Finance Act 2016PRESENTED BY DR. IKRAMUL HAQ, ADVOCATE SUPREME COURT

ASSISTED BY SYED MUHAMMAD IJAZ, FCA, LL.B. ADVOCATE HIGH COURT

PARTNERS HUZAIMA IKRAM & IJAZ

Table of contents

Material changes relating to manufacturing sector

Customs Act 1969

Sales tax Act, 1990

Income Tax Ordinance, 2001

Federal Excise Act, 2005

Customs Act, 1969CHANGES IN ACT AND SCHEDULES

SUMMARY

Confidentiality and restricted public disclosure of information

ADRC related changes

Changes in Tariffs/slabs/duties and rates

Amendment in 5th Schedule

Section 155H. Confidentiality of

information.

Two new clauses (d)” and (e) added after clause (c) allowing customs authority data sharing

Clause (d) - to the extent of agreed data contents under a memorandum of understanding, bilateral,regional, multilateral agreements or convention

Clause (e) -public disclosure of valuation data through any medium containing description of items,origin, currency, declared and assessed unit value without disclosing name and address of the importeror exporter or their suppliers

Purpose of adding these two clauses is to protect the confidentiality of information through exchange of information with trading partners, it will be ensured that data will not be disclosed publically with specific name and addresses of importer or exporter or their suppliers

Comments:

For violation of this confidentiality provision for punishment has not been provided as is the case of Income Tax Ordinance, 2001- To be checked

Section 195C. Alternative Dispute

Resolution.

By change in subsection 2 membership of the ADR committee from customs side is restricted

to an officer of customs not below the rank of Collector

Through change in subsection 4 the time limit for Board for passing an order on

recommendations of ADRC is extended from 45 days to 90 days

Further a proviso is added after subsection 4 through which if order is not passed by the

Board within 90 days then recommendations of ADRC shall be treated as an order passed by

the Board under this subsection

Corresponding amendments (relating to proviso of subsection 4) are made is subsection 5

allowing the aggrieved person to pay against recommendations of committee (treated to be

an order passed under the proviso to subsection 4)

TARIFFS/SLABS/DUTIES AND RATES

Reduction in slabs (from 5 to 4)

Comments

2% & 5% merged as single rate of 3%

The main distortion is through SROs that controls main tariffs which is still there and government

keeps on creating uncertainties through administrative orders

Reduction in duties mainly in selected items and overall issue of rationalization i.e. lower rate

of custom duty and ending all other taxes at source that increase the cost of inputs remains

un attended.

5th Schedule to the Customs Act, 1969

The Fifth Schedule To The Customs Act, 1969 (IV Of 1969), Shall Be Substituted In TheManner Specified In The Second Schedule To This Act [Finance Act 2016]

Part-i Imports Of Plant, Machinery, Equipment And Apparatus, Including Capital Goods For VariousIndustries/Sectors

PART-II Import Of Active Pharmaceutical Ingredients, Excipients /Chemicals, Drugs, Packing

Material/ Raw Materials For Packing And Diagnostic Kits And Equipment , Components And Other

Goods

Part-III Raw Materials/Inputs For Poultry And Textile Sector; Other Goods

PART- IV Imports Of Machinery And Equipment For Textile Sector

Part-V Import Of Automotive Vehicles (Cbus) Under Automotive Development Policy (Adp) 2016-21

Part-VI Imports Of Aviation Related Goods I.E. Aircrafts And Parts Etc. By Airline Companies /Industry Under National Aviation Policy 2015

PART-VII MISCELLANEOUS

Sales Tax Act, 1990CHANGES IN ACT AND SCHEDULES

SUMMARY

Zero rated regime for 5 export oriented sectors

Disallowance of input tax paid under provincial laws

Different due dates for different annexures and parts

Enhancement of cottage industry turnover threshold

Tax credit restriction in case supplies fails to declare supply or pay tax

ADRC related changes

Zero rating of supplies in case of sale of taxable activity (mergers/acquisitions)

Section 2- Definitions

clause (5AB) – Minimum threshold of supplies for Cottage industry increased from PKR 5 M to PKR

10M

clause (9) – Due Date – Reference to section 26AA (this section was omitted vide Finance Act, 2008)

rendering reference redundant thus omitted. Board is further empowered to specify different dates for

furnishing of different parts or annexures of the return. Corresponding changes have also been made in

section 26 Returns by omitting subsection 2. Corresponding changes are also made in section 6.

clause (14) – Input Tax – sub clause “d” relating to provincial sales tax on services omitted. This is very

strange that no such corresponding amendment in clause 20 [output tax] is made thus output tax still

includes

(iii) Provincial sales tax levied on services rendered or provided by the person;]

Point for discussion lack of harmonization and cases of harmful competition

Section 6, 7, 8, 11

Changes made in section 7 Determination of tax liability a proviso is added to clause (i) of subsection 2 to

restrict the input tax adjustment from the date to be notified by the Board in this respect, in addition to other

conditions, if the supplier has not declared such supply in his return or he has not paid amount of tax due as

indicated in his return

8. Tax credit not allowed- through changes in clause (L) of subsection 1 changes corresponding to change

in section 7 are made to restrict tax credit where the tax due has not been paid.

section 11 – Assessment of Tax and recovery of tax not levied or short-levied or erroneously refunded-

by adding subsection 4A an Officer of inland revenue is now authorized to determine the tax liability after

giving notice in cases where a person who is required to withhold tax under the provisions of this Act or rules

made thereunder.

Fails to withhold tax

Fails to deposit tax where tax is being withheld

Section, 30DDD, 47A

Newly added section 30DDD. Directorate General of Input Output Co-efficient Organization.

Authorizing Board to appoint a Director General and as many Directors, Additional Directors,

Deputy Directors, Assistant Directors and such other officers through a notification to this effect.

47A. Alternative dispute resolution only an officer not below the rank of Commissioner can be a

member of the committee earlier it was Additional Commissioner. Further time limit for Board to

pass an order against the recommendations of the committee is extended to 90 days [earlier 45

days] moreover a proviso is added to subsection 4 whereby the recommendations of committee

shall be treated as order passed by Board if Board fails to pass an order within 90 days.

Section 49, 56B

49. Sales of taxable activity or transfer of ownership by adding subsection 2 mergers and

acquisitions are facilitated by transferring the stock through a zero rated invoice to surviving or

acquiring entity

Section 56B substituted to accommodate OECD membership related conditions

56B. Disclosure of information by a public servant.– (1) Any information acquired under any provision of this Act

shall be confidential and no public servant shall disclose any such information, except as provided under section 216

of the Income Tax Ordinance, 2001 (XLIX of 2001).

(2) Notwithstanding anything contained in sub-section (1) and the Freedom of Information Ordinance, 2002 (XCVI

of 2002), any information received or supplied in pursuance of bilateral or multilateral agreements with government of

foreign countries for exchange of information under section 56A shall be confidential

Schedule 6 Table 1

Sr. # 100A inserted providing exemption with reference to Gawadar to various Chinese companiesdefining procedure of impose and procedure for local supplies

Sr. # 100B inserted to exempt supplies(within Gawadar free zone) for 23 years by business to beestablished within Gawadar- supplies outside Gawadar free zone & into territory of Pakistan shall besubject to sales tax

Sr. #105 corresponding changes to first schedule of custom by amending rate to 11 percent advaloremfor raw materials for the basic manufacture of pharmaceuticals

Sr. #110 LVD, SMD, LED’s with or without blast, tubular day lights, energy savers, tube lights, inverters,for renewable energy (respective PCT heading as provided in schedule 6)

Sr. # 111 white crystalline sugar (now appearing at serial 32 of table 1 of eighth schedule)

Sr. # 123 Aircraft dry/wet lease by PIA with effect from 19.3.2015

Sr. # 130 inserted-premixes for growth stunting

Sr. #131 inserted-laptop, notebooks whether or not incorporating multimedia kits & Sr. #132 Pc’s

Sr. #133 inserted-pesticides

Schedule 8 Table 1, 2 & 9th Schedule

Sr. #15 Tax rate on ingredients of poultry feed and cattle feed raise to 10 percent (earlier 5 percent)

Sr. #20 words and equipment edit to allow reduce rate on equipment related to alternative energy provided certificatefrom AEDB on prescribe format is available

Sr. #25 Tax on agriculture tractor's reduce to 5 percent (earlier 10 percent)

Sr. #26 Laser land leveler edit to be taxed at 7 percent

Sr. #33 Urea at the rate 5 percent

Sr. #34 setup top boxes, TV broadcast transmitters etc at the rate 5 percent (subject to PEMRA approval) concessionavailable up to 30.6.217

Table 2 tax at 5 percent silos are edit

Table 2 serial 8 milk chillers, tubular heat exchangers, milk processing plant, drying plants, UHT plants, Milk filters, &any other machinery and equipment for manufacturing of dairy products- if imported by registered manufactured who ismember of Pakistan Dairy Association

9th Schedule Sr. # 2 (B) Duty raised from 5 hundred rupees to thousand rupees & two hundred fifty two thousandrupees.

9th Schedule Sr. # 2 (C) tax raise to 1500 (earlier 1000)-IMEI registration tax raise to 1500 (earlier 500).

Federal Excise Act, 2005CHANGES IN ACT AND SCHEDULES

Section 2, 6, 16, 19

Clause (8a) – Due Date – Federal Government is empowered to specify different dates for

furnishing of different parts or annexures of the return. Corresponding changes have also

been made in section 4 Filing of Returns and payment of duties by omitting subsection 3 and

adding words “by the date as prescribed in this respect” in subsection 2.

Changes made in section 6 Adjustment of duties of excise a new subsection 2A is added

to restrict the input duty adjustment from the date to be notified by the Board in this respect,

in addition to other conditions, if the supplier has not declared such supply in his return or he

has not paid amount of tax due as indicated in his return

Subsection (13) is added to section 19 [Offences, penalties, fines and allied matters]

whereby Any person who contravenes any provision of this Act or rules made thereunder for

which no penalty has specifically been provided in this section shall be liable to pay a penalty

of five thousand rupees or three percent of the amount of duty involved, whichever is higher.

Section 38, 47B

38. Alternative dispute resolution - only an officer not below the rank of Commissioner can

be a member of the committee earlier it was Additional Commissioner. Further time limit for

Board to pass an order against the recommendations of the committee is extended to 90

days [earlier 45 days] moreover a proviso is added to subsection 4 whereby the

recommendations of committee shall be treated as order passed by Board if Board fails to

pass an order within 90 days

Section 47B substituted to accommodate OECD membership related conditions

[47B. Disclosure of information by a public servant.– (1) Any information acquired under any provision of this Act shall be confidential and no public servant shall disclose any such information, except as provided under section 216 of the Income Tax Ordinance, 2001 (XLIX of 2001).

(2) Notwithstanding anything contained in sub-section (1) and the

Freedom of Information Ordinance, 2002 (XCVI of 2002), any information

received or supplied in pursuance of bilateral or multilateral agreements with

government of foreign countries for exchange of information under section

47A shall be confidential.]

Schedules I, II, III

Schedule 1- Duty on certain items increased from 10 to 11%

Schedule 1- Duty of Cigarettes is now Rupees one thousand six hundred and forty-nine per

thousand cigarettes

Schedule 1- Table II- an note is added below table II– The duty on the services as specified

against serial numbers 1, 2, 2A, 5, 8, 11 and 13 shall not be levied on services provided in a

Province where the provincial sales tax has been levied thereon.]

Schedule II-Duty in VAT mode- White crystalline sugar is omitted as this is now a Sales Tax

Act, 1990’s subject.

Schedule III- CPEC and Gwadar related exemptions are provided to Chinese companies

Income Tax Ordinance,

2001CHANGES IN ACT AND SCHEDULES

Section 4B, 7C,7D, 8 and Division VIIIA

& B of P-1 of First Schedule

4B. Super tax for rehabilitation of temporarily displaced persons. Application of this section extended to Tax Year 2016 though this was intended to be a “One Time” Tax. This shows the high handedness and trustworthiness of the Government

Clause (II) of Subsection 2 is also amended to bring clarity in definition and scope of taxable Income. Taxable Income is now other than brought forward depreciation and brought forward business losses

7C. Tax on builders, 7D. Tax on developers and 8. General provisions relating to taxes imposed under sections 5, 1[5A, 6, 7, 7A 2[, 7B, 7C and 7D

Newly inserted Section 7C-tax shall be imposed on the profits and gains of a person deriving income from the business of construction and sale of residential, commercial or other buildings at the rates specified in Division VIIIA of Part I of the First Schedule- Applicable from 1-7-2016

Newly inserted 7D-a tax shall be imposed on the profits and gains of a person deriving income from the business of development and sale of residential, commercial or other plots at the rates specified in Division VIIIB of Part I of the First Schedule- Applicable from 1-7-2016

Corresponding amendments are also made in section 8 to make 7C and 7D a final discharge. Further no tax credits be allowed against such deductions

Section 15 & 15A

Sub-section (6) & 7 inserted to section 15 making property income taxable under fixed tax

regime as available before omission through Finance Act, 2013. Now up to PRK 200,000

property income is not taxable provided the AOP or individual has no other source of Income.

Company is still under normal tax regime. Hence provisions of section 15A are made

company specific only.

Rates defined in -First Schedule Part 1, Division VIA-INCOME FROM PROPERTY various slabs- Various Slabs 5 to 20 percent rates

Section 21

21. Deductions not allowed- New clause “c” is added to disallow deduction where

tax is required to be deducted and has not been deducted or if deducted has not

been deposited.

Two provisos are also added to clause “c” Proviso 1 restricts disallowance in respect of

purchases of raw materials and finished goods under this clause shall not exceed

twenty per cent of purchases of raw materials and finished goods

Proviso 2 considers recovery of any amount of tax under sections 161 or 162 as tax

paid

Clause “o” inserted whereby disallowing expenditure in respect of sales promotion,

advertisement and publicity in excess of five per cent of turnover incurred by pharmaceutical manufacturers.]

Section 22, 37A

22. Depreciation- Explanation to subsection 5 added whereby if asset is used for business during tax holiday/exemption period depreciation shall be deemed to be allowed in respect of the said tax year and after expiration of the exemption period, written down value of such assets shall be determined after reducing total depreciation deductions (including any initial allowance under section 23) in accordance with clauses (a) and (b) of this sub-section

37A. Capital gain on sale of securities. Explanation to clause “b” of subsection 3Aadded For removal of doubt it is clarified that derivative products include futurecommodity contracts entered into by the members of Pakistan Mercantile Exchangewhether or not settled by physical delivery.

Rates defined in -First Schedule Part 1,

Division VII-CAPITAL GAINS ON DISPOSAL OF SECURITIES- 0 to 18% rates depending on Tax year and holding period

Division VIII Capital Gains on disposal of Immovable Property- 0 to 10% depending on holding period REITs at 5%

Section 53, 59B

53. Exemptions and tax concessions in the Second Schedule – Subsection 2 amended to

facilitate MOUs and bilateral agreements with foreign Governments and IFIs

59B. Group relief- is now restricted to %age shareholding of the holding company in a

subsidiary.

Section 62A, 63

62A. Tax credit for investment in health insurance– New section added to provide tax

credit to a resident persons [filers only] deriving income from “Salary” or “Income from

business” on insurance premium paid to an insurance company registered with SECP

under the Insurance Ordinance, 2000. Following conditions apply

Maximum credit is restricted to actual premium paid or 5% of Income or 100,000/- whichever is

less

63. Contribution to an Approved Pension Fund- Proviso added to clause (ii) of subsection 2 through which the additional contribution of two percent per annum for each year of

age exceeding forty years shall be allowed upto the 30th June, 2019 subject to the

condition that the total contribution allowed to such person shall not exceed thirty

percent of the total taxable income of the preceding year.

Section 64AB

64AB. Deductible allowance for education expenses– New section added to provide tax

credit to individuals on tuition fee paid. Following conditions apply

taxable income of the individual is less than one million rupees

The amount of an individual’s deductible allowance for a tax year shall not exceed the lesser of–

(a) five per cent of the total tuition fee paid by the individual referred to in sub-section (1) in the year;

(b) twenty-five per cent of the person’s taxable income for the year; and

(c) an amount computed by multiplying sixty thousand with number of children of the individual

Carry forward of unadjusted allowance is not allowed

Either of parents by providing NTN or name of the Institution can claim credit

This allowance is not allowed as a deduction from withholding under section 149

Section 64B, 65A, 65B, 65C

64B. Tax credit for employment generation by manufacturers– Tax credit is extended for

companies formed for establishing and operating a new manufacturing unit sets up a

new manufacturing unit between 1st day of July, 2015 and 30th of June, [2019]- Earlier

ending limit was 2018

65A. Tax credit to a person registered under the Sales Tax Act, Tax credit for Sales Tax

Registered persons is enhanced from 2.5% to 3%

65B. Tax credit for investment- Credit for investment is extended to 2019. Now this sectionapplies if the plant and machinery is purchased and installed at any time between the

first day of July, 2010, and the 30th day of June, 6[2019]- Earlier last cutoff was 30-6-2016

65C. Tax credit for enlistment- Tax credit is extended to following year of enlistment as

well earlier it was available in the year of enlistment only.

Section 65D

65D. Tax credit for newly established industrial undertakings– Tax credit extended if the company is incorporated and industrial undertaking is set up between the first day of July, 2011 and 30th day of June, 4[2019]- Earlier ending limit was 2016

Ratio of equity raised through cash is reduced to at least 75% earlier 100% was to be raised through cash.

New restriction in subsection 4 added to treat the credit as being wrongly allowed if the business has been discontinued in the subsequent five years after the credit has been allowed

New subsection 1A added to provide formula for calculation of credit;

A x (B/C)

Where–

A is the amount of tax assessed to the person for the tax year before allowance of any tax credit for the tax year; and

B is the equity raised through issuance of new shares for cash consideration.

C is the total amount invested in setting up the new industrial undertaking.]

Section 65E

65E. Tax credit for industrial undertakings established before the first day of July, 2011– Tax credit extended if the plant and machinery is installed at any time between the first day of July, 2011 and 30th day of June, [2019]- Earlier ending limit was 2016

Ratio of equity raised through cash is reduced to at least 75% earlier 100% was to be raised through cash.

New restriction in subsection 6 added to treat the credit as being wrongly allowed if the business has been discontinued in the subsequent five years after the credit has been allowed

New subsection 3A added to provide formula for calculation of credit;

A x (B/C)

Where–

A is the amount of tax assessed to the person for the tax year before allowance of any tax credit for the tax year;

B is the equity raised through issuance of new shares for cash consideration; and

C is the total amount invested in the purchase and installation of plant and machinery for the industrial undertaking.]

Section 67, 68

67. Apportionment of deductions– By adding the words “expenditures, deductions and allowances” now deductions and allowances are also to be apportioned earlier it was only the expenditure that was to be apportioned. This will affect the pending litigations as the addition of words means an acceptance by the department that earlier the position was not so.

68. Fair market value – Very much discussed amendment

Through new subsection 4- Notwithstanding anything contained in sub-sections (1) and (3), the fair market value of immovable property shall be determined on the basis of valuation made by a panel of approved valuers of the State Bank of Pakistan

By Change in subsection 3- Commissioners are now left with the valuation of other than immovable properties

This is a major shift earlier only in cases where the FMV cannot be worked out commissioners were authorized to value. Now through subsection 4 an overriding effect is created to leave valuation of immovable property whether the value of it is ascertainable or not- to be valued by SBP’s approved valuers. So in 100% cases now valuation of immovable property has to be made.

This more like stepping inside the shoes of Provincial Government as the Federation is indirectly trying to tax immovable property which is beyond its constitutional command.

Section 107

107. Agreements for the avoidance of double taxation and prevention of fiscal evasion– Scope of this section enhanced by substitution of subsection 1 whereby now information exchange agreements for the prevention of fiscal evasion or avoidance of taxes including automatic exchange of information with respect to taxes on income imposed under this Ordinance or any other law for the time being in force, are also within purview of this section earlier it was limited only to avoidance of double taxation agreement.

By change is subsection 2 now restrictions are relaxed as any one of the following condition is to be met earlier it were all.

at least one of the following:]–

(a) relief from the tax payable under this Ordinance;

(b) the determination of the Pakistan-source income of non-resident persons;

(c) where all the operations of a business are not carried on within Pakistan, the determination of the income attributable to operations carried on within and outside Pakistan, or the income chargeable to tax in Pakistan in the hands of non-resident persons, including their agents, branches, and permanent establishments in Pakistan;

(d) the determination of the income to be attributed to any resident person having a special relationship with a non-resident person; and

(e) the exchange of information for the prevention of fiscal evasion or avoidance of taxes on income chargeable under this Ordinance and under the corresponding laws in force in that other country

Section 108

108. Transactions between associates- Subsection 3, 4, 5 Inserted through Finance Act to specify;

Every taxpayer who has entered into a transaction with its associate shall:

(a) maintain a master file and a local file containing documents and information as may be prescribed;

(b) keep and maintain prescribed country-by-country report, where applicable;

(c) keep and maintain any other information and document in respect of transaction with its associate as may be prescribed; and

(d) keep the files, documents, information and reports specified in clauses (a) to (c) for the period as may be prescribed

Taxpayer has to provide such record if demanded by Commissioner within 30 days of such demand

Commissioner can by an order in writing on request in writing by taxpayer grant 45 days extension at max unless there are exceptional circumstances justifying for a longer extension

Section 113, 113A & B

113. Minimum tax on the income of certain persons.– From Tax Year 2017 minimum

threshold for charge of minimum tax is reduced to PKR 10M or above earlier it was PKR

50M

By omitting proviso to subsection 1 of section 113 the concept of Gross loss in relation to

Minimum Tax is done away with. Now minimum tax is applicable in cases of gross loss as

well.

By adding an explanation to subsection 1 the following are made un-adjustable

Explanation.– For the purpose of this sub-section, the expression “tax payable or paid” does not include–

(a) tax already paid or payable in respect of deemed income which is assessed as final discharge of

the tax liability under section 169 or under any other provision of this Ordinance; and

(b) tax payable or paid under section 4B.]

Section 114, 122C

114. Return of income.– By adding proviso to subsection 5 the commissioner is empowered to issue notice for any one or more of last ten completed tax years, to any person who has not filed a tax return for any of last 5 completed tax years.

New proviso added to subsection 6 whereby COMMISSIONER’S APPROVAL IS DEEMED TO HAVE BEEN GRANTED if commissioner has not issued order in writing within 60 days for revision of return [from the date when the revision was sought] OR tax in revised return in greater than or loss is less than the return treated as assessed under section 120.

122C. Provisional assessment.– Provisos to subsection 2 substituted to restrain Commissioner from making provisions assessments in the following cases;

In case of Individuals and AOPs if they file return of Income with wealth statement and wealth reconciliation [within 45 days as prescribed in subsection 2] and present accounts and documents for audit of Income tax affairs for that tax year

Similarly In case of companies if they file return of Income with audited or final accounts as the case may be electronically [within 45 days as prescribed in subsection 2] and present accounts and documents for audit of Income tax affairs for that tax year

Section 134A, 140

134A. 3[Alternative] Dispute Resolution.– By changes in section 134A now an officer not

below the rank of commission can be the member of ADRC earlier it was Additional

Commissioner.

Further time limitation for Board to pass an order on recommendations of the ADRC is

extended to 90 days earlier it was 45 days

In case order is not passed within the aforesaid period, recommendations of the

committee shall be treated to be an order passed by the Board under this sub-section

140. Recovery of tax from persons holding money on behalf of a taxpayer.– A relief

provided to Tax payer by adding proviso to subsection 1 whereby no recovery under this

section can be made if the Tax payer has preferred appeal before the CIR (A) and the

appeal has not been decided and amounts becomes payable, subject to the condition

that taxpayer has deposited 25% of the disputed amount. [Though recovery before

adjudication by and independent Tribunal in against the norms of justice]

Section 147, 147A

147. Advance tax paid by the taxpayer.– Clarification added to include tax assessed

under section 113 and 113C as the base of determining advance tax liability

147A. Advance tax from provincial sales tax registered person.– Newly added section

This section does not apply to a person who is a filer on the thirtieth day of June of the previous

tax year

3% of the Turnover to be paid each month as advance tax

This is adjustable against 147 and against income tax liability

Excess to be refunded under section 170

Credit for tax paid has to be granted in sequence provided under section 4(3)

Section 152,152A, 153, 165B

152. Payments to non-residents.– Same state goods are excluded from the ambit of subsection 2A i.e. payments by a person to Pakistani PE of non residents being importer of the goods where tax has been paid on import u/s 148 are not more subject to withholding u/s 152

152A. Payment for foreign produced commercials.– Newly added section provides withholding of tax on payments to non residents either directly, through agent or intermediary relating to foreign produced commercials

Rate of withholding is 20%

Tax deducted is a final discharge of tax on income of non-resident arising out of such payment

[153. Payments for goods, services and contracts.– Clause (e ) to proviso to subsection 3 added whereby payments to electronic and print media for advertising services shall be final tax with effect from the 1st July, 2016

Cotton ginners are now subject to withholding of tax by virtue of omission of clause (e) of subsection 5 to section 153

165B. Furnishing of information by financial institutions including banks.– Confidentiality of “All” information is guaranteed earlier this was subject to section 216

Section 169, 170, 182, 231A

169. Tax collected or deducted as a final tax – Through subsection 4 clarification added that Where the tax collected or deducted is final tax under any provision of the Ordinance and separate rates

for filer and non-filer have been prescribed for the said tax, the final tax shall be the tax rate for filer .

Higher rate of non-filer shall be adjustable in the return filed for the relevant tax year.

170. Refunds.– Time limit for claiming refund is enhanced to 3 years earlier it was 2 years

198. Prosecution for un-authorised disclosure of information by a public servant.– by adding reference to section 107 the scope of section is further enhanced

231A. Cash withdrawal from a bank.– Explanation added whereby limit of cash withdrawal of PKR

50,000/- in on aggregate withdrawals from all the bank accounts in a single day. This is a bank

related amendment. Since this refers to ”Every Banking company” Hence it is quite clear that it

addresses on Bank specific account and not account holder specific accounts (Where the account

holder has accounts in other banks as well) otherwise this would have been a Sisyphean task

Section 231B, 236A, 236C, 236E

231B. Advance tax on private motor vehicles.– Proviso to subsection 1 added -Tax under this section cannot be recovered after 5 years from first registration

New subsection 1A added- Every leasing company or a scheduled bank or an investment bank or a

development finance institution or a modaraba shall, at the time of leasing of a motor vehicle to a

non-filer, collect advance tax at the rate of three per cent of the value of the motor vehicle.

236A. Advance tax at the time of sale by auction.– Notwithstanding the provisions of sub-section (2), tax collected on a lease of the right to collect tolls shall be final tax

236C. Advance Tax on sale or transfer of immovable Property- Subsection (3) Advance

tax under sub-section (1) shall not be collected if the immovable property is held for a

period exceeding five years

236E. Advance tax on foreign-produced TV plays and serials.– Omitted as now covered

under section 152A

Section 236O, 236P, 236T

236O. Advance tax under this chapter236A. Advance tax at the time of sale by auction.–

Words “Deducted” added as earlier only collected was available- Just a clarificatory

amendment

236P. Advance tax on banking transactions otherwise than through cash- Explanation

added whereby limit of transactions otherwise than cash amounting to PKR 50,000/- in on

aggregate from all the bank accounts in a single day. This is a bank related amendment.

Since this refers to ”Every Banking company” Hence it is quite clear that it addresses on

Bank specific account and not account holder specific accounts (Where the account

holder has accounts in other banks as well) otherwise this would have been a Sisyphean

task

Section 236U, 236V

236U. Advance tax on insurance premium.– Every insurance company shall collect advance tax at the time of collection of insurance premium from non-filers

In respect of general insurance premium and life insurance premium

the rates specified in Division XXV of Part IV of the First Schedule

Collection through agents is to be treated as collection by Insurance company- thus agents are also

dragged into this

236V. Advance tax on extraction of minerals.– advance tax at the rate specified in Division XXVI of

Part-IV of the First Schedule on the value of minerals extracted, produced, dispatched and carried

away from the licensed or leased areas of the mines

shall be collected by the provincial authority collecting royalty per metric ton from the lease-holder

of mines or any person extracting minerals

Advance tax collected under this section shall be adjustable

The value of the minerals for the purpose of this section shall be as specified by the Board

Other Changes- First Schedule

PART III Division II PAYMENTS TO NON-RESIDENTS The rate of tax to be deducted from

a payment referred to in sub-section (1A) of section 152 shall be 3[7% of the gross

amount payable in case a person is a filer and 12% in case the person is a non-filer].

PART III Division II PAYMENTS TO NON-RESIDENTS 6) The rate of tax to be deducted

from a payment referred to in clause (c) of sub-section (2A) of section 152 shall be,–

[(ii) in case a person is a filer, 7% of the gross amount payable and 12% if the person is a non-filer.]

PART III Division III PAYMENTS FOR GOODS OR SERVICES- (ab) in the case of the

supplies made by the distributors of fast moving consumer goods, 3% of the gross

amount payable, if the supplier is a company and 3.5% if the supplier is other than a

company

Other Changes- First Schedule

PART III Division III PAYMENTS FOR GOODS OR SERVICES- (c) in respect of persons

making payments to electronic and print media for advertising services,–

(i) in case of a filer, 3[1.5%] of the gross amount payable

PART III Division V Income from Property- Withholding rates ranging 5 to 20% various slabs

PART IV (See Chapter XII) DEDUCTION OR COLLECTION OF ADVANCE TAX- [Division II

BROKERAGE AND COMMISSION- New table -8 to 16% for various agents and filers

and non filers

Other Changes- First Schedule

PART IV Division IV Electricity Consumption- Bill value exceeds Rs.20000- at the rate

of [12] per cent for commercial consumers earlier it was 10%

PART IV [DIVISION X Advance tax on sale or transfer of immoveable property- The

rate of tax to be collected under section 236C shall be 5[1]% of the gross amount of

the consideration received 6[for filers and 7[2]% of the gross amount of the

consideration received for non-filers].]

Other Changes- First Schedule

PART IV DIVISION XVIII Advance tax on purchase of immovable property- Where

value of property is more than 3m Tax to be collected is Increased to 2% [earlier 1%]

for filer and 4% [earlier 2%] for non filer

PART IV [Division XXI Advance Tax On Banking Transactions Otherwise Than Through

Cash – Federal Government authorized to change the rate under this Division

PART IV Division XXV ADVANCE TAX ON INSURANCE PREMIUM- 0 to 4% rates on various types of premiums

Division XXVI ADVANCE TAX ON EXTRACTION OF MINERALS – 0% for filers and 5% for

non filers

THE SECOND SCHEDULE

PART I-EXEMPTIONS FROM TOTAL INCOME

Clause (13)- For receipt of income from other employers on account of gratuity,

pension etc exemption is increased to PRK 300000 [earlier 200000]

Clauses 126A to 126AD added exempting Chinese companies and Government

Organization WRT CPEC and GWADAR

[(133) IT exports- Income exempted till 2019 [earlier 2016] provided 80% of the receipts are brought to Pakistan in foreign Exchange through a banking channel

THE SECOND SCHEDULE

PART II-REDUCTION IN TAX RATES

Clause (3)- Substituted 50% reduction in overseas contracts if Foreign exchange is

brought in Pakistan through normal banking channels

Clause [(18B) added- Rate of Tax of Listed Companies shall be reduced by 2% if

(a) it fulfils prescribed shari’ah compliant criteria approved by State Bank of Pakistan,

Securities and Exchange Commission of Pakistan and the Board;

(b) derives income from manufacturing activities only;

(c) has declared taxable income for the last three consecutive tax years; and

(d) has issued dividend for the last five consecutive tax years.]

THE SECOND SCHEDULE

PART IV -EXEMPTION FROM SPECIFIC PROVISIONS

Clause (IIA)- sub clauses xxvi CPEC and GWADAR related exemption for 23 years starting from sixth day of February,

2007

& xxvii to allow exemption on Profit and gains of transmission line projects in line with clause 126M of part I of this

schedule

Clause [(38AA) CPEC and GWADAR related exemption to Chinese companies from operation of section 150

Clause [(57) Proviso added to allow reduced rate of minimum tax @ 05.% in case of Trading houses till Tax Year 2019

72B Three provisos added- Exemption from provisions of section 148 on imports by Industrial undertakings

quantity of raw material to be imported shall not exceed 110 per cent of the quantity of raw material imported

and consumed during the previous tax year

Commissioner shall conduct audit in respect of consumption, production and sales of the latest tax year for

which return has been filed and the taxpayer shall be treated to have been selected for audit under section

214C

if the taxpayer fails to present accounts or documents to the Commissioner or the officer authorized by the

Commissioner, the Commissioner shall, by an order in writing, cancel the certificate issued and shall proceed to

recover the tax not collected under section 148

THE SECOND SCHEDULE

PART IV -EXEMPTION FROM SPECIFIC PROVISIONS

Clause [(86) Exemption from probe u/s 111 for investment in Industrial undertaking where investment made on or after 1st day of January, 2014- Start of commercial production extended to Tax year 2019 earlier it was 2017

Clause 94- minimum tax on services of certain sector extended to Tax year 2017 [earlier 2016]

Clause[(98) The provisions of section 148 shall not apply to import of ships and other floating crafts including tugs, survey vessels and other specialized crafts purchased or bare-boat chartered by a Pakistani entity and flying Pakistani flag:

Provided that exemption under this clause shall be available up to the year 2020, subject to the condition that the ships and crafts are used for the purpose for which they were procured, and in case such ships and crafts are used for demolition purposes, tax collectible under section 148, applicable to ships and crafts purchased for demolition purposes, shall be chargeable.]

Clause 6[(99) The provisions of section 148 shall not apply to import or acquisition of aircraft on wet or dry lease by M/s Pakistan International Airlines Corporation with effect from 19th March, 2015.]

THE FROUTH SCHEDULE

RULES FOR THE COMPUTATION OF THE

PROFITS AND GAINS OF INSURANCE BUSINESS

Rule 6B substituted to be included in computing profit and taxed followings at

normal rate [earlier taxed as separate block]

there shall be included capital gains on disposal of shares and dividend of listed

companies, vouchers of Pakistan Telecommunication corporation, modaraba certificate

or instruments of redeemable capital and derivative products and shall be taxed at the

rates specified in Division II of Part I of First Schedule

THE SIXTH SCHEDULE

PART I, RECOGNISED PROVIDENT FUNDS

3. Employer’s annual contributions, when deemed to be income received by employee]- Contribution threshold raised to PKR 150000 [earlier 100000]

CONCLUDED- THANK

YOU VERY MUCH