FBR

TopicIs

INTRODUCTION:

The Central Board of Revenue (CBR) was created on April 01, 1924 through enactment of the Central Board of Revenue Act, 1924. In 1944, a full-fledged Revenue Division was created under the Ministry of Finance. After independence, this arrangement continued up to 31st August 1960 when on the recommendations of the Administrative Re-organization Committee, FBR was made an attached department of the Ministry of Finance. In 1974, further changes were made to streamline the organization and its functions. Consequently, the post of Chairman FBR was created with the status of ex-officio Additional Secretary and Secretary Finance was relieved of his duties as ex-officio Chairman of the FBR.

In order to remove impediments in the exercise of administrative powers of a Secretary to the Government and effective formulation and implementation of fiscal policy measures, the status of FBR as a Revenue Division was restored under the Ministry of Finance on October 22, 1991. However, the Revenue Division was abolished in January 1995, and FBR reverted back to the pre-1991 position. The Revenue Division continues to exist since from December 01, 1998.

By the enactment of FBR Act 2007 in July 2007 the Central Board of Revenue has now become Federal Board of Revenue.

Riffat Shaheen Qazi

Member (FATE)/Spokesperson FBR

Ms. Riffat Shaheen Qazi, a BS-21 officer, is the Member Facilitation and Taxpayer Education (FATE) in the FBR Headquarters since January, 22, 2010. She is also, the designated Official Spokesperson of FBR.

Ms. Qazi, a senior officer of Income Tax Group from the 7th Common, has previously served in various key positions across the country as part of her illustrious career spanning over, a period of 31 years. Her previous posting was in Regional Tax Office, Rawalpindi as Chief Commissioner Inland Revenue Service, where she introduced modern management /administrative recovery techniques. She also introduced proactive mode of communication Internal/External, creating linkages for facilitation of Tax Payers.

 Ms. Qazi brings with her a rich professional and academic experience. She holds a Master’s as well as an MPhil Degree in Economics from the University of Peshawar. She also did her Master’s in Business Administration from the John F. Kennedy University USA.

     Ms. Qazi has also attended the two modules of developing strategic change leadership at Rausing Executive Development

Center, LUMS Lahore. She also holds certificate in change management conducted by FBR.

She also did extensive Senior Executive Management training course, from the Harvard University Boston USA and from the Royal Institute of Public Administration (RIPA), London, UK on Developing a Modern Human Resource function. 

FUNCTIONS OF FBR/REVENUE DIVISION

In the existing setup, the Chairman, FBR, being the executive head of the Board as well as Secretary of the Revenue Division has the responsibility for

Formulation and administration of fiscal policies,Levy and collection of federal taxes andQuasi-judicial function of hearing of appeals.

 His responsibilities also involve interaction with the offices of the President, the Prime Minister, all economic Ministries as well as trade and industry.

CHAIRMEN FBR/CBR/SECRETARIES REVENUE DIVISION

In the existing setup, the Chairman, FBR, being the executive head of the Board as well as Secretary of the Revenue Division has the responsibility for

formulation and administration of fiscal policies,

levy and collection of federal taxes andQuasi-judicial function of hearing of appeals.

 His responsibilities also involve interaction with the offices of the President, the Prime Minister, all economic Ministries as well as trade and industry.

The names of Secretaries/Ex-officio Chairmen, full time Chairmen Secretary, Revenue Division/Chairmen and Vice Chairman, who headed the FBR/ Revenue Division from August 14, 1947 are given below:

Chairman, FBR

1) Mr. Mumtaz Haider Rizvi13-02-2012

Till Date

2)Mr. Mehmood Alam (Member SP&S)

25-01-2012

13-02-2012

Secretary Revenue Division/ Chairman, FBR

1) Mr. Salman Siddique24.12.2010

21.01.2012

Chairman, FBR

1) Mr. Sohail Ahmad18.05.2009

24.12.2010

Secretary Revenue Division/ Chairman, FBR

1) Mr. Ahmad Waqar23.07.2008

18.05.2009

Secretary General Revenue Division/ Chairman, FBR

1)  Mr. M. Abdullah Yusuf14.06.2006

23.07.2008

Secretary Revenue Division/ Chairmen, CBR

1) Mr. M. Abdullah Yusuf12.03.2004

 14.06.2006

2) Mr. Riaz Ahmad Malik03.07.2001

 11.03.2004

3) Mian Iqbal Farid07.11.1998

 06.11.1999

4) Mr. Riaz Hussain Naqvi08.11.1999

 02.07.2001

Vice Chairmen, Chairman CBR

1) Mr. Moinuddin Khan02.01.1998

06.11.1998

2) Mr. HafeezullahIshaq11.11.1996

02.01.1998

3) Mr. Shamim Ahmed28.08.1996

11.11.1996

4) Alvi Abdul Rahim (Remained vice Chairman of CBR before becoming Chairman CBR)

13.07.1995

28.08.1996

Secretary Revenue Division/ Chairmen, CBR

1) Mr. A.R. Siddiqi11.07.1994

11.01.1995

2) Mr. Javed Talat26.07.1993

01.07.1994

3) Qazi M. Alimullah03.05.1993

17.07.1993

4) Mr. M. Mubeen Ahsan03.11.1992

03.05.1993

5) Mr. Sajjad Hassan03.10.1991

03.11.1992

Chairmen, CBR

1) Mr. Sajjad Hassan24.07.1991

03.10.1991

2)Mr. Ahadullah Akmal

16.08.1990

24.07.1991

3)Mr. Ghulam Yazdani Khan

22.01.1989

11.08.1990

4)Syed Aitezazuddin Ahmed

20.08.1988

02.01.1989

5) Mr. I. A. Imtiazi11.08.1985

20.08.1988

6)Mr. Fazlur Rahman Khan

14.12.1980

11.08.1985

7) Mr. N. M. Qureshi 12.11.19 14.12.198

75 0

8) Mr. M. Zulfiqar01.10.1974

12.11.1975

9) Mr. Riaz Ahmad17.11.1973

30.09.1974

10)

Mr. M. Zulfiqar11.10.1971

17.11.1973

Finance Secretaries/ Ex-Officio Chairmen, CBR

1) Mr. A.G.N. Kazi08.09.1970

 10.10.1971

2) Mr. Ghulam Ishaq Khan31.05.1966

 08.09.1970

3) Mr. M. M. Ahmed06.03.1963

 30.05.1966

4) Mr. Mumtaz Mirza19.06.1961

 06.03.1963

5) Mr. M. Ayub29.07.1960

 19.06.1961

6) Mr. H. A. Majid01.11.1958

 29.07.1960

7) Mr. Mumtaz Hassan 25.02.1952

 01.11.1958

8) Mr. Abdul Qadir01.02.1950

 25.02.1952

9) Sir Victor Turner14.08.1947

01.02.1950

About Income Tax

Taxation according to a person’s ability to pay is universally accepted principle, and income is considered a satisfactory though not a sufficient index of such ability to pay. Income Tax is, therefore, generally recognized as a highly equitable form of taxation. A tax levied on income can normally be shifted to others and thus its incidence is on those for whom it is intended. Since income tax is progressive in nature, it tends to reduce economic disparity. Tax rates and method of calculating taxable income varies with fiscal status of the tax payer. Following are the broad categories of taxpayers:-

Companies

Association of Persons (AOP)Non-Salaried IndividualsSalaried individuals

Capital Value Tax

It is payable by individuals, firms and companies which acquire an asset by purchase or a right to use for more than 20 years.

Corporate Asset Tax

It is levied through section 12 of the Finance Act, 1991. This is one time levy payable by a company as defined in Companies Ordinance, 1984, on the value of fixed assets held by the company on the "specified date".

Messages from the Board

Chairman

Withholding Taxes collected by Federal Board of Revenue are significant contributors to the exchequer. The collection is on the rise over the years. Nonetheless, visible gaps have been observed between the actual collection of Withholding Taxes and their true potential in the economy. One of the Study Groups has quite recently identified that 110 % gap exist in collection from Salary & Wages alone. In order to streamline the management for exploiting the true potential of Withholding Taxes, the Director General (Withholding Taxes) is mandated with the task of spearheading the task of streamlining the Withholding Taxes.The DG (Withholding Taxes) has laid a strong foundation that I am sure will help bridge the yawning gap in revenue collection.

Member Direct Taxes

In view of the falling revenue syndromes and apparent difficulty in meeting the ever-increasing budgetary targets, it is imperative to explore the possible avenues for bringing in the extra revenues for the Government. Withholding taxes were unanimously considered the most potential source. In order to have a unified approach in streamlining this source of revenues, the Director General (WHT) has been established.I am confident that the guidelines contained herein and those in the linked pages will be extremely helpful to all the stakeholders,

to explore the potential avenues and identify the loopholes for improving the management of Withholding Taxes thereby increasing the overall collection of the FBR.

Withholding Tax

Introduction

Major sources of Tax Revenue in the country are federal taxes comprising of Income Tax, Sales Tax, Custom duties and Federal Excise Duty. Out of total collection of Rs.581 (b) for current financial year up-to February, 2008 the share of Income Tax comes to Rs. 212(b) i.e. 37 % of the taxes collected by FBR. Within total Direct Tax revenue, 41% comes from various withholding taxes, which are characterized by their adjustable and presumptive nature. Withholding taxes are part of tax system ever since imposition of direct taxes by the governments. In recent years, globalization has forced many countries to alter their economies to harmonize tax policies and alignment thereof with new trade and investment policies embodied in the free trade agreements. The concept of “Hang Together” is more relevant today than ever before. Countries can neither close their borders nor their economies. Tax policies cannot be isolated from the international economies either. Tax competition is almost an un-alloyed evil, working as a constraint on governmental over-reach. Countries, therefore, have to take positive steps to protect the integrity of their individual and corporate tax systems from the competition so engendered. 

Withholding Taxes in Pakistan

Short history

Withholding is an act of deduction or collection of tax at source, which has generally been in the nature of an advance tax payment. It is an effective mechanism and important/timely source of revenue. Their contribution is about 41 percent of total direct tax revenues. Increase from Rs.5 (b) in 1991 to above Rs 169(b) in 2007 speaks of exponential growth and consequential heavy reliance on withholding taxes in Pakistan. Under the repealed Income Tax Act, 1922, tax was deducted from two main sources of income; namely, salaries and interest on securities. Over the period of time, Withholding Tax net was extended, by steadily introducing different Provisions in the Tax Laws. The repealed Income Tax Ordinance, 1979, brought in all the provisions of the Income Tax Act, 1922. However, in the 1990s, withholding tax net was expanded extensively by providing for withholding tax on a wider variety of transactions and making most of them presumptive. Provisions of the Income Tax Ordinance, 2001, are more or less the same, except for a few changes and additions. Important withholding provisions relate to salary, imports, exports, commission and brokerage, dividend, contracts, profit on debt, utilities, vehicles tax, stock exchange-related provisions and non-residents, etc., with varying rates.

Introduction & Procedure of Advance Ruling

Introduction

With a view to remove any confusion and to avoid disputes in respect of determination of the income tax liability of a non-resident person, a procedure of Advance Rulings has been brought on statute by way of incorporating Section 206A into the Income Tax Ordinance, 2001, i.e. 1.7.2003. Through this facility non-residents can obtain, in advance, a binding ruling on the issues that could arise in determining their tax liabilities at a later stage. Therefore, time consuming and expensive legal disputes can be avoided. The Centre Board of Revenue is empowered to determine any question of law or of fact as

specified in the application made before it in respect of a transaction which has been undertaken or is proposed to be undertaken by a non-resident in Pakistan on its own or in combine with a resident concern.

The detailed procedures for obtaining an advance ruling are contained in Rule 231A and 231B of the Income Tax Rules, 2002. An application form for the purpose has also been prescribed in Rule 231B, stipulating the information required to be divulged and the documents to be attached.

Composition of the Advance Ruling Committee

 The application for advance ruling is considered and decided upon by a committee headed by the Chairman, Central Board of Revenue, after giving due opportunity to the applicant of explaining his case. Other members of the committee are Member (Direct Taxes), Central Board of Revenue, and Additional Secretary, Law, Justice, and Human Rights Division, Government of Pakistan.

Procedure

The applicant may seek advance ruling by making an application to the Central Board of Revenue in the prescribed form and manner.

 The application for advance ruling should be presented in the form prescribed for the purpose by the applicant in person or by an authorized representative to the Secretary, International Taxes Operations, Room No. 424, 5th Floor, FBR House, and Constitution Avenue, Islamabad.

The application and the accompanying annexures may be neatly typed on one side of plain paper of A-4 size leaving a

minimum margin of 30mm on all the four sides and may be duly indexed. Legible photocopies of the relevant documents may be attached.

 No information as required in the prescribed application form may be withheld. Provision of complete and correct information would help the applicant in getting an early decision.

The question(s) of law or fact on which advance ruling is sought may be stated clearly in the application using a text box.

Si gning of Applicatio n

The application, its verification and the annexures, statements and documents accompanying it, are required to be signed by a person competent to do so. Where a person signing the application and other documents claims to have been duly authorized to do so, the application must be accompanied by a power of attorney authorizing him to sign.

Authorized Representative

The applicant is entitled to present his case before the Advance Ruling Committee either personally or through an authorized representative. If the applicant desires to be represented by an authorized representative, a duly authenticated document authorizing him to appear for the applicant should be enclosed.

Payment of Fee

There is no fee for seeking an advance ruling from the Central Board of Revenue.

Withdrawal of application

The applicant may withdraw his application at any time before the ruling is issued.

Advantages of Advance Ruling

Helps non-residents in planning their income tax affairs well in advance.Gives clarity to the local partners of non-residents vis-à-vis their liabilities under the tax laws.Brings certainty in determination of the tax liability.

Helps in avoiding long drawn and expensive litigation.It is inexpensive, expeditious and binding.

Who can seek advance ruling?

Federal Excise-Goods / Services Liable to Excise Duty

Duties specified in the Federal Excise Act, 2005:

Federal Excise duty is payable on:

Goods produced or manufactured in Pakistan;Goods imported into Pakistan;Such goods as the Federal Government may, by notification in the official Gazette, specify, as are produced or manufactured in the non-tariff areas and are brought to

the tariff areas for sale or consumption therein; andservices, provided or rendered in Pakistan;

However, all the goods and services are exempt under section 16, except:

The goods and services specified in the First Schedule, which shall be charged to Federal excise duty as, and at the rates, set-forth therein;The goods and services specified in Third Schedule shall be exempt from duty subject to such conditions and restrictions, if any, specified therein and no adjustment in terms of section 6 shall be admissible in respect of goods exempt from duty of excise whether conditionally or otherwise; andThe goods as mentioned in the Second Schedule shall be chargeable to FED in the same manner as provided in the Sales Tax Act, 1990, as provided in section 7 of the Federal Excise Act, 2005. The same shall apply to services as notified vide SRO 550(I)/2006 dated 5th June 2006.

OVERVIEW OF FEDERAL EXCISE DUTY

The Federal Excise Act, 2005, was promulgated with effect from 1st July, 2005, repealing the Central Excises Act, 1944. Following are some of the significant changes brought about by the new Act:

 The word “Federal” was used in place of “Central”. Therefore, now the term “Federal Excise Duty” is more appropriate as compared to old “Central Excise Duty” for the duties of excise levied under the 2005 Act.

The system of physical supervision has been entirely done away with and now all clearances will be self-assessed and no prior permission for clearance will be required.

The payment of duty will be on monthly basis and the duty on all clearances during the month will be payable by the 15th of next month. This is in contrast to previous requirement of payment of duty prior to clearance.

No gate passes are required for clearances as in the old system.

Double taxation has been eliminated by allowing adjustment of the excise duty paid on the input goods used directly in the manufacture of excisable goods.

On some services and goods FED is payable in VAT more i.e. in the same manner as provided in the Sales Tax Act, 1990? For details see the link ‘Goods/Services Liable to Excise Duty’ on this page.

Federal Excise duty is payable on:

Gods produced or manufactured in Pakistan;Goods imported into Pakistan;Such goods as the Federal Government may, by notification in the official Gazette, specify, as are produced or manufactured in the non-tariff areas and are brought to the tariff areas for sale or consumption therein; andServices, provided or rendered in Pakistan;

Special Excise Duty

As part of budgetary measures for the year 2007-08, Special FED at 1% has been levied on goods which are manufactured or are imported in Pakistan. This duty is in addition to FED as prescribed in First Schedule of the Federal Excise Act, 2005. For list of goods excluded from purview of this special duty and other details see SRO 655(I)/2007.

Mr.Mumtaz Haider Rizvi

Member (Customs)

Mr.Mumtaz Haider Rizvi a BS-22 officer is the Member Customs in FBR Headquarters.Mr. Rizvi, a senior officer of Pakistan Customs Group has previously served in various key positions across the country in his illustrious career spanning over 34 years.He is also holding additional charge of Chairman FBR/Secretary Revenue Division.Mr. Rizvi brings with him a rich professional and academic experience. He holds a Master’s degree in Economics and LLB from the University of Punjab.

Pakistan Customs

Introduction

Pakistan Customs is the guardian of Pakistan borders against movement of contra band goods and is facilitator of bona fide trade. It provides a major source of revenue to the Government of Pakistan in the form of taxes levied on the goods traded across the borders. It also helps to protect the domestic industry, discourage consumptions of luxury goods and stimulate development in the under -developed areas.

About Sales Tax - Overview

OVERVIEW

Sales Tax was a provincial subject at the time of partition. It was being administered in the provinces of Punjab & Sindh as provincial levy. Sales tax was declared a federal subject in 1948 through the enactment of General Sales Tax Act, 1948 and in 1952; this levy was transferred permanently to the Central Government. Sales tax was levied at the standard rate of 6 pies per rupee at every stage whenever a sale was affected. The trading community protested against this system, and this resulted in the enactment of Sales Tax Act 1951.

A system of licensed manufacturers & wholesalers was instituted whereby they were allowed to purchase goods free of sales tax from each other and pay tax on sales to unlicensed traders. Imports were chargeable to Sales Tax but the licensed manufacturers & wholesalers were allowed to import goods without the payment of Sales Tax. Later on Sales Tax became chargeable on locally produced & imported goods at

the time of their sales & import, respectively. The sales tax, was collected under the Finance Ordinance, 1956, on goods which were chargeable to Central Excise Duty, as if it were a duty of Central Excise. In April 1981, by virtue of an amendment in the Sales Tax act, 1951, the collection of Sales Tax on non-excisable goods was also entrusted to the Central Excise Department.

In the late eighties the government decided to replace Sales Tax with the Value Added Tax in the country as a part of its structural adjustment program which was undertaken to correct anomalies & distortions both in our tax & non-tax regimes. Accordingly new enactment titled Sales Tax Act 1990 replaced Sales Tax Act 1951 with effect from 1-11-1990.

Liability to Sales Tax:

Following sectors are required to get registration for sales tax and charge sales tax on their supplies/ services:

ManufacturingImportServicesDistribution, Wholesale & Retail stage.

Previously it was being charged at the manufacturing & import stage, and its scope has been extended now to remaining sectors.

Sales Tax is chargeable on all locally produced and imported goods except computer software, poultry feeds, medicines and unprocessed agricultural produce of Pakistan and other goods specified in Sixth Schedule to The Sales Tax Act, 1990.

Registration

Every person in sectors mentioned above, who makes a taxable supply in Pakistan is required to be registered under the Sales Tax Act.

However, manufacturers having taxable turnover below five million rupees and also utility bill below Rs. Seven lac during the last twelve months are exempted from registration and payment of sales tax. Similar exemption is also available to retailers having total turnover below Rs. five million in the last twelve months.

The rate for sales tax is 16% of value of supplies. However, there are some items which are chargeable to sales tax at 18.5% or 21% of value of supplies (see SRO 644(I)/2007 as amended by SRO 537(I)/2008 dated 11th June 2008)

The Registration Form(s) are submitted to the Central Registration Office, FBR, or Sales Tax Collect orates/ RTOs for the allotment of a Registration Number by the persons liable to be registered under the Sales Tax Act. The taxpayer is then issued a Certificate of Registration.

Returns

As per law each registered person must file a return by the 15th of each month regarding the sales made in the last month.

All registered persons are required to file returns electronically and in such cases the payment is to be made by the 15th and return can be submitted on FBR’s e-portal by 18th.

Detailed procedure in this respect is given in Sales Tax General Order no. 04 of 2007.

There are some sectors which are required to file returns on quarterly (tri-monthly) basis e.g. retailers including dealers of specified electric goods and CNG dealers.

Maintenance of Records

All registered persons are required to maintain records at their business premises of the goods purchased and supplied made by them. All the records are required to be kept for a period of 5 years.

Refunds of Sales Tax

In cases where the Input Tax exceeds the Output Tax due from the registered person in respect of a tax period because of exports or other zero-rated supplies, the excess amount of input is refunded back to the taxpayer within 45 days. In all other cases of excess input tax, the Board can specify the procedure for refund.

Additional Tax

If a registered person does not pay the tax within the specified time or claims a tax credit or refund which is not admissible to him, or incorrectly applies the rate of zero percent to the supplies made by him, he has to pay the additional tad at the following rates:

One and half percent of tax due or the part thereof per month; However, in case of tax fraud, the rate of additional tax shall be two percent per month.

Arrears

The work regarding Arrears gets initiated in the following cases:

Late or no submission of the ReturnsAmount paid is less than the tax amount payableA demand raised after an audit/ scrutiny is upheld after adjudication

TAXPAYERS AUDIT :

Hafiz Muhammad Anees:

Member (Taxpayers Audit):

Hafiz Muhammad Anees a BS-21 officer, is the Member (Taxpayers Audit) in

the FBR Headquarters.He is, a senior officer of Pakistan Customs Service and

has previously served in various key positions across the country in his

illustrious career spanning over 32 years. He has served as Director General,

Internal Audit (Customs) and Member, Appellate Tribunal (Customs, Excise &

Sales Tax), Karachi & Lahore. He has also remained posted as Member

(HRM), Member (IMS) and Member (Enforcement & Accounting) in the FBR

(HQ).He brings with him a rich professional and academic experience. He

holds a Master Degree in Economics from the University of Punjab.

Introduction:

Tax system in Pakistan is operating on self assessment basis. There is no physical

control on the persons (including industrial concerns) registered under different

taxes, except under special circumstances. The system promotes voluntary-

compliance, self-documentation, self-assessment, and self-policing. Audit is the only

instrument of control with the FBR through which compliance level of registered

persons is monitored i.e. whereby the government checks whether a registered

person/ taxpayer has correctly determined his tax liability, deposited due tax to the

government and is making adjustments of input tax etc to which he is legally

entitled. In order to safeguard the government’s interests, it is necessary that a

central risk based “Audit Management System/ Centralized Automated Audit

Monitoring System” be established and be constantly reviewed and

streamlined/improved from time to time for achieving the desired results, and

coordinate the audit activities of different taxes. Accordingly, as per FBR's reforms

program, a Member (Audit) is now recruited from the private sector since April,

2002 and an Audit Wing has been established under him with effect from 1st

January, 2003.