Tax credit on investment in shares and
insurance - Section 62
The maximum
allowable threshold of eligible investment in shares or Sukuks and premium on
insurance policy is proposed to be enhanced from Rs.1.5 million to Rs.2
million.
Tax credit for non-profit organizations - Section 100C
Income derived
by religious or charitable organizations from investment in deposits with
scheduled banks is eligible for tax credit equal to the amount of tax on such
income. It is now proposed that profit on debt from deposits with Micro finance
banks should also be eligible for such tax credits.
Business income of a non-resident person
- Sections 101 and 152
The Bill seeks
to expand the scope of Pakistan source business income derived by a non-resident
person by including import of goods, whether or not the title to the goods
passes outside Pakistan, if the import is part of an overall Engineering,
Procurement, Construction and Commissioning (EPCC) arrangement irrespective of
the fact that the importer is the person, associate of the person or any other
person.
Gain on disposal of assets outside
Pakistan - Section 101 A
The Bill
proposes to introduce a new section whereby disposal of assets outside Pakistan,
by a non-resident, may also be subject to tax in Pakistan if such assets derive
their value from assets located in Pakistan.
Agreements for avoidance of double
taxation and prevention of fiscal evasion - Sections 107 and 109
Keeping in view
the drive on Base Erosion and Profit Shifting (BEPS), the Bill proposes that
the benefits available under a Double Tax Treaty may also be re-characterized
by the tax authorities.
Concept of beneficial ownership - Section 109
The Bill seeks
to introduce the concept of beneficial ownership by empowering the tax
authorities to disregard an entity or a corporate structure that does not have
an economic or commercial substance or was created as part of tax avoidance
scheme.
Controlled foreign company - Section 109A
The Bill
proposes to introduce the concept of controlled foreign company whereby subject
to certain conditions, the income of a foreign company controlled by a resident
person, would be taxable in the hand of such resident person.
Foreign income and assets statement - Section 116A
Every resident
individual having foreign income equal to or in excess of USS 10,000 or foreign
assets of value of USS 100,000 or more are now required to file a foreign asset
and income statement. Consequential changes have also been proposed in sections
114 and 118 regarding filing of return of income to enable filing of statement
of foreign assets and income along with the return of income. Corresponding
penalty has also been prescribed for non-filing of statement.
Best judgment assessment - Section 121
If a taxpayer
has been issued a notice for filing of return of income in respect of one or more
of the last ten completed tax years and he fails to file such return, a best
judgment assessment in such a case can be passed within two years from the end
of the tax year in which the notice is issued.
Alternative Dispute Resolution Committee
- Section 134A
Substantial
changes have been proposed in the provisions of the above section which may
have far reaching effects. The most significant changes are that it is now
proposed that the ADRC shall only hear the case after the withdrawal of appeals
filed by either party pending before any appellate authority and that the
decision of the ADRC shall be binding on both the parties i.e. the Board and
the aggrieved person.
Recovery of tax - Section 140
The requirement
of payment of 25% of the tax demand along with the appeal filed before the
Commissioner Inland Revenue (Appeals) has been reduced to 10% of the tax demand
to avoid recovery of tax through attachment of bank accounts or recovery from
third parties.
Relief from withholding - Section 153
The Bill
proposes to enhance non-withholding tax limits in respect of sale of goods and
services rendered from Rs.25,000 and Rs.10,000 to Rs.75,000 and Rs.30,000
respectively.
Furnishing of information by banks - Section 165A
Through this
section, banking companies were required to provide online access to their
central database that contains details of account holders and their day to day
transactions. Such access was so far denied by the banks for reason of secrecy
and confidentiality of banking data. It is now proposed that the banks instead
of giving access to online data, may provide details of tax collected on cash
withdrawal exceeding Rs.50,000 from filers and non-filers in respect of such
accounts where cash withdrawal exceed Rs.1 million or more during each calendar
month. The threshold for providing details of deposit in any account during a
month has also been proposed to be enhanced from Rs.1 million to Rs.10 million.
Similarly, the threshold of credit card transactions is also proposed to be increased
from Rs.100,000 to Rs.200,000 per month.
Claim of credit by a company being a
member of an Association of Persons -
Section 168
In order to
synchronize the claim of credit by a company being a member of an Association
of Persons (AOP) of taxes deducted and collected at source, the Bill proposes
to allow credit in proportion to its share in the taxable income of the AOP.
Appointment in special audit panel - Section 177
In relation to
appointment of special audit panels by the Federal Board of Revenue (the
Board), the Bill proposes to empower the appointment of:
·
A foreign
expert or specialist;
·
A tax
audit expert deployed under an audit assistance programme of an international
tax organization or a tax authority outside Pakistan.
Penalty - Section 182
Penalty for
non-filing of statements under various provisions of the Ordinance is proposed
to be rationalized.
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