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Tax Handbook
2012
Tax Handbook 2012
An Information Guide
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Tax Handbook
2012
Preface
This handbook attempts to cater the needs of the various post budget queries forthcoming by our clients. We have attempted to apprise them
with a comprehensive explanation of the implications and effect that this Finance Bill has brought about. The handbook encompasses the
amendments in the Income Tax Ordinance, Sales Tax Act, Federal Excise Act, Customs Act and Miscellaneous Laws. The applicable amendments
in the laws after enactment are effective from July 1, 2012 unless otherwise specified.
The commentary should be read in conjunction with the applicable sections of respective Ordinances, Acts and Rules along with the text of
the Finance Bill 2012. This commentary attempts to provide a general guideline and thus should not be considered as a conclusive and
enforceable document. Professional advice should be sought before acting on any amendment in the Finance Bill or on our comments.
We hope that this handbook enhances your perception of Budget 2012-13. For better understanding and convenience, we have also drafted
a Tax Planning Guide appended to this handbook.
This handbook is the property of Horwath Hussain Chaudhury & Co. and is compiled for the exclusive use of its clients and employees.
No part of this handbook may be reproduced except with prior permission of Horwath Hussain Chaudhury & Co.
Although best efforts have been made to ensure accuracy of the information in this handbook, any errors and omissions are regretted.
Lahore
June 02, 2012
www.crowehorwath.pk
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Tax Handbook
Contents
Chapter
Page
General
Budget ‘12-13
1-4
Commentary on the Finance Bill 2012
Highlights
5-7
Income Tax
Ordinance, 2001
Schedules
First
Second
Third
Fourth
Fifth
Seventh
Eighth
9-16
16-19
20-21
21
21
21
22
22
Sales Tax
Act, 1990
Schedules
Sixth Schedule
Notable Notifications
23
23
24-26
Federal Excise
Act, 2005
Schedules
First
Notable Notifications
27-29
30
Customs
Act, 1969
Notable Notifications
Miscellaneous Laws
31-32
33-34
35-36
Tax Planning Guide 2012
Income Tax
Sales Tax
Capital Value Tax
37-47
48-49
50
2012
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Tax Handbook
2012
Budget, 2012-2013
Budget, 2012-2013
Salient Features of the Budget 2012-2013
The salient features of the budget 2012-13 are as follows:
The total outlay of budget 2012-13 is Rs. 3,203 billion (Rs. 3,110 billion: 2011) showing an increment of 3%.
The resource availability during 2012-13 has been estimated at Rs. 2,719 billion (Rs. 2,171 billion: 2011) showing an increment
of 25%.
The net revenue receipts for 2012-13 have been estimated at Rs. 1,775 billion (Rs. 1,328 billion: 2011) indicating an increment
of 34%.
The provincial share in federal revenue receipts is estimated at Rs. 1,459 billion (Rs. 1,209 billion: 2011) during 2012-13 showing
an increment of 21%.
The net capital receipts for 2012-13 have been estimated at Rs. 478 billion (Rs. 525 billion: 2011) showing a decrease of 9%.
The external receipts in 2012-13 are estimated at Rs. 387 billion (Rs. 226 billion: 2011) showing an increment of 71%.
The overall expenditure during 2012-13 has been estimated at Rs. 3,203 billion (Rs. 3,110 billion: 2011) of which the current
expenditure is Rs. 2,612 billion (Rs. 2,632 billion: 2011) and development expenditure is Rs. 591 billion (Rs. 478 billion: 2011).
The share of current expenditure Rs. 2,612 billion (Rs. 2,632 billion: 2011) is 82%, (85% : 2011) of the total budgetary outlay
for 2012-13.
The expenditure on General Public Services is estimated at Rs. 1,877 billion, (Rs 1,898 billion: 2011) which is 72% (72% : 2011)
of the current expenditures.
The size of Public Sector Development Programme (PSDP) for 2012-13 is Rs. 873 billion (Rs 734 billion: 2011), while for other
Development expenditures an amount of Rs. 154 billion (Rs. 122 billion: 2011) has been allocated. This shows an increment of 19%
and 26%, respectively.
The provinces have been allocated an amount of Rs. 513 billion (Rs. 430 billion: 2011) from Public Sector Development Programme
(PSDP) showing an increment of 19%.
An amount of Rs. 10 billion (Rs.10 billion: 2011) has been allocated to Earthquake Reconstruction and Rehabilitation Authority
(ERRA) in the PSDP 2012-13.
01
Budget, 2012-2013
Comparative Budgetary Position 2012-2013 & 2011-2012
Receipts
2012-2013
2011-2012
(Rs. in Billion)
(Rs. in Billion)
2,503.58
2,024.57
730.33
512.19
3,233.91
2,536.76
(1,458.92)
(1,208.62)
1,774.99
1,328.14
Net Capital Receipts (B)
477.78
525.50
External Resources (C)
386.87
226.15
79.55
90.74
483.81
939.20
3,203.00
3,109.73
Tax Revenue (FBR)
Non Tax Revenue
Gross Revenue Receipts
Less: Provincial Share in Taxes
Net Federal Revenue Receipts (A)
Estimated Provincial Surplus (D)
Bank Borrowings (E)
Total Resources (A+B+C+D+E)
02
Tax Handbook
2012
Budget, 2012-2013
Expenditures
2012-2013
2011-2012
(Rs. in Billion)
(Rs. in Billion)
1,876.84
1,898.03
545.39
510.18
Public Order and Safety Affairs
70.16
61.85
Economic Affairs
53.64
72.24
Environment Protection
0.74
0.60
Housing and Community Amenities
1.86
1.65
Health Affairs and Services
7.85
6.65
Recreation, Culture and Religion
6.25
5.37
47.87
45.21
1.34
30.13
2,611.94
2,631.91
360.00
303.66
76.77
52.40
436.77
356.06
154.29
121.76
3203.00
3,109.73
General Public Services
Defence Affairs and Services
Education Affairs and Services
Social Protection
Current Expenditures (A)
Development Expenditure (B)
Federal Government
Provincial Government
Other Development Expenditure (C)
Total Expenditures (A+B+C)
03
Budget, 2012-2013
Breakup of Receipts
14.92%
12.08%
2.48%
55.42%
15.10%
Revenue Receipts (Net)
Capital Receipts (Net)
External Resources
Estimated Provincial Surplus
Bank Borrowings
Breakup of Expenditures
0.24%
1.49%
0.20%
0.04%
11.24%
2.40%
4.82%
58.60%
17.03%
0.06%
0.02%
2.19%
1.67%
Defence Affairs and Services
Housing and Community Amenities
Education Affairs and Services
Other Development Expenditures
Public Order and Safety Affairs
General Public Services
Social Protection
Economic Affairs
Health Affairs and Services
Development Expenditures (PSDP)
04
Environment Protection
Recreation, Culture & Religon
Dev. Loans and Grants to Province
Tax Handbook
2012
Commentary
The Finance Bill, 2012
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Tax Handbook
Finance Bill Highlights
2012
Finance Bill Highlights
Income Tax Ordinance, 2001
The Finance Bill, 2012 seeks to define National Clearing Company Limited and assigns it the role of withholding agent.
Concept of 'Total Income' income rationalized.
Notional benefit on concessional loan by employers to employees to the extent of Rs. 500,000 shall be exempt from tax.
Tax on capital gains from short selling of immovable property has been imposed.
Additional amount received on delayed refunds to be treated as 'Income from Other Sources'.
Provisions relating to setting off of losses in case of AOPs have been rationalized.
Limits for determination of tax credit on investment in listed shares and life insurance have been relaxed.
Tax credits have been extended to industrial undertakings as a relief to combat industrial crises.
The Commissioner (Appeals) empowered to grant stay against tax demand for 30 days.
Commissioner (Appeals) is no more bound to dispose of an appeal within 4 month time limit.
Appellate Tribunal empowered to grant stay against recovery of tax demand for 180 days.
Commercial Importers, Traders and Exporters have been provided an alternative option to be taxed under Normal Tax Regime.
The Bill seeks to make manufacturer a withholding agent in respect of supplies made to distributors, dealers and wholesalers.
Taxpayer Honor Card Scheme has been introduced providing privilege to active taxpayers.
Flat rate of default surcharge at 18% p.a. prescribed.
Tax free threshold of daily cash withdrawals from banks has been increased from Rs. 25,000 to Rs. 50,000.
NCCPL has been empowered to collect advance tax from members of stock exchanges.
Exemption threshold for salary income and business income has been increased to Rs. 400,000.
Slabs of total income have been reduced and uniform and progressive rates for computing tax liability have been introduced for both
individuals and AOPs.
Rates of tax on disposal of securities frozen for two years.
Relief has been provided to both individual and AOP retailers by reducing rate of turnover tax applicable to them from 1% to 0.5%.
Tax on goods transport vehicles has been increased from Re. 1 to Rs. 5 per Kg of the laden weight.
Tax for passengers transport vehicles plying for hire has been increased from Rs. 100 per seat per annum to Rs. 500 per seat per
annum.
Advance tax to be paid on registration of motor vehicles (1,301cc to 1,600cc) has been increased from Rs. 16,875 to Rs. 25,000.
Exemption, subject to certain conditions, has been provided on amount received from income payment plan out of accumulated
balance of Pension Accounts.
Reduced rate of 3% shall be sanctioned to importers only at the production of exemption certificate.
Intra group profit on debt and dividends shall be exempt from tax if group companies opt to be taxed under group taxation.
Exemption from applicability of capital gains tax extended.
Initial Allowance on building reduced from 50% to 25%.
An alternative option for payment of tax at the rate of 40% of profits and gains net of royalty has been provided to Petroleum
Exploration and Production Companies.
Dividends received by banks from money market funds and income funds are to be taxed at the rate 25% in Tax Year 2013 and at
the rate of 35% in Tax Year 2014 and onwards.
05
Finance Bill Highlights
Sales Tax Act, 1990
The Finance Bill harmonized the procedure for tax assessment and recovery of tax not levied or short levied or erroneously refunded.
Uniform rate of sales tax @16% made applicable and higher sales tax rates from standard rate of 16% eliminated.
Supplies against international tenders exempted that are currently treated as zero rated.
Nomenclature of certain existing HS Codes revised to align coding with World Customs Organization (WCO).
Exemption on locally produced cotton seeds oil withdrawn.
Sales Tax rate on import and supplies of black tea reduced from 16% to 5%.
Certain zero-rated items included in exempt items list.
Federal Excise Act, 2005
Rate of duty enhanced on locally produced cigarettes.
Rate of duty reduced by Rs. 100 per metric ton on cement.
Duty on lubricant oil, certain cosmetic items and perfumes withdrawn.
Duty in respect of air travel rationalized.
Services provided by asset management company and companies providing insurance cover for livestock have been exempted from
duty.
Exemption on viscose staple fiber withdrawn.
Customs Act, 1969
En route pilferage of transit goods has regarded as smuggle.
Additional functionary directorates have been introduced for effective functional enforcement.
Punishment of whipping eliminated and punishment on computer related offences introduced.
Powers of adjudicating authorities Collectors, Superintendent and Principal Appraiser extended and jurisdiction of monetary limit of
each level of authority redefined.
Departmental appeals allowed for officers before Collector (Appeals) and Appellate Tribunal.
Concept of e-auction of goods introduced.
Custom duty in respect of shredded tyre scrap for cement manufacturers and raw materials of printing and stationery items has been
reduced.
The maximum tariff rate has been reduced from 35% to 30%.
06
Tax Handbook
2012
Finance Bill Highlights
Miscellaneous Laws
Capital value of shares of a public listed company acquired by a person has been exempted from CVT.
Cantonment Board not to be included in the definition of urban area.
For residential flats and commercial immovable area, the rate of CVT has been decreased to 2% of the recorded value if the value
of the immovable property is recorded.
Maximum rate of cess for gas infrastructure development companies has been increased.
Certain provisions of the Finance Bill, 2012 are to be immediately applicable with effect from June 2, 2012.
07
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08
Tax Handbook
2012
Income Tax Ordinance, 2001
Income Tax Ordinance, 2001
'National Clearing Company Limited' Defined
Section 2(35A)
National Clearing Company Limited (NCCPL) was incorporated in 2001 to manage and operate the National Clearing & Settlement System (NCSS).
The capital market of Pakistan has a triangular foundation comprising of the stock exchanges, Central Depository Company and NCCPL. NCCPL is
playing a significant role in the capital market of Pakistan.
The Operations of NCCPL are governed by the following:
NCCPL Regulations, 2003
NCSS Procedures, 2003
Clearing House (Registration and Regulations) Rules, 2005
By virtue of the Finance Bill, 2012 the definition of NCCPL has been sought to be inserted as a company incorporated under the Companies Ordinance,
1984 and licensed as 'Clearing House' by the Securities and Exchange Commission of Pakistan.
Concept of 'Total Income' Rationalized
Section 10, 53(IA), 9
The Bill seeks to rationalize an inclusive concept of 'total income' that includes:
Person's income under all heads of income for the year, and
Person's income exempt from tax under any of the provisions of the Income Tax Ordinance, 2001
By virtue of proposed amendment in the definition of total income, whereby the exempt income has been included in the scope of total income
and, therefore, the superfluous provision envisaged under subsection (1A) of Section 53 captioned as Exemptions and tax concessions under the
Second Schedule is sought to be omitted.
Pursuant to amendment in the definition of 'total income', Section 9 captioned as 'Taxable income' is sought to be amended. It would result in
including the person's income under all heads of income for the year except exempt income.
Concessional Loans by Employers to Employees
Section 13(7), (14)
Presently the loan advanced by an employer to an employee on soft terms is considered as perquisite for the employee and it is added to the taxable
income of the employee based on benchmark interest rate policy given under the provisions of the law.
By virtue of the Finance Bill, 2012, the employer may disburse a loan of upto Rs. 500,000 to an employee free of interest or at a rate lower than
the benchmark rate. Thus, notional benefit on loan amount of upto Rs. 500,000 would not be treated as taxable perquisite for an employee. This is
a good move to incentivize employees whereby small loans are advanced by employers to employees for their financial assistance.
In an another move the Bill seeks to cap the benchmark rate of interest for concessional loans as 10% instead of aligning it with benchmark rate
that has pitched upto 13%.
Taxability of Capital Gain on Sale of Immovable Property
Section 37(1A)
The Finance Bill, 2012 seeks to introduce the policy of taxing gains on disposal of real estate. Taxing the real estate sector is very much confusing
in the Country and according to research reports a huge foreign direct investment (FDI), flow of foreign remittances and a phenomenal rise in banking
growth in the past years helped significant investment in the real estate sector but the revenue contribution from this sector was negligible due to
legal issues. The Bill proposes a new tax policy for the property sector with an aim to broaden the tax base and impose tax on those earning huge
profits in this sector.
09
Income Tax Ordinance, 2001
The Bill seeks to tax the gains arising on sale of immovable property held for a period less than two years under the head capital gains at the following
rates:
Period for which Immovable Property is Held
Rate of Tax
Up to 1 year
10%
More than 1 year but not more than 2 years
5%
Additional Amount Received on Delayed Refunds
Section 39,171
In the wake of activating the dormant provisions of law to compensate the taxpayer receiving additional amount on account of delayed refunds, the
Bill seeks to tax such amount under the income head of ‘Income from other sources’ so as to charge tax on such compensation.
The Bill seeks to replace the fluctuating rate linked with KIBOR for determining the compensation on delayed refunds with the flate rate of 15% per anum.
Redundancy in Setting off of Losses in AOP Cases Removed
Section 59A
By virtue of the Finance Act, 2003, a new section 59A was inserted to provide procedure for set-off of losses in the case of AOPs. Consequent to
changes in principles of taxation of AOPs, the redundant references made to the provisions of loss adjustment are sought to be removed so as to
bring harmony in the principles of taxation of AOPs.
Tax Credit on Investment in Listed Shares and Life Insurance
Section 62(2),(3)
Tax credit for investment in shares and insurance is worked out using the following formula:
(A/B) X C
Where A is the amount of tax assessed to the person for the tax year before allowance of any tax credit under Part-X of Chapter III
B is the person's taxable income for the tax year and
C is the lesser of:
a)
b)
c)
Total cost of acquiring the shares or the total contribution or the premium paid by the person
15% of the person's taxable income for the year
Rs. 500,000
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Tax Handbook
2012
Income Tax Ordinance, 2001
The Bill seeks to enhance the eligible investment amount for tax credit on investment in shares and insurance by the resident persons other than
companies in the following manner:
Current
Proposed
15% of the person's taxable income for the year
Rs. 500,000
20% of the person's taxable income for the year
Rs. 1,000,000
The Bill seeks to curtail the limit of holding period of shares for reversing the tax credit already availed thereof under the following timeline:
Current
Proposed
Disposal of shares within 36 months
of the date of acquisition
Disposal of shares within 24 months
of the date of acquisition
'Tax Payable' Clarified for Availing of Tax Credit for Investment in BMR
Section 65B(1)
The Bill seeks to clarify the phraseology of ‘tax payable’ in consonance to availing tax credit on the amount invested for balancing, modernization
and replacement (BMR) of plant and machinery shall be allowed as tax credit.
The tax payable shall constitue the tax paid under the following regimes:
Normal Tax Regime
Minimum Tax Regime
Final Tax Regime
Terminative Date for Availing of Tax Credit for Investment in BMR Extended
Section 65B(4)
By virtue of Finance Act, 2010 some relief measures for recession stricken industry and a tax credit for BMR costs incurred by corporate sector
was provided @ 10% in the tax year of its incurrence. This concession had been made available in-between the Tax Years 2011 to 2015. The Finance
Bill, 2012 seeks to extend the terminative date of availing the tax credit upto the Tax Year 2016 and the credit amount is also sought to be doubled
i.e. at 20% of the tax payable.
Tax Credit for Newly Established Industrial Undertakings
Section 65D
In the wake of dampening industrial crisis in the country the Federal Government, as a relief measure for new investment, introduced tax credit for
new industrial undertakings vide Finance Act, 2011 on fulfilling the following pre-requisites:
A new corporate taxpayer establishes a new industrial undertaking for manufacturing in Pakistan between the first day of July, 2011
and 30th day of June, 2016
Industrial undertaking is managed by a company registered under the Companies Ordinance, 1984
The industrial undertaking is not formed by the splitting up or reconstruction or reconstitution
The industrial undertaking is set up with 100% equity owned by the company
The Finance Bill, 2012 seeks to include and clarify the following in order to avail the tax credit:
Corporate dairy farming is proposed to be treated as an industrial undertaking
100% equity raised through issuance of new shares for cash consideration
Short term financing obtained from banking companies for the purposes of meeting working capital requirements shall not disqualify
the taxpayer from claiming tax credit under this section
Industrial undertaking is proposed to be treated to have been setup on the date on which the industrial undertaking is ready to go
into production, whether trial-run production or commercial production
11
Income Tax Ordinance, 2001
Tax Credit for Equity Investment in Existing Established Industrial Undertakings
Section 65E
By virtue of Finance Act, 2011 the Federal Government, as a relief measure for an investment, introduced a tax credit for equity investment in existing
established industrial undertakings.
The amount of the tax credit is equal to 100% of the tax payable and is allowed to such company for new investment made on or after first day of
July, 2011, for a period of five years or commencement of commercial production, whichever is later.
The Finance Bill, 2012 seeks to include and clarify the following in order to avail the tax credit:
Corporate dairy farming to be treated as an industrial undertaking
100% equity raised through issuance of new shares
Equity investment for expansion project and for a new project
100% tax credit whereby separate books of accounts are maintained for an expansion project or a new project otherwise the tax
credit shall be such proportion of the tax payable as is the proportion between the new equity and the total equity including new
equity
The plant and machinery is installed at any time between July 1st, 2011 and the 30th June, 2016
New equity means the fresh issue of shares and shall not include loans obtained from shareholders or directors
Short term financing obtained from banking companies for the purposes of meeting working capital requirements shall not disqualify
the taxpayer from claiming tax credit under this section
In case of tax credit for equity investment for expansion in Industrial unit, the newly introduced section 65E is meant to provide tax credit on investment
by a company with 100% equity investment in BMR, or for expansion of the plant and machinery already installed, in an industrial undertaking set
up in Pakistan before July 1, 2011 subject to the fulfillment of laid down conditions.
Tax credit shall be allowed on the basis of proportion that such equity investment bears to the total investment in the company. The tax credit shall
be allowed if the plant and machinery is purchased and installed at any time between July 1, 2011 and June 30, 2016 and amount of tax credit shall
be allowed against the tax payable by the taxpayer in respect of the tax year in which the plant or machinery is purchased and installed and for the
subsequent four years.
FBR Empowered to Make Rules for
Determination of Cost of an Asset and Consideration Received
Section 76, 77
The Bill seeks to empower FBR to make rules for determination of cost of any asset and determination of consideration received for any asset.
Special Provision Relating to Capital Gain Tax on Disposal of Listed Securities
Section 100B
The Finance Bill, 2012 seeks to insert a special provision relating to Capital Gain Tax, which states that tax on Capital Gains on disposal of listed
securities shall be computed, determined, collected and deposited in accordance with the rules laid down in Eighth Schedule. This section shall not
apply to the following persons or class of persons, namely:
a)
b)
c)
d)
e)
A mutual fund
A banking company, a non-banking finance company, an insurance company
A modaraba
A “foreign institutional investor” being a person registered with NCCPL as a foreign institutional investor
Any other person or class of persons notified by the Board
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Tax Handbook
2012
Income Tax Ordinance, 2001
Anomaly in Pakistan-Source Dividend Income Removed
Section 101B
The proposed insertion seeks to include ‘remittance of after tax profit of a branch of a foreign company operating in Pakistan’ as a Pakistan-source
income. The Finance Act, 2008 amended the inclusive definition of dividend income to include remittance of after tax profit of a branch of a foreign
company operating in Pakistan; however, reference to Pakistan source income was overlooked under the scope of geographical source of income.
This anomaly is sought to be removed by elaborating the Pakistan-source dividend as:
Dividend paid by a resident company
Remittance of after tax profit of a branch of a foreign company operating in Pakistan
Phraseology of 'Tax Payable or Paid' for Minimum Tax Applicability Clarified
Section 113
The Bill seeks to clarify that tax payable or paid does not include tax already paid or payable in respect of deemed income which comes under the
Final Tax Regime in ascertaining the minimum tax liability .
In Budget speech, the Finance Minister announced the incentive of reduction in minimum tax rate from 1% to 0.5% but relevant amendments are
missing under the provisions of the Finance Bill, 2012 and to that extent needs to be clarified.
Profit/Loss for Revised Return
Section 114(6)(c)
The Bill proposes that the revised return ought to reflect the profit amount or loss amount as determined or ascertained under best judgment
assessment, amended order, revision order, provisional assessment, appellate order or rectified order.
Limitation Period for Examination of Return Extended
Section 120(6)
The Finance Bill, 2012 proposes to extend the limitation of examination of return by further 180 days. Presently in case the return of income is not
complete, the Commissioner has the powers to serve a notice for furnishing of certain documents uptill the close of the financial year in which the
return is furnished.
Ex-parte Assessment Effectuated
Section 121(1)
By virtue of proposed insertion the Bill seeks to elaborate that the ex-parte assessment would have an overriding effect on the deemed assessment
on the basis of original return or revised return filed thereof.
Amendment of Provisional Assessment
Section 122(1)(5A)
The proposed insertion seeks to include the provisional assessment in the scope of amendment of assessment.
The Bill further seeks to omit the redundant references for amending assessments made under the Repealed Income Tax Ordinance. The Bill also
seeks to empower the Commissioner to undertake such enquiries as he deems fit for amending an order.
Compliance Requirement for Invalidating of
Provisional Assessment for Corporate Taxpayers Explained
Section 122C (2) Proviso
The Bill proposes to insert a new proviso to envisage the compliance requirement for invalidating the provisional assessment made in the case of
corporate taxpayers whereby the return of total income along with audited accounts or final accounts are filed electronically during the time limitation
of sixty days.
Time Limitation for Tax Demand Stay by Commissioner (Appeals) Prescribed
Section 128(1A)
The proposed insertion seeks to envisage the powers of the Commissioner (Appeals) against the recovery of tax levied under the Ordinance and
period of stay has been provided for 30 days.
13
Income Tax Ordinance, 2001
Time Limitation for Disposal of the Appeal by Commissioner (Appeals) Withdrawn
Section 129(5)(6)(7)
The Bill proposes to withdraw the provisions of time limitation of four months for disposal of an appeal by the Commissioner (Appeals) as well as to
withdraw the relating conditions laid down for implementation of such time limitation.
Appointment of An Accountant Member of ATIR
Section 130(4)(ii)
The proposed amendment seeks to curtail the minimum experience requirement for appointment of an Accountant Member of Appellate Tribunal
Inland Revenue from five years to three years.
Eligibility Criterion for Appointment of Chairperson of Inland Revenue Appellate Tribunal
Section 130(5)
The Bill seeks to remove the compulsive condition of appointment of a judicial member as a chairperson of Inland Revenue Appellate Tribunal. The
proposed omission empowers the Government to appoint a chairperson either from accountant members or judicial members.
Tax Demand Stay by Appellate Tribunal
Section 131(5)
The proposed substitution seeks to remove the ambiguous multiple time limitation periods against stay of recovery of tax with a single provision of
stay against tax recovery for 180 days in aggregate and in case stay by high court is already granted then the availed time thereof would be excluded
from the given time period of 180 days.
Option to Commercial Importers, Traders &
Exporters For Assessment under Normal Tax Regime
Sections 148(7), 153(1)(a), 154(4) and 169 Clauses (41A),
(41AA) and (41AAA) of Part IV of the Second Schedule
At present, different sectors are operating under the Final Tax Regime (FTR) and finally discharge their tax liabilities under that regime. For example,
commercial importers are paying 5% withholding tax; exporters 1%; suppliers 3.5%. Under that system taxes collected or deducted at source are
treated as a final tax liability in respect of such amounts.
The proposed changes would result in maintenance of books of account to record each and every business transaction which would ultimately promote
documentation. In this way, taxpayer will either have to pay higher rate of withholding tax for not maintaining books of accounts or pay lower rate
under normal tax regime and file income tax returns. To bring them at par with the taxpayers operating under normal tax regime the right of carry
forward of losses and other related provisions will remain applicable if such option is availed.
However, in order to opt in the newly introduced scheme the minimum tax liability in respect of such income shall not be less than:
60% of tax collected at the import stage
70% of tax deducted at source on such supplies
50% of the tax collected at the time of realization of export proceeds and indenting commission
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Tax Handbook
2012
Income Tax Ordinance, 2001
Payments to Non-residents & to PE of Non-residents
Sections 152, 153
In an effort to remove the anomalous placement of withholding taxes provisions applicable to nonresidents and to Permanent Establishment (PE)
of a nonresident have been rearranged to make the implications of the provisions more clear and unambiguous.
The Bill proposes the insertion of a new subsection to rearrange the withholding tax provisions whereby a person making a payment for advertisement
services to a nonresident media person relaying from outside Pakistan shall deduct tax from the gross amount paid at the rate of 10%. This was
previously covered under section 153A which is now being replaced.
The Bill further seeks that deduction of tax from payment of insurance premium or re-insurance premium to a nonresident shall not apply in case of
written approval of the Commissioner to the effect that such amount is taxable to a PE of the nonresident in Pakistan.
The proposed omission of references in Section 153 regarding payments to a PE of a non-resident on account of sale of goods, rendering of or
providing of services or execution of a contract are intended to be placed in Section 152; however, no such corresponding reference has been made
to Section 152.
Manufacturers Liable to Collect Tax at Source from Traders and Distributors
Section 153A
Withholding tax on payments for goods, services and contracts is one of the major contributors to the Government Exchequer and over the period
of time frequent amendments have been brought in under the relevant provisions of law. Right from the promulgation of the Ordinance numerous
amendments have been made to the withholding provisions and in eventuality has resulted into some ambiguities in its application.
In an attempt to broaden tax base manufacturers have been given the role of withholding tax agent to collect the required amount of withholding
tax at the time of sale to distributors, dealers and wholesalers at the proposed tax rate of 1% of the gross amount of their sales.
Taxpayer Card Scheme Introduced
Section 181B
In an attempt to boost the morale of active taxpayers the proposed insertion of a new section seeks to introduce a 'Taxpayer Honour Card Scheme'
to privilege active taxpayers.
Voluntarily Penalty Payment Prescribed
Section 182(2)
The Finance Bill, 2012 proposes to insert a proviso to prescribe that where the taxpayer admits his default he may voluntarily pay the amount of
penalty due thereon.
Default Surcharge to be Determined on Flat Rate Basis
Section 205
The Finance Bill, 2012 proposes to introduce a flat rate of default surcharge at the rate of 18% per annum contrary to the prevailing varying
rate that is linked with the KIBOR. The Bill further seeks to provide relief in the amount of default in consequent to appeal orders.
Hierarchical Arrangement of Tax Authorities
Section 207(3)(3A)
The Bill seeks to make all the tax authorities subordinate to FBR. The Bill proposes to arrange hierarchical order of income tax authorities to name
the subordinates of Chief Commissioner of Inland Revenue.
Condonation of Time Limit
Section 214A
The Bill seeks to insert an explanation to the provision of condonation of time limit to elaborate the jurisdictional powers of authorities to condone
the time limit with respect to powers vested with them.
15
Income Tax Ordinance, 2001
Functionary of Directorate General (Intelligence and investigation), Inland Revenue Established
Section 230
In line with similar functionaries working under the auspices of 'Inland Revenue' under Sales Tax and FED the proposed insertion seeks to induct
the DG Intelligence and Investigation authority under hierarchical arrangement as to be notified by the Government.
Limit of Cash Withdrawal from a Bank
Section 231A
Finance Bill 2012 seeks to enhance the daily cash withdrawal limit attracting the deduction of withholding tax from Rs. 25,000 to Rs. 50,000. However,
the rate of withholding tax has not been changed.
Collection of Tax by a Stock Exchange
Section 233A(1)(d)
The Bill seeks to restrict the Stock Exchanges registered in Pakistan to act as a withholding agent from collecting advance tax from its members in
respect of trading of shares and financing of carryover trades in share business. The restriction to collect advance tax from members on trade of
shares has been reinforced in the Finance Bill, 2012 as it was also provided in the Finance (Amendment) Ordinance, 2012.
Collection of Tax by NCCPL
Section 233AA
The Bill seeks to introduce a new section whereby it proposes NCCPL to collect advance tax from the members of stock exchanges registered in
Pakistan in respect of margin financing in share business at the rate of 0.01% of value of shares.
First Schedule
Uniform Rates of Tax for Business Individuals and Association of Persons
Part 1 Division 1 Clause 1
The Finance Bill, 2012 seeks to revive the older pattern whereby the individuals, other than the salaried class, and AOPs were taxed at the same
slab rates. The Finance Bill, 2010 introduced a flat rate of 25% applicable on all AOPs.
The Finance Bill, 2012 seeks to restore the common slab rates used by both the individuals, other than the salaried class, and the AOPs and revised
the rates and slabs as under:
Current Rates of Tax for Individuals
Applicable on Taxable income
Taxable income not exceeding Rs. 350,000
Proposed Rates of Tax for Individuals and
AOPs Applicable on Taxable income
0%
Taxable income not exceeding Rs. 400,000
0%
Taxable income exceeding Rs. 350,000
but not exceeding Rs. 500,000
7.5%
Taxable income exceeding Rs. 400,000
but not exceeding Rs. 750,000
10% of the amount exceeding
Rs. 400,000
Taxable income exceeding Rs. 500,000
but not exceeding Rs. 750,000
10%
Taxable income exceeding Rs. 750,000
but not exceeding Rs. 1,500,000
Rs. 35,000 + 15% of the amount
exceeding Rs. 750,000
Taxable income exceeding Rs. 750,000
but not exceeding Rs. 1,000,000
15%
Taxable income exceeding Rs. 1,500,000
but not exceeding Rs. 2,500,000
Rs. 147,500 + 20% of the
amount exceeding Rs. 1,500,000
Taxable income exceeding Rs. 1,000,000
but not exceeding Rs. 1,500,000
20%
Taxable income exceeding Rs. 2,500,000
Rs. 347,500 + 25% of the
amount exceeding Rs. 2,500,000
Taxable income exceeding Rs. 1,500,000
25%
16
Tax Handbook
2012
Income Tax Ordinance, 2001
Rates of Tax for Salaried Taxpayers
Part 1 Division 1 Clause 1A
The Finance Bill, 2012 seeks to reduce the slab rates applicable on salaried individuals. Existing 17 slabs are proposed to be reduced to 5 as under:
Current Rates of Tax for Salaried Taxpayers Proposed Rates of Tax for Salaried Taxpayers
Applicable on Taxable income
Applicable on Taxable income
Taxable income not exceeding Rs. 350,000
0%
Taxable income not exceeding Rs. 400,000
0%
Taxable income exceeding Rs. 350,000
but not exceeding Rs. 400,000
1.50%
Taxable income exceeding Rs. 400,000
but not exceeding Rs. 750,000
5% of the amount exceeding
Rs. 400,000
Taxable income exceeding Rs. 400,000
but not exceeding Rs. 450,000
2.50%
Taxable income exceeding Rs. 750,000
but not exceeding Rs. 1,500,000
Rs. 17,500 + 10% of the amount
exceeding Rs. 750,000
Taxable income exceeding Rs. 450,000
but not exceeding Rs. 550,000
3.50%
Taxable income exceeding Rs. 1,500,000
but not exceeding Rs. 2,500,000
Rs. 92,500 + 15% of the amount
exceeding Rs. 1,500,000
Taxable income exceeding Rs. 550,000
but not exceeding Rs. 650,000
4.50%
Taxable income exceeding Rs. 2,500,000
Rs. 242,500 + 20% of the
amount exceeding Rs. 2,500,000
Taxable income exceeding Rs. 650,000
but not exceeding Rs. 750,000
6.00%
Taxable income exceeding Rs. 750,000
but not exceeding Rs. 900,000
7.50%
Taxable income exceeding Rs. 900,000
but not exceeding Rs. 1,050,000
9.00%
Taxable income exceeding Rs. 1,050,000
but not exceeding Rs. 1,200,000
10.00%
Taxable income exceeding Rs. 1,200,000
but not exceeding Rs. 1,450,000
11.00%
Taxable income exceeding Rs. 1,450,000
but not exceeding Rs. 1,700,000
12.50%
Taxable income exceeding Rs. 1,700,000
but not exceeding Rs. 1,950,000
14.00%
Taxable income exceeding Rs. 1,950,000
but not exceeding Rs. 2,250,000
15.00%
Taxable income exceeding Rs. 2,250,000
but not exceeding Rs. 2,850,000
16.00%
Taxable income exceeding Rs. 2,850,000
but not exceeding Rs. 3,550,000
17.50%
Taxable income exceeding Rs. 3,550,000
but not exceeding Rs. 4,550,000
18.50%
Taxable income exceeding Rs. 4,550,000
20%
17
Income Tax Ordinance, 2001
Taxability of Salary Income
Sr.
No
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
Average Tax Rate
Tax Liability for the Tax Year 2012
Taxable
Salary
Pre-Budget
Post-Budget
Increase /
(Decrease)
Pre-Budget
Post-Budget
Rs.
Rs.
Rs.
Rs.
%
%
350,000
400,000
450,000
550,000
650,000
750,000
900,000
1,050,000
1,200,000
1,450,000
1,700,000
1,950,000
2,250,000
2,850,000
3,550,000
4,550,000
5,551,000
0
6,000
11,250
19,250
29,250
45,000
67,500
94,500
120,000
159,500
212,500
273,000
337,500
456,000
621,250
841,750
1,110,200
0
0
2,500
7,500
12,500
17,500
32,500
47,500
62,500
87,500
122,500
160,000
205,000
312,500
452,500
652,500
852,700
0
(6,000)
(8,750)
(11,750)
(16,750)
(27,500)
(35,000)
(47,000)
(57,500)
(72,000)
(90,000)
(113,000)
(132,500)
(143,500)
(168,750)
(189,250)
(257,500)
0%
1.5000%
2.5000%
3.5000%
4.5000%
6.0000%
7.5000%
9.0000%
10.0000%
11.0000%
12.5000%
14.0000%
15.0000%
16.0000%
17.5000%
18.5000%
20.0000%
0%
0%
0.5556%
1.3636%
1.9231%
2.3333%
3.6111%
4.5238%
5.2083%
6.0345%
7.2059%
8.2051%
9.1111%
10.9649%
12.7465%
14.3407%
15.3612%
Tax liability has been worked out without taking into account the marginal tax relief.
Graphical Representaion
1,200,000
1,000,000
800,000
600,000
400,000
200,000
0
1
2
3
4
5
6
7
8
18
9
10
11
12
13
14
15
16
17
Tax Handbook
2012
Income Tax Ordinance, 2001
Rate of Tax on Retailers
Part 1 Division 1A
The Finance Bill, 2012 seeks to reduce tax rate applicable on retailers, both individuals and AOPs, having turnover of upto Rs. 5 million in a tax
year from 1% to 0.50%.
Rate of Tax Applicable on Capital Gains on Disposal of Securities
Part 1 Division VII
The Finance Bill, 2012 seeks to make editorial changes to enhance clarity and seeks to freeze the tax rates for Tax Years 2011 to 2014 that have
already been introduced by the Finance (Amendment) Ordinance, 2012. Tax rates proposed by the Finance Bill are as under:
Period for which Securities are Held
Tax Year
Existing Rates
Proposed Rates
Less than 6 months
2011
2012
2013
2014
2015
10%
10%
12.5%
15%
17.5%
10%
10%
10%
10%
17.5%
More than 6 months but less than 12 months
2011
2012
2013
2014
2015
2016
7.5%
8%
8.5%
9%
9.5%
10%
7.5%
8%
8%
8%
9.5%
10%
Rate of Tax on Capital Gains on Disposal of Immovable Property
Part 1 Division VIII
The Finance Bill, 2012 seeks to charge tax on capital gains in respect of disposal of immovable properties on the following rates:
Period for which Immovable Property is Held
Up to 1 year
More than 1 year but less than 2 years
Rate of Tax
10%
5%
Collection of Tax from Distributors, Dealers and Wholesalers
Part IIA
The Finance Bill seeks to collect tax from distributors, dealers and wholesalers at 1% of the gross amount of their sales.
Part IV
Tax on Motor Vehicles
Division III & Division VII
The Bill seeks to enhance tax rates on motor vehicles as under:
For goods transport vehicle, tax is proposed to be increased from Re. 1 to Rs. 5 per kilogram of the laden weight;
For passenger transport vehicles plying for hire with registered seating capacity of 20 persons or more, the tax is proposed to be
increased from Rs. 100 per seat per annum to Rs. 500 per seat per annum; and
Advance tax levied at the time of registration of a new 1301cc to 1600cc locally manufactured motor vehicle is proposed to be
enhanced from Rs. 16,875 to Rs. 25,000.
19
Income Tax Ordinance, 2001
Second Schedule
Exemptions & Tax Concessions
The Second Schedule relates to specific exemptions granted in respect of total income; reduction in tax rates; reduction in tax liability and exemption
from specific provisions. The Bill proposes to exempt or extend the scope of exemptions in respect of the following sources of income:
Part I
Exemptions from Total Income
Amounts Received from Income Payment Plan out of
Accumulated Balance of Pension Accounts
Clause 23B & 23C
The Bill seeks to exempt from tax the amounts received as monthly installment from income payment plan invested out of the accumulated balance
of an individual pension account with a pension fund manager or an approved annuity plan etc. as specified in Voluntary Pension System Rules, 2005,
provided the accumulated balance is invested for 10 years.
It also seeks to exempt the withdrawal of accumulated balance from approved pension fund that represents the transfer of balance of approved
provident fund to the said approved pension fund under the Voluntary Pension System Rules, 2005.
Donations to Specified Institutions
Clause 61(ia) & Clause 66(xxvii)
The Bill seeks to extend the exemption on donation paid to The Citizen Foundation as a straight deduction from taxable income . Any income derived
by The Citizen Foundation shalll also be exempt.
Profits and Gains Derived by a Venture Capital Company & Venture Capital fund
Clause 101
The Bill seeks to extend the exemption to profits and gains derived by a venture capital company and venture capital fund registered under the
Venture Capital Companies and Funds Management Rules, 2000 beyond 2014. It proposes to extend this exemption by further 10 years upto
June 30, 2024.
Part II
Reduction in Tax Rates
Advance Tax from Importers
Clause 9A
The Bills seeks to correlate the collection of 3% tax from importers only on production of exemption certificate issued by the Commissioner.
Part IV
Exemptions from Specific Provisions
Exemption from Deduction of Tax on Paying Dividends and Profit on Debt
Clause 11B & 11C
The Bill seeks to introduce new clauses whereby the payment of inter-corporate dividends and inter-corporate profit on debts would not attract the
deduction of tax in the hands of company making such payment provided the group companies are subject to group taxation under Section 59AA
and 59B of the Income Tax Ordinance, 2001.
20
Tax Handbook
2012
Income Tax Ordinance, 2001
Capital Gains Tax on Disposal of Certain Securities Withdrawn
Clause 47B
The Finance Bill, 2012 seeks to extend the exemption from application of capital gains tax on disposal of securities to National Investment Unit Trust,
Collective Investment Scheme, Modaraba, REIT Scheme, Private Equity and Venture Capital Fund, recognized provident fund, approved superannuation
fund or approved gratuity fund.
Applicability of Advance Tax on Electricity Bill of a Commercial / Industrial Consumer
Clause 76
The Bill seeks to withdraw exemption available to manufacturer-cum-exporter industrial undertakings situated in Karachi Export Processing Zone
from the collection of advance tax on electricity bills.
Third Schedule
Initial Allowance and First Year Allowance
Part II
The Finance Bill seeks to reduce the initial allowance for buildings from 50% to 25%.
Fourth Schedule
Mutual Insurance Companies
Rule 6B
The Bill seeks to reduce the rates of tax applicable on capital gains on disposal of shares of listed companies, vouchers of Pakistan Telecommunication
Corporation, Modaraba Certificates or instruments of redeemable capital and derivative products by mutual insurance associations as under:
Period for which Securities are Held
Tax Year
Existing Rates
Proposed Rates
Less than 6 months
2011
2012
2013
2014
2015
10.0%
12.5%
15.0%
17.5%
17.5%
10.0%
10.0%
12.5%
15.0%
17.5%
More than 6 months but less than 12 months
2011
2012
2013
2014
2015
8.0%
8.5%
9.0%
9.5%
10.0%
8.0%
8.0%
8.5%
9.0%
9.0%
Fifth Schedule
Mechanism for Computation of Tax on Profits and
Gains Petroleum Exploration and Production Companies
Rule 4A
The Bill seeks to introduce a new rule whereby petroleum exploration and production companies may opt to pay tax at the rate of 40% of their profit
and gains net of royalty derived by them.
However, they may opt to do so upon withdrawing pending appeals, references and petitions filed by them and paying the entire outstanding tax
liability created under the Income Tax Ordinance, 2001 upto the tax year 2011 by June 30, 2012. It is pertinent to mention that the Bill proposes
that this option is available for one time only and would be irrevocable.
21
Income Tax Ordinance, 2001
Seventh Schedule
Rules for the Computation of the Profits and Gains of a Banking Company and Tax Payable Thereon
Dividends Received from Money Market Funds and Income Funds
Rule 6
The Bill seeks to enhance the tax rates on dividends received from money market funds and income funds to 25% for the Tax Year 2013. The tax
rate is proposed to be raised further to 35% in the Tax Year 2014 for the ongoing period.
Eighth Schedule
Rules for the Computation of Capital Gains on Listed Securities
The Bill seeks to introduce Eighth Schedule dealing with the rules for the computation of capital gains on listed securities. This Schedule proposes
the structural and procedural details that would be followed by NCCPL in calculating capital gains and issuing certificate to taxpayers in respect of
their capital gains subject to tax.
Manner and basis of computation of capital gains and tax thereon:
NCCPL shall issue an annual certificate to the taxpayer on the prescribed form in respect of capital gains subject to tax for a financial
year. However, on request of a taxpayer or if required by the Commissioner, NCCPL shall issue a certificate for a shorter period within
a financial year.
Above mentioned certificate shall be filed along-with the return of income.
NCCPL shall furnish to the Board within 30 days of end of each quarter, a statement of capital gains and tax computed thereon in
that quarter.
Capital Gains computed under this Schedule shall be charged to tax at the rate applicable in Division VII of Part I of First Schedule.
Enquiries as to source of Investment shall not be made:
If a person has made investment in listed securities prior to introduction of this Ordinance and the amount remains invested for a
period of 45 days upto June 30, 2012 and he has filed a statement of investment with the Commissioner along with a Return of
Income and wealth Statement for the Tax Year 2012.
If a person has made investment in listed securities from the date of coming into force of this Ordinance till 30th June, 2014 and
the amount remains invested for a period of 120 days and the tax on capital gains has been duly discharged and he has filed a
statement of investment with the Commissioner alongwith a Return of Income and wealth Statement for the Tax Year 2012.
Rates for CGT for the Tax Years 2013 and 2014
Division VII Part I First Schedule
The Finance Bill, 2012 seeks to freeze the rate of tax for two years. Proposed rate of tax shall be as follows:
Holding Period
Tax Year
Present Rate
Proposed Rate
Less than six months
2011
2012
2013
2014
2015
10%
10%
12.5%
15%
17.5%
10%
10%
10%
10%
17.5%
More than six months but less than twelve months
2011
2012
2013
2014
2015
2016
7.5%
8%
8.5%
9%
9.5%
10%
0%
7.5%
8%
8%
8%
9.5%
10%
0%
Twelve months or more
22
Tax Handbook
2012
Sales Tax Act, 1990
Sales Tax Act, 1990
Assessment of Tax and Recovery of Short Levied or Erroneously Refunded Tax
Section 11 and Section 36
In view of concurrence in procedural application of Section 11 and Section 36, the proposed amendment seeks to merge these provisions under
Section 11 and seeks to omit Section 36. The new placement of these provisions of law would harmonize the procedure for assessment of Sales
Tax and streamline the provisions of law. The proposed amendment further aims at the following changes:
Time limit for issuance of show cause notice, in case of tax not levied or short levied or refunded due to any inadvertence, error or
misconstruction, has been enhanced from three years to five years from relevant date.
Officer of Inland Revenue is proposed to make his decision in 120 days from the date of issuance of show cause notice; however,
this period can be further extended by 90 days and the maximum period which can be excluded from the time period mentioned
earlier, due to adjournment or stay, has also been extended by 60 days.
Uniformity in Standard Sales Tax Rate of 16%
S.R.O. 594(1)/2012 seeks to rescind S.R.O. 644 (I)/2007 S.R.O. 644 (I)/2007 whereby items which were charged at 19.5% and 22% would be
charged at a uniform rate of 16%.
Sixth Schedule (Table 1)
Implementation of Revised HS Code - 2012
The Bill proposes to implement revised HS code - 2012 of the World Customs Organization (WCO) by substituting 18 PCT headings in column 3 of
Table 1 of Sixth Schedule with 23 new PCT headings. HS codes are revised in view of technological and trade developments after every five years.
These changes are of technical nature and will have no effect on rates to be applied and procedures to be followed.
Zero Rating Category Substitution with Exemption Category
Fifth Schedule & Sixth Schedule (Table 2)
The Bill proposes to substitute zero rating on supplies made against international tenders with exempt supplies by omitting it from Fifth Schedule
and including it in Table 2 of Sixth Schedule.
Withdrawal of Exemption for Cotton Seed Oil
Sixth Schedule (Table 2)
The Bill proposes to withdraw exemption on cotton seed oil.
23
Sales Tax Act, 1990
Notable Notification
S.R.O. 589(I)/2012
This S.R.O. seeks to make amendments, additions or substitution in Sales Tax Rules 2006. A brief summary of significant proposed amendments,
additions or substitution is as under:
Rule Ref.
Description of proposed amendments, additions or substitution
Rule 5,
sub rule(1), clause C
It proposes to authorize the FBR to transfer the registration of a registered person or any business
of a registered person to an area of jurisdiction where the place of business or registered office or
manufacturing unit is located.
Rule 7,
sub rule(3)
A new sub rule (4) is introduced which states that change of nature of business from individual to
AOP or corporate person shall be allowed when:
Transfer of individual business from any person to his spouses or children or change in
nature of business from individual to AOP
Change of nature of business from AOP to corporate entity provided directors in the
corporate entity are the same persons who were members of AOP
For both cases mentioned above change shall be allowed by LRO after receiving verified documents
from RTO. Whereby transfer of business or change in nature of business is due to any other reason,
a new Sales Tax Registration Number shall be issued.
Rule 12
Sub rules (1), (2), (3), (4) and (5) are substituted resultantly giving powers to Commissioner or
Board, instead of Collector, to suspend the registration or black list a person if they have reasons
to do so.
Rule 50B
Rule 50B has been substituted which describes the procedure to be followed to avail the exemption
facility for supply of locally produced goods against international tender. Procedure is same as was
for availing zero rated facility, under rescinded rule, with one exception that the facility of exemption
has been restricted to goods which become part of project to be completed or goods to be supplied.
Rule 50C
It is substituted with new rule to replace "zero rated" with "exempt". This change has been made with
an aim to hold illegal refunds.
S.R.O. 590(I)/2012
The S.R.O. seeks to remove requirement for commercial importers of computer hardware and parts to pay minimum value addition Tax @ 10%.
S.R.O. 591(I)/2012
Through amendments made by this S.R.O. import and supply of polyethylene and polypropylene by registered manufacturer for manufacture of mono
filament yarn and who makes exempt supplies of net cloth to green house farming shall be exempt, earlier they were zero rated.
24
Tax Handbook
2012
Sales Tax Act, 1990
S.R.O. 592(I)/2012
This S.R.O. seeks to make following changes in Sales Tax Special Procedure Rules 2007:
Sub rule(2) of rule 58E is omitted which would result in importers who do not claim any refund of excess input tax also being subject
to audit.
Rules of Chapter XI has been substituted with new rules, in new rules Sales Tax rates has been revised with a view to increase revenue,
detail of such revision is as below:
Rule Ref.
Sales Tax Payable By
Existing Sales Tax Rate
Proposed Sales Tax Rate
58 H
Every steel-melter, steel re-roller and
composite unit of aforesaid (having single
electricity meter)
Rs. 6 per unit of electricity consumed.
Rs. 8 per unit of electricity consumed.
58 H (4)
Ship breakers
Rs. 848 per metric ton.
Rs. 6,700 per metric ton.
58 Ha (2)
Steel melters (generating electricity using
gas generators)
Rs. 1,972 per hundred cubic meter or
HM3
Rs. 1,900 per hundred cubic meter or
HM3
58 Ha (2)
Re-rolling mills (self generated electricity)
Rs. 38,964 per inch of mill size
Rs. 51,822 per inch of mill size
58 I (1)
Re-roller
Rs. 5,526 per metric ton
Rs. 7,349 per metric ton
58 I (2)
Registered person
Rs. 5,960 per metric ton
Rs. 8,387 per metric ton
58 I (3)
Downstream Industry
Rs. 6,306 per metric ton
Rs. 9,651 per metric ton
58 I (4)
Registered Person
Rs. 5,628 per metric ton
Rs. 7,740 per metric ton
58 I (5)
Un-registered buyer
Rs. 780 per metric ton
Rs. 1040 per metric ton
Registered person
Rs. 7,308 per metric ton (registered
person)
Rs. 780 per metric ton (other than
registered person)
Rs. 9,651 per metric ton (registered
person)
Rs. 1,040 per metric ton (other than
registered person)
58 I (6)
Un-registered person
A new rule 58MC has been inserted which states that steel melters and re-rollers who also supply stainless steel products other
than billets, ingots and re-rolled MS products shall follow standard Sales Tax procedures and fixed taxes under this chapter shall
not be applicable to them.
S.R.O. 595(I)/2012
This S.R.O. seeks to make following amendments in S.R.O. 551(1)/2008:
Raw material, component and subcomponents imported for using the in manufacture of goods to be supplied against international
tenders are removed from list of exempted goods.
Waste paper, re-meltable scrap, sprinkler equipment, drip equipment and spray pumps including supplies thereof have been exempted
from the ambit of Sales Tax.
25
Sales Tax Act, 1990
Revision in Sales Tax Rates
Following new S.R.Os are introduced which seek to amend the old rates as given below:
S.R.O
Description
Previous Rate/Amount
Proposed Rate/Amount
604(I)/2012
Import of soya bean as mentioned in
S.R.O 313(I)/2006
7%
6%
608(I)/2012
Import and supplies of black tea
16%
5%
605(I)/2012
Import of rapeseed and sunflower
seed
15%
14%
597(I)/2012
Billets and Ingots
Rs. 55,000 & Rs. 60,000
respectively
Rs. 65,000 & Rs. 60,000 respectively
(This has also been set at minimum
value)
602(I)/2012
Re-meltable scrap, sprinkler, drip
equipment
cotton seed oil
0%
Exempt
Exempt
0%
26
Tax Handbook
2012
Federal Excise Act, 2005
Federal Excise Act, 2005
First Schedule (Table I)
Federal Excise Duty on Excisable Goods Revised
The Finance Bill, 2012 seeks to revise rates of FED for certain excisable goods aligned with given pricing threshold as under:
Relevant
Reference
in Schedule
Description of Goods
Headings/SubPresent Rates
headings Number
Proposed Rates
9
Locally produced cigarettes if their
retail price exceeds Rs. 22.86 per ten
cigarettes.
24.02
65% of retail price (if retail price
exceeds Rs. 21 per 10 Cigarettes)
65% of retail price (if
retail price exceeds Rs.
22.86 per 10 Cigarettes)
10
Locally produced cigarettes if their
retail price exceeds Rs. 13.36 per ten
cigarettes but does not exceeds Rs.
22.86 per ten cigarettes.
24.02
Rs. 6.04 per 10 cigarettes + 70%
per incremental rupee or part thereof
(if retail price exceed Rs. 11.50 but
does not exceed Rs. 21 per 10
Cigarettes)
Rs. 7.02 per 10
cigarettes + 70% per
incremental rupee or
part thereof.
11
Locally produced cigarettes if their
retail price does not exceed Rs. 13.36
per ten cigarettes.
24.02
Rs. 6.04 per 10 cigarettes (if retail
price does not exceed Rs. 11.50 per
10 Cigarettes)
Rs. 7.02 per 10
cigarettes
13
Portland cement, aluminous cement,
slag cement, super sulphate cement
and similar hydraulic cements, whether
or not coloured or in the form of
clinkers.
25.23
Rs. 500 per Metric ton
Rs. 400 per Metric ton
First Schedule (Table I)
Federal Excise Duty on Excisable Goods Withdrawn
The Finance Bill, seeks to withdraw the FED charged on the following items:
Relevant
Reference
in Schedule
Description of Goods
Headings/Subheadings Number
Present Rates
Proposed Rates
22
Lubricating oil in packs not exceeding
10 liters.
2710.1951
10% per Liter
Nil
23
Lubricating oil in packs exceeding 10
liters.
2710.1952
10% per Litre
Nil
24
Lubricating oil in bulk (vessels,
bouzerslorries etc).
2710.1953
Rs. 7.15 per Liter
Nil
25
Lubricating oil manufactured from
reclaimed oils or sludge or sediment,
subject to the condition if sold in retail
packing or under brand names the
words manufactured from reclaimed
oil or sludge or sediment should be
clearly printed on the pack.
Respective
headings
Rs. 2 per Liter
Nil
27
Federal Excise Act, 2005
Relevant
Reference
in Schedule
Description of Goods
Headings/Subheadings Number
Present Rates
Proposed Rates
27
Base lube oil
2710.1993
Rs. 7.15 per Liter
Nil
42
Perfumes and toilet waters.
3303.0000
10% of retail price if packed in retail
packing and 10% ad valorem if in
bulk
Nil
43
Beauty or make-up preparations and
preparations for the care of the skin
(other than medicaments), including
sunscreen or sun tan preparations;
manicure or pedicure preparations
33.04
10% of retail price if packed in retail
packing and 10% ad valorem if in
bulk
Nil
44
Preparation for use on the hair
excluding herbal hair oil and kali
mehndi.
33.05
10% of retail price if packed in retail
packing and 10% ad valorem if in
bulk
Nil
45
Pre-shave, shaving or after shave
preparations, personal deodorants,
bath preparations, depilatories and
other perfumery, cosmetic or toilet
preparations, not elsewhere specified
or included; prepared room
deodorizers, whether or not perfumed
or having disinfectant properties
(excluding agarbatti and other
odoriferous preparations which operate
by burning).
33.07
10% of retail price if packed in retail
packing and 10% ad valorem if in
bulk
Nil
50
Filter rods for cigarettes
20% ad val.
Nil
5502.0090
Pricing Mechanism for Cigarettes Rationalized
The Finance Bill, 2012 seeks to insert new conditions regarding variant of the existing brand of cigarettes, in order to avoid FED evasion. The Bill
seeks to restrict the manufacturer or importer of cigarette to introduce or sell new cigarette brand variant of the existing brand family at a price
lower than the price of the existing variant cigarettes after the announcement of 2012-13 Budget.
The Bill also seeks to introduce a provision by virtue of which, a new brand of cigarette could not be sold at a price which is more than 5% lower,
than the price of a Most Popular Price Category (MPPC).
28
Tax Handbook
2012
Federal Excise Act, 2005
FED Increased on Air Tickets
First Schedule (Table II)
The Finance Bill, 2012 seeks to revise the FED on international air travel as enumerated below:
Relevant
Reference
in Schedule
Headings/Subheadings Number
Description
3(a)
Services provided or rendered in
respect of travel by air of the
passenger within the territorial
jurisdiction of Pakistan.
9803.1000
3(b)
Services provided or rendered in
respect of travel by air of the
passenger embarking on international
journey from Pakistan
9803.1100
(i)
Economy and
economy plus
(ii) Club, business and first class
Present Rates
Proposed Rate
of FED
16% of the charges plus rupees
twenty per ticket
16% of the charges plus
rupees sixty per ticket
Rs. 3,240 for Economy and economy
plus and four thousand two hundred
and forty rupees for club, business
and first classes, for passengers
embarking from SAARC region, UAE
(Middle East), Saudi Arabia, Africa,
Afghanistan.
Rs. 3,840
Rs. 4,240 for economy and economy
plus classes and five thousand seven
hundred and forty rupees for club,
business and first classes.
Rs. 6,840
Exemption Granted on Services Relating to Livestock Insurance and Asset Management Companies
The Finance Bill, 2012 seeks to amend the Table-II in third schedule to grant exemptions on services in respect of livestock insurance and asset
management companies
Relevant Reference in Schedule
Description of Services
Headings/Sub-headings Number
7
Livestock insurance
9813.1600
8
Services provided by Asset
Management Companies with effect
from 1st of July, 2007.
Respective Headings
29
Federal Excise Act, 2005
Notable Notifications:
Withdrawal of FED Exemption
S.R.O. 599(I) / 2012
This S.R.O. seeks to amend Table in S.R.O. 474(I) / 2009, dated June 13, 2009 to withdraw exemptions in respect of following:
Relevant Reference
in Schedule
Description of Goods
Headings/Sub-headings Number
Restored Rate of Duty
48
Viscose staple fibre
Respective Headings
10% ad val.
FED on Air Tickets Rationalized
S.R.O. 600(I) / 2012
This S.R.O. proposes to amend Rule 41A of Federal Excise Rules 2005 by withdrawing excise duty on services provided by aircraft operators in
respect of travel by air of passengers embarking for Pakistan from anywhere in the world.
By virtue of this S.R.O. excise duty chargeable on all international air tickets issued by airlines or through their agents for international journey
terminating in Pakistan has been withdrawn.
This S.R.O. proposed to substitute existing sub-rule (7) with a new rule as follow:
Existing sub-rule(7)
Proposed sub-rule(7)
An air ticket issued for international travel covering more than
one destination on flights operated by one or more airlines
shall be chargeable to excise duty by the airline issuing the
ticket and shall be charged at the rate of excise duty applicable
for the farther destination in terms of distance from Pakistan.
Where an airline operating in Pakistan uplifts passengers from
Pakistan for another airline, the liability to charge, collect and
pay Federal Excise Duty with respect to such passengers,
shall be of the uplifting airline.
As excise duty on international travel to Pakistan has proposed to be withdrawn, so such excise duty will not be called as Air Travel Tax (ATT).
S.R.O. 603(I) / 2012
This S.R.O rescinds 6 notifications already issued by Federal Government of Pakistan. A brief summary of the S.R.Os rescinded, matters discussed
in them and the effect of rescission thereof is given hereunder:
Rescinded S.R.O
Subject Matter of the S.R.O
Effect of Rescission
S.R.O. 807(I)/2005
Rebate given of Federal Excise Duty, paid on base oil used in the manufacture of the motor
lubricating oil for different automobiles
Rebate withdrawn
S.R.O. 671(I)/2006
Fixing the minimum price of lubricating oil in packs at US$ 2 per litre for the purpose of
assessment of excise duty at import stage (PCT headings 2710.1951 and 2710.1952)
Price determination as per
normal procedure
S.R.O. 777(I)/2006
Rates of excise duty chargeable on the tickets issued for the services of travel by air on
international journey originating from Pakistan to SAARC countries, Middle East, Saudi
Arabia, Afghanistan, Europe, Far East, China, USA, Canada, Australia and South America
Rates withdrawn
S.R.O. 949(I)/2006
Exempting the import and supply of solvent oil (PCT heading 2710.1150) for manufacture
of shoe adhesives subject to certain conditions
Exemption withdrawn
S.R.O. 1229(I)/2007
Exempting special Excise Duty levied on the tractor parts by registered vendors to the
manufacturers of agricultural tractors
Exemption withdrawn
S.R.O 47(I)/2012
Levying FED on facilities for travel services at specified rates
Rates withdrawn
30
Tax Handbook
2012
Customs Act, 1969
Customs Act, 1969
Definition of 'Smuggle' Broadened
Section 2 (s)
The Finance Bill, 2012 proposes to insert “en route pilferage of transit goods” in definition of 'smuggle' in an effort to curb en route pilferage for
evading duties.
Additional Functionary Directorates Established
Section 3AA, 3BB, 3BBB, 3CC
The Finance Bill, 2012 seeks to introduce new additional functionary directorates for the purposes of jurisdictional administrative division evident
from the assigned nomenclature. The new proposed directorates are:
Directorate General of Transit Trade
Directorate General of Reform and Automation
Directorate General of Risk Management
Directorate General of Intellectual Property Rights Enforcement
Board Empowered to Change Pakistan Customs Tariff Coding
Section 18E
The Finance Bill, 2012 seeks to authorize the Board to make changes in the Pakistan Customs Tariff, specified in the First Schedule to the Customs
Act, 1969 merely for the purposes of aligning statistical suffix of the Pakistan Customs Tariff (PCT) codes with World Customs Organization (WCO).
Punishment for Certain Offences Altered
Section 156(1)
The Finance Bill, 2012 proposes the following amendments in provisions for punishment for following offences:
Punishment
Serial No.
Applicable to
The punishment, of whipping under this
section, to be totally eliminated.
Serial No. 8(i), 89(i) and 92 of Section 156(1)
General
The punishment, for transferring certain
classes of goods subject to prescribed
conditions and transit of goods across
Pakistan to a foreign territory, to be
enhanced by including imprisonment for
a term of up to 5 years.
Serial No. 64 of Section 156(1)
Section 128 & Section 129
Prosecution to those instances where
attempts are made to make unauthorized
access or to interfere with Custom
Computerized System or to make
unauthorized use of unique user identifier
by any person, be enhanced.
Serial No. 101, 102 and 103 of Section 156(1)
Sections 155I, 155J and 155K
31
Customs Act, 1969
Adjudicating Jurisdiction and Powers of the Officers Changed
Section 179(1)
The Finance Bill, 2012 proposes revision in the jurisdiction and powers of the officers of Customs in terms of amount of duties and other taxes
involved thereby.
S. No.
Adjudicating Authority
Existing Limit
Proposed Limit
(i)
Collector
-
without limit
(ii)
Additional Collector
without limit
not exceeding Rs. 3,000,000
(iii)
Deputy Collector
not exceeding Rs. 800,000
not exceeding Rs. 1,000,000
(iv)
Assistant Collector
not exceeding Rs. 300,000
not exceeding Rs. 500,000
(v)
Superintendent
-
not exceeding Rs. 50,000
(vi)
Principal Appraiser
-
not exceeding Rs. 50,000
Departmental Appeals Allowed before Collector (Appeals) & Appellate Tribunal
Section 193(1), 194 A
The Finance Bill, 2012 proposes that officer of Customs aggrieved by any decision or order passed by officer of Customs below the rank of Additional
Collector may also prefer an appeal to Collector (Appeals) within thirty days of the date of communication to him of such decision or order.
The Finance Bill, 2012 proposes that any person or officer of Customs may prefer to file an appeal to the Appellate Tribunal against any order passed
by any officer of Customs not below the rank of Additional Collector under section 179.
Electronic Auction for Sale of Goods Allowed
Section 201
In the wake of growing trend of e-trading, the Bill proposes to allow the mode of disposal of goods through electronic auctions.
Rewards for Meritorious Conduct
Section 202 B
The Finance Bill, 2012 seeks to introduce the system of award for those officers and informers who render meritorious conduct in cases involving
evasion of Custom duty and taxes and confiscation of goods after the realization of whole or part of duty and taxes involved. The procedure of such
reward is proposed to be introduced by the Board by notification in the Official Gazette.
Condonation of Time Limit
Section 224
The Finance Bill, 2012 proposes to authorize the authorities to condone the time limit in complying with the procedural requirement whereby the
delay is beyond the control of the concerned person.
32
Tax Handbook
2012
Customs Act, 1969
Notable Notifications
Rates of Duty Reduced on Certain Items
S.R.O. 574(I)/2012
This S.R.O. seeks to amend Table-I of S.R.O. 567(I)/2006, dated June 5, 2006. By virtue of this S.R.O. Custom duty on following items shall be levied
at reduced rate specified hereunder against each item.
S. No.
PCT Code
23A
4004.0020
44A
3215.1190
3215.1990
3701.3020
4802.5700
9612.1010
3215.1990
Description
Present Rate
Proposed Rate
Condition
Shredded tyre scrap
20%
10%
If imported by cement manufacturers
Black ink
Colour ink
CTP plates
Fully sensitized cheque paper
weighing 40 g/m2 or more but
not more than 150 g/m2
Red bleed through ribbons for
dot matrix printers
Anti-forgery security printing ink
20%
20%
10%
20%
10%
10%
5%
10%
If imported by Printing Industry
20%
10%
20%
10%
The notification also seeks to restrict the concession of Customs duty at 0% only to ambulances having following features:
Rear panel and rear step
Stretcher of 8 feet length in case of hiace type vehicles and 6 feet in case of mini-van type vehicles
Folding seats for 2-4 persons
Oxygen supply system with cylinder
Rotary lamp and siren
Fire extinguisher
Hooks for intravenous infusion giving sets / bottles
Small cabinet for medicines
Nebulizer, room light, examination light, wiring switch sockets 12Volt
Water resistant floor
Suction unit
Suspension system of base vehicle to be spring and shock absorber type and not exclusively of leaf spring type
Permanent markings as ambulance on the front and rear of the vehicle
The S.R.O. further seeks to amend Table-III of S.R.O. 567(I) / 2006 dated June 5, 2006 by reducing the rate of Customs duty from 10% to 5% on
87 pharmaceuticals ingredients.
33
Customs Act, 1969
Exemption on Certain Items Withdrawn
S.R.O. 577(I)/2012
This S.R.O. seeks to amend S.R.O. 482(I) / 2009, dated June 13, 2009 by substituting certain items in the table for levy of regulatory duty on import
of goods.
S. No.
Proposed
Rate of Regulatory
Duty
Betel Nuts
Areca nuts (Betel nuts)
10% ad valorem
Smoking tobacco, whether or not
containing tobacco substitutes in
any proportion
Water pipe tobacco specified in
Subheading Note 1 of Chapter 24 of the
First Schedule to the Customs Act, 1969
15% ad valorem
Other (Newly Inserted)
15% ad valorem
PCT Code
Existing
1
0802.8000
6
2403.1100
6A
2403.1900
Description
Notification under Free Trade Agreements Rearranged
S. No.
Revising SRO (New)
SRO Revised
Description
1
S.R.O. 582(I)/2012
S.R.O. 659(I)/2007
Substituted Table-I and Table-II in respect of certain items imported
into Pakistan from Peoples Republic of China under Free Trade
Agreement (FTA)
2
S.R.O. 583(I)/2012
S.R.O. 1261(I)/2007
Substituted Table-I and Table-II in respect of certain items imported
into Pakistan from Malaysia under Free Trade Agreement (FTA)
3
S.R.O. 584(I)/2012
S.R.O. 1296(I)/2005
Substituted Table-I and Table-II in respect of certain items imported
into Pakistan from Peoples Republic of China under Free Trade
Agreement (FTA)
4
S.R.O. 585(I)/2012
S.R.O. 558(I)/2004
Substituted Table-I and Table-II in respect of certain items produced
in and imported from Islamic Republic of Iran or the Republic of
Turkey and SAARC countries imported into Pakistan under Free
Trade Agreement (FTA)
5
S.R.O. 586(I)/2012
S.R.O. 570(I)/2005
Substituted Table-I and Table-III and Table-IV in respect of certain
items imported into Pakistan from Sri Lanka under Free Trade
Agreement (FTA)
DTRE Scheme Rationalized
S.R.O.601(I)/2012
This S.R.O. seeks to amend rule No. 297 and 305 of Custom Rules, 2001 by attaching condition that DTRE facility shall be available to persons who
manufacture and export goods in accordance with the prevalent value-addition of the relevant industry, only if the value addition is not less than
15%, and goods imported shall be utilized within twelve months, instead of twenty four months from the date of approval of DTRE application.
34
Tax Handbook
2012
Miscellaneous Laws
Capital Value Tax (CVT)
Exemption of CVT on Shares of Public Listed Company
Section 7(1)
The Finance Bill, 2012 seeks to reinforce the amendments introduced in the Finance (Amendment) Ordinance, 2012, by virtue of which a person
shall not be liable to pay CVT on the capital value of shares of public listed company acquired by him.
Further, Cantonment Board and the rating areas as defined under the Urban Immovable Property Act, 1985 are proposed to be excluded from the
definition of 'urban area' under CVT law.
Revision in rates of CVT on Residential Flats of any Size and
Commercial Immovable Property Situated in Urban Areas
Section 7(2)
The Bill proposes to apply CVT on following rates on the above-cited properties.
Category
S.No
Residential
flats
Commercial
immovable
property
Description of Property
Rate of CVT
1
Where the value of immovable property
is recorded
2% of recorded value or value as per DC rate
Whichever is higher
1a
Where the value of immovable property
is not recorded
Rs. 100 per square feet of the covered areas of
the immovable property or value as per DC rate
Whichever is higher
2
Where the value of immovable property
is recorded
2% of recorded value of the landed area
or value as per DC rate
Whichever is higher
2a
Where the value of immovable property
is not recorded
Rs. 100 per square feet of the landed area
or value as per DC rate
Whichever is higher
2b
Where the immovable property is a
constructed property
Rs. 10 per square feet of the constructed area
in addition to the value worked out above
Whichever is higher
35
Miscellaneous Laws
Gas Infrastructure Development Cess Act, 2011
The Second Schedule
Increase in Rates of Cess
Section 3(1)
The Finance Bill, 2012 seeks to increase the maximum rate of cess as follows:
S.No
Sector
1
Fertilizer - Feed Stock (except for fertilizer plants having fixed price contracts)
2
Compressed Natural Gas (CNG)
(a) Region - I
Khyber Pakhtunkhwa, Baluchistan & Potohar Region (Rawalpindi, Islamabad
& Gujarkhan)
(b) Region - II
Sindh & Punjab (excluding Potohar Region)
Existing Cess
Proposed Cess
(Rs./MMBTU)
(Rs./MMBTU)
197
300
141
300
79
200
3
Industrial (including Captive Power)
13
100
4
WAPDA/KESC/GENCOs
27
100
5
Independent Power Plants (IPPs)
70
100
Declaration under the Provisional Collection of Taxes Act, 1931
The provision of the Finance Bill, 2012 regarding the following matters shall be immediately applicable with effect from 2nd June, 2012:
Service of show cause notice on a person for payment of tax or charge not levied, short levied or erroneously refunded, under the
Sales Tax Act, 1990, due to inadvertence, error, misconstruction or by reason of collusion or a deliberate act
Change in the rate of FED on cigarette and cement and withdrawal of FED on certain items specified in the First Schedule to the
Federal Excise Act, 2005
Customs tariff as provided in the First Schedule to the Customs Act, 1969
36
Tax Handbook
2012
Tax Planning Guide
For Corporations & Individuals
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Tax Handbook
2012
Income Tax
Income Tax
Who is Required to File a Return of Income?
Following persons are required to furnish a return of income for a tax year:
every company
every AOP
individual whose taxable income for the year exceeds Rs. 400,000
any non-profit organization
any person who
has been charged to tax in respect of any of the two preceding tax years
claims a loss carried forward under the Income Tax Ordinance for a tax year
owns immovable property with a land area of 250 sq. yards or more, or owns any flat located in areas falling within the municipal
limits existing immediately before the commencement of Local Government laws in the provinces, or area in a Cantonment, or
the Islamabad Capital Territory. The following are excluded from this category:
•
•
•
•
widows
orphans below the age of 25 years
disabled persons
non-resident Pakistanis in case of ownership of immovable property
owns immovable property with a land area of 500 square yards or more located in a rating area
owns a flat having covered area of 2,000 square feet or more located in a rating area
owns a motor vehicle having engine capacity above 1000cc
has obtained National Tax Number
has industrial and commercial electricity connection and the amount of annual utility bills exceed Rs. 1,000,000
Who is Required to File Wealth Statement?
Every resident taxpayer filing a return of income whose declared or assessed income is Rs. 1,000,000 or more
Every resident taxpayer filing statement under FTR and has paid tax of Rs. 35,000
What Year End Can a Taxpayer Adopt?
Class of Person
Tax Year Type
Companies, Association of persons
and Individuals
Normal Tax Year
July 01 to June 30
Sugar
Special Tax Year
October 01 to September 30
Banking and Insurance Companies
Special Tax Year
January 01 to December 31
Ginners, Rice huskers, Oil mills
Special Tax Year
September 01 to August 31
Shawl manufacturers
Special Tax Year
April 01 to March 31
37
Year End
Income Tax
When to File the Return of Income?
Status
Year End
Date of Filing
Tax Year
Salaried Individual &
Non-corporate Taxpayer (falling under FTR)
June 30, 2012
August 31, 2012
2012
Other Individual & AOP
June 30, 2012
September 30, 2012
2012
Company (including falling under FTR)
June 30, 2012
December 31, 2012
2012
Company
September 30, 2012
September 30, 2013
2013
Company
December 31, 2012
September 30, 2013
2013
Who is Required to Pay Advance Tax?
Every business individual whose latest assessed taxable income excluding the presumptive tax income is more than
Rs. 500,000
Every Association of Person
Every Company
When to Pay Advance Tax by an Individual?
Individuals have to pay advance tax within 15 days after the close of each quarter.
When to Pay Advance Tax by an AOP or Company?
Period
Quarter
Payment Date
1st of July to 30th September
September quarter
On or before the 25th of September
1st October to 31st December
December quarter
On or before the 25th of December
1st January to 31st March
March quarter
On or before the 25th March
1st April to 30th June
June quarter
On or before the 15th of June
38
Tax Handbook
2012
Income Tax
Rate of Tax for Business Individuals and AOPs
The basic exemption limit for business individuals and AOPs is Rs. 400,000 and the varying slab rates range from 10% to 25% as under:
Income Brackets
Rates
Taxable income not exceeding Rs. 400,000
0%
Taxable income exceeding Rs. 400,000 but
not exceeding Rs. 750,000
10% of the amount exceeding
Rs. 400,000
Taxable income exceeding Rs. 750,000 but
not exceeding Rs. 1,500,000
Rs. 35,000 + 15% of the amount
exceeding Rs. 750,000
Taxable income exceeding Rs. 1,500,000
but not exceeding Rs. 2,500,000
Rs. 147,500 + 20% of the
amount exceeding Rs. 1,500,000
Taxable income exceeding Rs. 2,500,000
Rs. 347,500 + 25% of the
amount exceeding Rs. 2,500,000
Special Rebates
To Senior Citizens
A rebate of 50% of the tax payable is allowed to senior citizen who has attained the age of 60 years or above, provided his total income excluding
FTR income does not exceed Rs. 1,000,000.
To Teachers and Researchers
A further rebate of 75% of taxpayable on salary income is allowed to a full time teacher or a researcher, employed in a non profit education or
research institution recognized by a Board of Education or Higher Education Commission including Government training and research institution.
Minimum Tax
Minimum tax is applicable to a resident company, AOP (having turnover more than 50 million) and individuals (having turnover more than 50 million)
at the rate of 1% (in budget speech 2012, rate is proposed to be reduced to 0.5%) of turnover even if the business sustain losses except a company
which has declared gross loss before depreciation and other inadmissible expenses.
39
Income Tax
Rate of Tax for Salaried Individuals
The basic exemption limit for salaried individuals is Rs. 400,000 and the varying slab rates range from 5% to 25% as under:
Income Brackets
Rates
Taxable income not exceeding Rs. 400,000
0%
Taxable income exceeding Rs. 400,000
but not exceeding Rs. 750,000
5% of the amount exceeding
Rs. 400,000
Taxable income exceeding Rs. 750,000
but not exceeding Rs. 1,500,000
Rs. 17,500 + 10% of the amount
exceeding Rs. 750,000
Taxable income exceeding Rs. 1,500,000
but not exceeding Rs. 2,500,000
Rs. 92,500 + 15% of the amount
exceeding Rs. 1,500,000
Taxable income exceeding Rs. 2,500,000
Rs. 242,500 + 20% of the
amount exceeding Rs. 2,500,000
Marginal Tax Relief for Salaried Taxpayers
Where the total income of the taxpayer marginally exceeds the maximum slab limit, the income tax payable shall be the tax payable upto the maximum
of the slab exceeded plus tax on marginal amount as under:
Income Bracket
Marginal Taxable Amount
Where total income:
Does not exceed Rs. 550,000
20%
Does not exceed Rs. 1,050,000
30%
Does not exceed Rs. 2,250,000
40%
Does not exceed Rs. 4,550,000
50%
Exceeds Rs. 4,550,000
60%
40
Tax Handbook
2012
Income Tax
Tax on Rental Income
In case of non-corporate taxpayers:
Gross Amount of Rent
Rate of Tax
Where the gross amount of rent:
Does not exceed Rs. 150,000
Nil
Exceeds Rs. 150,000 but does not exceed Rs. 400,000
5.00% of the gross amount exceeding Rs. 150,000
Exceeds Rs. 400,000 but does not exceed Rs. 1,000,000
Rs. 12,500 plus 7.50% of the gross amount exceeding Rs. 400,000
Exceeds Rs. 1,000,000
Rs. 57,500 plus 10.00% of the gross amount exceeding Rs. 1,000,000
In Case of Corporate Taxpayers
Gross Amount of Rent
Rate of Tax
Where the gross amount of rent:
Does not exceed Rs. 400,000
5.00% of the gross amount of rent
Exceeds Rs. 400,000 but does not exceed Rs. 1,000,000
Rs. 20,000 plus 7.50% of the gross amount exceeding Rs. 400,000
Exceeds Rs. 1,000,000
Rs. 65,000 plus 10.00% of the gross amount exceeding Rs. 1,000,000
41
Income Tax
Allowances and Tax Credit
Section
Particulars
Concession
Maximum Limit
60
Zakat
Straight income deduction
N/A
61
Charitable Donation
Straight income
deduction / Tax credit
Lower of amount of donations or:
30% of taxable income in case of individual and AOP
20% of taxable income in case of company
62
Investment in Shares
and Insurance
Tax credit
Resident person other than company shall be allowed
Lower of:
total cost of acquiring shares / insurance premiums paid
20% of taxable income
Rs. 1,000,000
63
Approved Pension Fund
Tax credit
Lower of:
total contribution or premium paid by individual
20% of taxable income
64
Profit on Debt or Share
Tax credit
Lower of:
total profit paid
50% of taxable income
Rs. 750,000
65A
If 90% of sales by the
manufacturer are made to
sales tax registered persons
Tax credit
2.50% of tax payable
65B
Balancing, modernization
and replacement of plant &
machinery from July 1, 2011
to June 30, 2016
Tax credit
20% of tax payable
65C
Enlisting a company on
stock exchange
Tax credit
15.00 % of tax payable
65D
Equity Investment
Tax credit
Equal to 100% of tax payable (Conditions apply)
65E
Equity Investment
Tax credit
Equal to 100% of tax payable attributable to new expansion
(Conditions apply)
42
Tax Handbook
2012
Income Tax
Tax Rates for Companies
Company
Tax Rate
Banking Company
35%
Public Company (other than a banking company)
35%
Private Company (other than a banking company)
35%
Small Company having turnover upto Rs. 250 million
25%
Fixed Tax on Turnover in Case of Individual and AOPs
Category
Rate
In case of individual or AOP being retailer and having turnover
upto Rs. 5,000,000
0.5% of turnover as final tax
In case of individual or AOP being retailers having turnover
Exceeding Rs. 5,000,000 but does not exceed Rs. 10,000,000
Rs. 25,000 plus 0.5% of the turnover exceeding Rs. 5,000,000
Exceeding Rs. 10,000,000
Rs. 50,000 plus 0.75% of the turnover exceeding Rs. 10,000,000
Individual and AOP retailer cannot claim any adjustment of withholding tax collected or deducted under any head during the year
Rate of Tax on Capital Gains on Disposal of Immovable Property
Period for which Immovable Property is Held
Up to 1 year
More than 1 year but less than 2 years
Rate
10%
5%
43
Income Tax
Third Schedule (Part I)
Tax Depreciation Rates
Description
Rate
Building (all types)
10%
Furniture (including fittings)
Machinery and plant (not otherwise specified)
Motor vehicles* (all types)
Ships, technical or professional books
15%
Computer hardware including printer, monitor and allied items
Machinery and equipment used in manufacturing of I.T. products
Aircraft and aero engines
30%
Below ground installations
100%
Offshore platform and production installations
20%
A ramp built to provide access to person with disabilities,
not exceeding Rs. 250,000 each
100%
Third Schedule (Part II)
Depreciation Allowance
Description
Section
Rate
Initial allowance
23
25% (For buildings)
50% (Other eligible assets)
First year allowance
23A
90%
First year allowance
(in case of alternate energy projects)
23B
90%
44
Tax Handbook
2012
Income Tax
Penalties
Default
Rate of Penalty
Failure to file any return of income
0.1% of tax payable per day subject to minimum
Rs. 5,000 & maximum 25% of tax payable
Failure to pay any tax (other than a penalty)
In case of first default
In case of second default additional penalty
In case of third and subsequent defaults additional penalty
5% of the amount of tax on default
25% of the amount of tax on default
50% of the amount of tax on default
Concealment of income or furnishing of
inaccurate particulars of income
25,000 or amount equal to tax sought to be evaded by
concealment or furnishing of inaccurate particulars which
ever is high
Failure to maintain records
Rs. 10,000 or 5% of the amount of tax on income
whichever is high
Making of false or misleading statement
Rs. 25,000 or 100% of the amount of tax short fall,
whichever is higher
Penalty for obstructing the access of comissioner
Rs. 25,000 or 100% of the tax involved, whichever is high
Penalty for obstructing any Income Tax authority in
performance of his official duties
Rs. 25,000
Additional Tax
Failure to
pay tax excluding advance tax
pay any penalty
pay any other amount of tax under
the Income Tax Law
pay advance tax
collect tax
deduct tax
deposit tax deducted or collected
18% per annum of amount of default
45
Payment of commission to petrol pump operators
156A
Payment on account of approved pension fund
Prize on prize bonds, winning from raffle, lottery or cross word puzzle
Prize on winning of quiz & prize offered by companies for promotion on sales
156
156B
Income from Property
Exports
Foreign exchange proceeds on account of indenting commission
Manufacturers to collect tax at source from traders and distributors
155
154
153A
Average rate of tax
10%
10%
20%
As per slabs
1%
5%
1%
6%
Payment to resident company on account of:
153
20%
5%
10%
20%
15%
6%
6%
Execution of Contract (other than supply of goods & rendering of services)
Payment to Non-Resident on account of:
Royalty, fee for technical services to a non-resident Person
Execution of Contract (other than for supply of goods & rendering of services)
Contract for construction, assembly, installation projects, supervisory activities
and advertisement services
Other payments to non-resident except payment to foreign news agencies,
syndicate services & non-resident contributing having no permanent establishment
in Pakistan
Profit on Debt
On payment of insurance or re-insurance premium
Payments to non-resident media persons
152
After Deduction of Zakat
10%
10%
10%
10%
10%
10%
2%
6%
Profit on Debt:
National saving deposit including DSC, under national saving scheme
Profit on TFCs
Profit on banking account or deposit
Profit on security
Profit on Post Office Saving Account
Profit on security issued by Federal Government, Provincial Government or Local Authority
151
10%
Average rate of tax
Rendering of Services:
Passenger transport services & News print media services
Other services
Dividends
150
1.5%
3.5%
1%
Income from Salary
149
5%
3%
2%
1%
Standard
Tax Rates
Sale of Goods:
Sale of rice, cotton seed or edible oil
Sale of any other goods
Sale of edible oil to manufacturer of cooking & vegetable ghee mills
Imports:
Commercial imports
Raw material imports by an industrial undertaking
Pulses
Fiber fabrics (other than of cotton), capital goods, cement, coal, mobile phones,
sugar, gold, silver, wheat raw, wood, medical surgical & dental equipment, certain
medicines & vaccines, broadcasting equipment, urea fertilizer etc.
Nature of
Payment/Transaction
148
Section/
Sub-section
of I.Tax Ord.
Deduction/Collection of Tax at Source
Final
Final
Final
Final
Final
Final
Final except for listed companies
Minimum
Final except for manufacturercum-supplier & listed companies
Final
Final
Final
Adjustable
Final except for
imports for self use by
manufacturers
Adjustable/
Final Discharge
25% of accumulated balance
Nil
Nil
Rs. 150,000
(In case of non-corporate taxpayer)
Nil
Nil
Rs. 10,000
Rs. 25,000
Nil
Interest on investment up to Rs.
150,000 is exempt in case of
National Saving Scheme and TFCs
and where installment is less than
Rs. 1,000 per month
Nil
Rs. 400,000
Subject to certain exclusion
Exemption
Limit
Pension fund manager
Every person selling petroleum products
Payer
Federal Govt., Provincial Govt. Local
Authority or a company
Collector / Authorized dealer in foreign
exchange
Payer
Government Company, a registered AOP,
foreign contractor or consultant or a
consortium or a joint venture, Individual
with turnover exceeding 25 million, AOP
with turnover exceeding 50 million and
exporter of export house
Payer
Bank / Financial institution
Banking Co., Financial Int.
Company, Finance Society
Federal Government, Provincial
Government or Local Authority
Payer of Profit
Payer
Every Employer
Custom Authorities
Persons Required
To Deduct/Collect Tax
Monthly
Monthly
When actually paid
Monthly
At time of realization
When Paid
When actually paid
When actually paid
When credited or
paid which ever is earlier
When Paid
Monthly
Statements of Tax
Collected/Deducted
Income Tax
46
Collection of tax by stock exchange registered in Pakistan on account of:
Purchase of shares
Sale of shares
Tax on motor vehicle
Goods transport vehicle of:
Ladden weight till 8119 Kg
Ladden weight 8120 Kg or more
234
Tax on gas consumption charges of a Compressed Natural Gas (CNG) Station
Electricity Consumption
Does not exceed Rs. 400
Exceeds Rs. 400 but does not exceed Rs. 600
Exceeds Rs. 600 but does not exceed Rs. 800
Exceeds Rs. 800 but does not exceeds Rs. 1,000
Exceeds Rs. 1,000 but does not exceed Rs. 1,500
Exceeds Rs. 1,500 but does not exceed Rs. 3,000
Exceeds Rs. 3,000 but does not exceed Rs. 4,500
Exceeds Rs. 4,500 but does not exceed Rs. 6,000
Exceeds Rs. 6,000 but does not exceed Rs. 10,000
Exceeds Rs. 10,000 but does not exceed Rs. 15,000
Exceeds Rs. 15,000 but does not exceed Rs. 20,000
Exceeds Rs. 20,000
Telephone subscriber where the monthly bill exceeds Rs. 1,000
Subscriber of mobile phone and prepaid mobile & telephone cards
Sale of units through any electric medium or whatever form
Sale of any property or goods by auction / tenders
Purchase of air tickets
234A
235
236
236A
236B
In case of passenger transport vehicle with seating capacity of:
4 or more person but less than 10 person
10 or more person but less than 20 person
20 or more person
Other private motor car with engine capacity of:
Upto 1000CC
1001CC to 1199CC
1200CC to 1299CC
1300CC to 1599CC
1600CC to 1999CC
2000CC and above
Brokerage and Commission
233
Purchase of motor vehicle manufactured locally with engine capacity:
Up to 850CC
851CC to 1000CC
1001CC to 1300CC
1301CC to 1600CC
1601CC to 1800CC
1801CC to 2000CC
Above 2000CC
233A
Cash withdrawals from bank
231B
Nature of
Payment/Transaction
231A
Section/
Subsection
of I.Tax Ord.
Final
Final / Adjustable
5%
5%
10%
10%
10%
N/A
N/A
Adjustable
Rs. 1,000
Adjustable
Fully adjustable for companies
whereas adjustable upto the extent
of tax liability for individuals and
AOPs
N/A
Nil
N/A
Nil
Nil
Final
Final
Nil
Rs. 50,000
Adjustable
Adjustable
Exemption
Limit
Adjustable/
Final Discharge
0
Rs. 80
Rs. 100
Rs. 160
Fully adjustable for companies
Rs. 300
whereas adjustable upto the extent
Rs. 350
of tax liability for individuals and
Rs. 450
AOPs
Rs. 500
Rs. 650
Rs. 1,000
Rs. 1,500
At 5% (Industrial consumer)
At 10% (Commercial consumer)
4%
Rs. 750
Rs. 1250
Rs. 1750
Rs. 3000
Rs.4,000
Rs. 8000
Rs. 25 per seat
Rs. 60 per seat
Rs. 500 per seat
Rs. 5 Per Kg of laden weight
Rs. 1200 Per Annum
After 10 years from
1st registration
0.01%
0.01%
10%
Rs. 7,500
Rs. 10,500
Rs. 16,875
Rs. 25,000
Rs. 22,500
Rs. 16,875
Rs. 50,000
0.2%
Standard
Tax Rates
Person making sale
Person making sale by auction
Person preparing mobile and
phone bills and person selling
prepaid cards
Person preparing
Electricity bills
Person making consumption bill
Excise and Taxation Department
Stock exchange
Payer
Registering Authority
Every banking company
Persons Required
To Deduct/Collect Tax
At time of realization
of sale proceeds
At time of realization
Monthly
Monthly
Monthly
Annually
At time of payment
When actually paid
At time of registration
When cash is with drawn
Statements of Tax
Collected/Deducted
Tax Handbook
2012
Income Tax
47
Sales Tax
Sales Tax
Sales Tax Applicability
Sales Tax is applicable at the rate of 16% of the value of:
Taxable supplies made by a registered person
Goods imported into Pakistan
Filing of Sales Tax Return
The sales tax return is to be filed within 15 days from the close of month by the registered persons
Sales Tax Registration Threshold
Annual Turnover of Taxable Supply
Manufacturers or Producers
More than
Rs. 2.5 million
Up to
Rs. 2.5 million
Sales Tax
Exempt u/s 13
Retailer
Wholesalers
(including Dealers)
and Distributors
Importers and
Exporters
More than
50 million
Making Taxable Supply
Sales
Sales Tax
Tax
GST @ 16% on manufacturer, importers & wholesalers
Exporters fall under zero-rated category (@ 0%)
Retailers fall under special procedure for payment of sales tax
48
Rs. 10,000
or 5% of amount
of tax involved
whichever is higher
Rs. 5,000
or 3% of amount
of tax involved
whichever is higher
Penalty of
Rs. 5,000
Rs. 10,000 or 5% of tax involved
whichever is higher
Required to enrol / register
himself and fails to do so
Fails to maintain records
On receipt of
1st notice
2nd notice
3rd notice
Twice of the amount of
penalty for the said offence
Repetition of an offence for
which a penalty is provided
under this Act
Rs. 25,000
Failure to submit summary of
sale and purchase invoices
required under this Act
Such person shall, further be liable, upon conviction by the Special Judge,
to imprisonment for a term which may extend to one year, or with fine which
may extend to an amount equal to the loss of tax involved, or with both.
Rs. 25,000 or 100 % of amount of tax involved whichever is higher
Rs. 25,000
or 10% of amount
of tax involved
whichever is higher
Violates any embargo placed
on removal of goods in
connection with recovery of tax
Rs. 5,000
Rs. 10,000
Rs. 50,000
Non production of record
Rs. 10,000 due to failure to furnish
the information required by Board
Rs. 5,000 or 3% of tax involved
whichever is higher
Contravenes any provision of
this Act for which no specific
penalty is provided and fails to
fulfil conditions prescribed in a
Notification
Fails to make payment in the
manner prescribed in Section 73
knowingly and without lawful authority gains access to the computerized system
unauthorizedly uses or discloses or publishes information obtained from the computerized system
falsifies any record or information stored in the computerized system
knowingly or dishonestly damages or impairs the computerized system
knowingly or dishonestly damages or impairs any duplicate tape or disc or other storage medium
unauthorizedly uses unique user identifier of any other registered
fails to comply with or contravenes security of unique user identifier
Rs. 25,000 or 100% of tax involved
whichever is higher
Makes or files false documents,
statements and declaration
Destroys or alters the record
Denies or obstructs authorised
officer to access record and
to perform his duties
Commits, causes to commit or
attempts to commit tax fraud
Denies or obstructs Sales Tax
Officer posted to business premises to
access record and to perform his duties
If any person
* No penalty shall be imposed, if miscalculation is made first time during the year.
* Certain defaults attract imprisonment along with penalty. Refer to Section 33 of the Sales Tax Act for complete reference of penalties.
*Default Surcharge at the rate KIBOR plus 3% per annum of the tax due would be imposed in the case of inadmissible input tax credit or
refund and on nonpayment of tax and such tax would be calculated on the basis of period of default.
Rs. 5,000
or 3% of amount
of tax involved
whichever is higher
Rs. 10,000
or 5% of amount
of tax involved
whichever is higher
Fails to notify change in
nature of supply
Fails to issue invoice
Un-authorisely issues invoice
Fails to deposit tax
*Repeats erroneous calculation
If return is filed in 15 days of
due date than penalty of Rs. 100
for each day of default
Penalty of
Rs. 5,000
Fails to furnish return
within due date
Penalties
Tax Handbook
2012
Sales Tax
49
Capital Value Tax (CVT)
Capital Value Tax
Certificates / Instruments of Redeemable Capital
Capital Value Tax is levied on the transactions of certificates or any instrument of redeemable capital as under:
Purchase
Rate of CVT
Collected by
Modaraba certificates or any
instrument of redeemable capital
Purchase of shares of a public company
listed on a registered Stock Exchange
0.02% of purchase value
Personal responsible for registering or attesting
the tranfer of asset.
Personal responsible for registering or attesting
the tranfer of asset.
0.01% of purchase value
CVT on Real Estate Transactions
Capital Value Tax is leviable on the real estate transactions of sale and purchase in the following manner:
Nature of Transaction
Rate of CVT
Residential immovable property (other than flats)
situated in urban area, measuring at
least 500 square yards or one kanal whichever is less
Where the value of Immovable property is recorded
2 % of the recorded value
Where the value of immovable property is not recorded
Rs.100 per square yard of the landed area
Where the immovable property is a constructed property
Rs.10 per square feet of the constructed
area in addition to the value worked out above
Commercial immovable of any size situated in urban area
Where the value of immovable property is recorded
2 % of the recorded value of land
Where the value of immovable property is not recorded
Rs.100 per square feet of the landed area
Where the immovable property is a constructed
Rs.10 per square feet of the constructed
area in property addition to the value worked
out above
Residential flats
Where the value of immovable property is recorded
2 % of the recorded value
Where the value of immovable property is not recorded
Rs.100 per square feet of the covered area
50
Tax Handbook
Disclaimer:
2012
Horwath Hussain Chaudhury & Co. is a member of Crowe Horwath International, a Swiss verein (Crowe Horwath). Each
member firm of Crowe Horwath is a separate and and independent legal entity. Horwath Hussain Chaudhury & Co. and its
affiliates are not responsible or liable for any acts or omisssions of Crowe Horwath or any other member of Crowe Horwath
specifically disclaim any and all responsibility or liability for acts or omissions of Crowe Horwath or any Crowe Horwath
member. ©2012 Horwath Hussain Chaudhury & Co.
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