Budget Flash 2018
Income
tax
Bonus shares - Section 2(29)
The taxation of
bonus shares has been proposed to be done away with on the popular demand of
the capital market. Corresponding amendments have also been proposed in the
withholding provisions to omit withholding of tax on issuance of bonus shares.
Super tax - Section 48
The charge of
super tax was extended up to the tax year 2017 through the Finance Act, 2017.
It is proposed to extend the levy up to the tax year 2020. The present rate of
super tax is 3% which will apply to the tax year 2018. It is now proposed that
the rate be reduced to 2% for the tax year 2019 and 1% for the tax year 2020.
For banking companies, the rate will be 4%, 3% and 2% respectively for the tax
years 2018, 2019 and 2020.
Taxation of undistributed profits -
Section 5A
The mandatory
requirement to distribute at least 40% dividend by listed companies to avoid
tax on undistributed profits is proposed to be reduced to 20%. The rate of tax
on undistributed profits is also proposed to be reduced from 7.5% to 5%.
Carry forward of losses - Sections 57
and 59A
Substantial
changes are proposed to be introduced to restrict the allow ability of carry
forward of depreciation and amortization losses up to 50% of taxable income of
the taxpayer arising from income from business only.
Tax credits - Sections 658, 65D and 65E
The eligible
period for investment in plant and machinery for availing tax credit is now
proposed to be extended to 30 June 2021 from the current period of 30 June
2019.
Unexplained income - Section 111(2)
For the purpose
of tax ability of unexplained income or assets, it is proposed that concealed
foreign assets and foreign income can be taxed in the tax year immediately
preceding the tax year in which such asset or income is discovered by the
Commissioner.
Immunity to foreign remittances -
Section 11 1(4)
Presently all
remittances irrespective of any threshold are eligible for immunity from any
probe by the tax authorities with respect to the sources of funds remitted. It
is now proposed to restrict the immunity to remittances up to Rs.10 million in
a tax year.
Fee for Offshore Digital Services -
Sections 2, 6, 101, 152 and First Schedule
Tax at the rate
of 5% is proposed to be introduced on fee for offshore digital services paid by
a resident person or borne by a permanent establishment of a non-resident
person.
Advance tax on persons remitting amounts
abroad through credit or debit or prepaid cards - Section 236Y and First Schedule
It is proposed
that every banking company be required to collect adjustable advance tax at the
rate of 1% (3% in case of non-filers) from every credit card, debit card and
prepaid card transaction completed with a person outside Pakistan.
Services rendered by a non-resident
through its permanent establishment
- Section 152
The Bill
proposes that tax deducted on payments for services by a permanent establishment
of a non-resident should constitute a minimum tax. The amendment seeks to align
the taxability of a non-resident service provider with that of a resident service
provider under section 153.
Taxability of commercial importers - Section 148
The Bill
proposes that the tax required to be collected from commercial importer at import
stage is to be treated as a minimum tax.
Advance tax - Section 147
In its drive
for collecting more and more taxes, the Government now seeks to give additional
powers to the Commissioner to examine the estimates of advance tax submitted by
the taxpayers and also seek supporting information regarding such estimates.
The Bill also seeks to give powers to the Commissioner to reject an estimate which
in his opinion is not duly supported by proper evidences of estimates.
Return not filed within due date - Sections 182A and 214D
The Bill
proposes to omit section 2140 which automatically selects a case for audit
where the return of income was not filed within the due date or extended due
date. However, to continue to have a check on non-filing of tax returns, it is
also proposed that if a taxpayer fails to file its return of income within the
due date or the extended due date, its name will not be included in the Active
Taxpayers List and it will not be entitled to carry forward any loss for the
year.
Definition of Filer - Section 2(23A)
The definition
of a filer is proposed to be amended to include those taxpayers whose names
appear in the Active Taxpayers Lists issued by the AJ&K Council or Gilgit
Baltistan Council. Now such taxpayers will also be considered filers for tax
purposes.
Definition of Permanent Establishment - Section 2(41)
The concept of
“dependent agents” as prescribed within the definition of a permanent
establishment has been proposed to be expanded to include agents that not only
conclude contracts but also such agents who play the principal role leading to
the conclusion of contracts without material modification by the non-resident
and who act exclusively or almost exclusively on behalf of the non-resident.
Gift - Sections 37 and 79
The benefits
available of non-recognition and valuation on receipt of asset by way of a gift
are provided in both the above sections which deal with capital gains and
non-recognition of gains on sale of assets. It is now proposed to restrict the
above benefits only to such gifts that are given to persons who are relatives.
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