ for this purposes means, the gross gross registered tonnage per annum in
receipts, exclusive of Sales Tax and Federal respect of ships, vessels and all floating crafts
Excise duty or any trade discounts shown on including tugs, dredgers, survey vessels and
invoices, or bills, derived from sale of goods other specialized craft not registered in
(excluding any amount relating to income subject Pakistan and hired under any charter other
to final tax). than bare-boat charter.
Business income from services rendered ―Equivalent amount‖ for the this purpose means
outside Pakistan of certain person the rupee equivalent of a US dollar according to
the exchange rate prevalent on the first day of
Business income from services rendered out-side December in the case of a company and the first
Pakistan, the receipts of which are brought into day of September in other cases in the relevant
Pakistan in foreign exchange through normal tax year.
banking channel is subject fixed tax at the rate of
1% of the gross receipts. [Clause (21) of Part II of 2nd Schedule to the
Income Tax Ordinance, 2001]
[Clause (3) of Part II of 2nd Schedule to the
Income Tax Ordinance, 2001] Capital gains from sale of securities
Business income from construction contracts Capital gains as reduced by capital losses, if any,
executed out-side Pakistan arising from the disposal of the securities held for
a period of less than a year [calculated from the
Business income from execution of construction date of acquisition (whether on or before or after
contracts out-side Pakistan, the income of which 30th June 2010) to the date of disposal (on or
is brought into Pakistan in foreign exchange after July 01, 2010)] is subject to fixed tax as
through normal banking channel is subject fixed under:
tax at the rate of 1% of the gross receipts.
Tax Holding Period
[Clause (3A) of Part II of 2nd Schedule to the Year Tax Rate if Tax Rate if holding
Income Tax Ordinance, 2001] holding is less is six months or
than six more than six
Business income of certain manufacturers of months months but less one
cooking oil or vegetable ghee or both year
2011 10% 7.5%
Business income of manufacturers of cooking oil 2012 10% 8%
or vegetable ghee or both attributable to 2013 10% 8%
purchases of locally produced edible oil is subject 2014 10% 8%
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Brochure –IR-IT-05 updated June, 2012 Income subject to Separate Charge, Final Tax and Fixed Tax
Facilitation and Taxpayer’s Education Wing (FATE)
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Brochure –IR-IT-05 updated June, 2012 Income subject to Separate Charge, Final Tax and Fixed Tax
Facilitation and Taxpayer’s Education Wing (FATE)
―Finance society‖ includes a co-operative (ii) Has imports exceeding Rs.500 million during
society which accepts money on deposit or the tax year;
otherwise for the purposes of advancing loans or (iii) Owns total assets exceeding Rs. 350 million
making investments in the ordinary course of at the close of the Tax Year;
business. (iv) Is a single object company;
(v) Maintains computerized records of imports
―Financial institution‖ means an institution as and sales of goods;
defined under the Companies Ordinance, 1984, (vi) Maintains a system for issuance of 100%
i.e. - Financial institution includes: cash receipts on sales;
a. a company or an institution whether (vii) Presents its accounts for tax audit every
established under any special enactment year;
and operating within or outside Pakistan (viii) Is registered with Sales Tax Department;
which transacts the business of banking or and
any associated or ancillary business through (ix) Makes sales of industrial raw material to
its branches; manufacturer registered for sales tax
b. a modaraba, leasing company, investment purposes;
bank, venture capital company, financing
company, housing finance company, a non- ―Local Government‖ has the same meaning as
banking finance company; and defined in the Punjab Local Government
c. such other institution or companies Ordinance, 2001 (XIII of 2001), the Sindh Local
authorized by law to undertake any similar Government Ordinance, 2001 (XXVII of 2001),
business, as the Federal Government may, the NWFP Local Government Ordinance, 2001
by notification in the official Gazette, specify (XIV of 2001) and the Balochistan Local
for the purpose. Government Ordinance, 2001 (XVIII of 2001).
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Brochure –IR-IT-05 updated June, 2012 Income subject to Separate Charge, Final Tax and Fixed Tax
Facilitation and Taxpayer’s Education Wing (FATE)
―agent‖), other than an agent of independent (b) any amount received by the owner of a
status acting in the ordinary course of building from a tenant which is not
business as such, if the agent – adjustable against the rent payable by the
(i) has and habitually exercises an tenant (Goodwill, Pugree, Deposit, etc.).
authority to conclude contracts on behalf
of the other person; Resident
(ii) has no such authority, but habitually (a) An association of persons is resident for a
maintains a stock-in-trade or other tax year if the control and management of its
merchandise from which the agent affairs is situated wholly or partly in Pakistan
regularly delivers goods or merchandise at any time in the year.
on behalf of the other person; or (b) A company is resident for a tax year if –
(g) any substantial equipment installed, or other (i) it is incorporated or formed by or under
asset or property capable of activity giving any law in force in Pakistan;
rise to income. (ii) the control and management of the
affairs of the company is situated wholly
“Person” in Pakistan at any time in the year; or
(a) An individual; (iii) it is a Provincial Government or local
(b) a company or association of persons Government in Pakistan.
incorporated, formed, organized or (c) An individual is resident for a tax year if
established in Pakistan or elsewhere; he/she:
(c) the Federal Government, a foreign (i) is present in Pakistan for a period of, or
government, a political subdivision of a periods amounting in aggregate to, 183
foreign government, or public international days or more in the tax year;
organization. (ii) is an employee or official of the Federal
Government or a Provincial Government
―Profit on a debt‖ whether payable or posted abroad in the tax year.
receivable, means –
(a) any profit, yield, interest, discount, premium ―Royalty‖ means any amount paid or payable,
or other amount, owing under a debt, other however described or computed, whether
than a return of capital; or periodical or a lump sum, as consideration for —
(b) any service fee or other charge in respect of (a) the use of, or right to use any patent,
a debt, including any fee or charge incurred invention, design or model, secret formula or
in respect of a credit facility which has not process, trademark or other like property or
been utilized. right;
(b) the use of, or right to use any copyright of a
―Public company‖ means – literary, artistic or scientific work, including
(a) a company in which not less than 50% of the films or video tapes for use in connection
shares are held by the Federal Government with television or tapes in connection with
or Provincial Government; radio broadcasting, but shall not include
(b) a company in which not less than 50% of consideration for the sale, distribution or
the shares are held by a foreign exhibition of cinematograph films;
government, or a foreign company owned by (c) the receipt of, or right to receive, any visual
a foreign government; images or sounds, or both, transmitted by
(c) a company whose shares were traded on a satellite, cable, optic fibre or similar
registered stock exchange in Pakistan at technology in connection with television,
any time in the tax year and which remained radio or internet broadcasting;
listed on that exchange at the end of that (d) the supply of any technical, industrial,
year; or commercial or scientific knowledge,
(d) a unit trust whose units are widely available experience or skill;
to the public and any other trust as defined (e) the use of or right to use any industrial,
in the Trust Act, 1882. commercial or scientific equipment;
(f) the supply of any assistance that is ancillary
―Rent‖ means any amount received or and subsidiary to, and is furnished as a
receivable by the owner of land or a building as means of enabling the application or
consideration for the use or occupation of, or the enjoyment of, any such property or right as
right to use or occupy, the land or building, and mentioned in sub clauses (a) through (e);
includes: and
(a) any forfeited deposit paid under a contract (g) the disposal of any property or right referred
for the sale of land or a building; and to in sub clauses (a) through (e);
18
Brochure –IR-IT-05 updated June, 2012 Income subject to Separate Charge, Final Tax and Fixed Tax
Facilitation and Taxpayer’s Education Wing (FATE)
Tax Year
• A period of twelve months ending on 30th
day of June i.e. the financial year and is
denoted by the calendar year in which the
said date falls. For example, tax year 2011
corresponds to the financial year from July
01, 2010 to June 30, 2011 and the financial
year from July 01, 2011 to June 30, 2012
corresponds to tax year 2012; and
• Includes a special year or a transitional year
that the person is permitted to use under
section 74 of the Income Tax Ordinance,
2001.
Sales Tax
Sales Tax Act, 1990;
Sales Tax Rules, 2006;
Sales Tax Special Procedure Rules, 2007;
Sales Tax Special Procedure (Withholding) Rules, 2007
Sales Tax Notifications (SRO‘s issued by the Federal Government);
Sales Tax General Orders;
Sales Tax Circulars/Rulings (Clarifications issued by the Federal Board of Revenue);
Sales Tax Forms (Registration form, return forms, tax deposit form);
Computer Software (Refund claim);
Publications and brochures
FATE
―Facilitation and Tax Education ―
Is the Key to Voluntary Compliance
And
Voluntary Compliance Is the Key to
―Better Revenues‖