shahid hussain asad senior member(inland revenue policy), federal board of revenue
TRANSCRIPT
EXISTING TAX REGIME IS FACILITATING INVESTMENTS IN
PAKISTAN
SHAHID HUSSAIN ASAD SENIOR MEMBER(Inland Revenue Policy),FEDERAL BOARD OF REVENUE
Pakistan’s Existing Tax Regime and Investment Policy
Tax Regime or Tax Policy is being used to attract Investments.
The tools used for this purpose include: Tax Concessions Tax Credits Special allowances for depreciation and
capital Expenditure Tax Treaties for FDI Reduction in customs duties
Tax Concessions
Reduction in corporate and other tax rates
Tax Holidays to promote specific industry to promote specific area to promote specific projects to promote foreign direct investment
Group Relief and Group Taxation
Reduction in Corporate Tax Rate
Corporate Income Tax reduced from as high as 65% to 32% at present and will be further reduced to 30% for tax year 2017.
Rate of small company reduced to 25%. This year paid-up capital limit for small company enhanced to 50m from 25m
Promoting Specific Industry
Power Generation Transmission Line Projects Software Exports LNG Terminal Operators and Terminal
Owners Halal Meat Production units Cellular Mobile Phones manufacturing Coal Mining Projects in Thar Housing sector
Power Generation
Income power generation projects exempt from tax-no sunset clause
Tax on Dividend to shareholders is 7.5% against 15% standard rate.
Exempt from Minimum tax on turnover.
Coal Mining Projects
Income of coal mining projects exempt from tax
Exempt from Minimum tax on turnover. Exemption from withholding tax from
dividend received by shareholders for 30 years
Input tax adjustment allowed to power producing units using Thar coal
Import of coal-mining machinery & equipment for Thar coal free of sales tax
Other Energy related Projects LNG Terminal Operators and Terminal
Owners are exempt from income tax for five years. They are also exempted from minimum tax on turnover and Alternative Corporate Tax.
• Exemption from income tax for 10 years in respect of profits and gains derived from a transmission line project set up between 1-7-2015 to 30-6-18
HOUSING SECTOR
Deduction allowed for interest paid on loan
Supply of bricks and crushed stone exempt from Sales Tax up to 30.6.2018.
Other Exemptions
Software Exports
Halal Meat for 4 years if they get Certification
Cellular Mobile Phones manufacturing for 5 years if certified by PTA
Promoting Specific Area/Zones
Enterprises/industrial undertakings in the Special Economic Zones Gawadar Zone Baluchistan/Malakand/Gilgit-Baltistan for
local fruit processing KPK /Baluchistan(new industrial
undertakings) Larkana Industrial Estate
Promoting Specific Projects
CPEC Pioneer Industry Projects China Overseas Ports Holding
Company Limited from Gawadar Port operations
China Pakistan Economic Corridor(CPEC)
CPEC, an important economic initiative, having planned 28 energy projects.
Tax exemption on interest paid to Chinese financial institutions providing funding to these projects is under active consideration for which negotiations are underway between Federal Board of Revenue and State Administration of Taxation(SAT), China.
Pioneer Industry Projects
Five years income tax exemption to projects that have been declared as ‘Pioneer Industry’ by Economic Coordination Committee of the Cabinet, such as Biaxially Oriented Polyethylene Terephthalate (BOPET) Project and Biaxially Oriented Polyethylene Terephthalate Project.
Gawador Port Project
Income from Gawadar Port operations derived by China Overseas Ports Holding Company Limited for a period of twenty three years
Promoting Foreign Direct Investment
Reduced corporate tax rate of 20% if invested by at least 50% foreign equity.
Exemption from withholding tax on purchase of immovable property if invested in a scheme by Federal or Provincial Government in the foreign exchange remitted from outside Pakistan through normal banking channels.
If invested through remittances, no questions asked.
Group Relief
In line with the International tax law, Pakistan provides relief if within a group of companies. The major advantage is absorbing or setting off losses of associates against their own income.
Inter-corporate dividend and inter-corporate interest is also exempt for companies qualifying for group taxation.
Tax Credits
Tax credits for investment in new industrial undertakings-100% in existing industrial undertakings-
10/20% Expansion projects involving 100% new
equity-by existing companies 100% Tax Credits for Employment
Generation Tax credit equal to 1% (subject to a
maximum of 10%) for every 50 new employees
Tax Incentives under Tax Treaties
Through a wide Treaty Network (around 70 tax treaties in force) Pakistan offers following incentives to Foreign Investors: Avoidance of double taxation Despite changes in domestic tax law,
certainty of tax rates on passive income Preferential tax rates for income from
dividend, interest, royalty and fee for technical services
Certainty of non-discrimination and mutual agreement procedure in case of conflict
Special allowances for Capital Expenditure
In addition to normal and initial depreciation, if an industrial undertaking is set up in specified rural and underdeveloped area, a First Year Allowance equal to 90% is allowed instead of 25% initial allowance.
Similarly, 90% accelerated depreciation is allowed instead of 25% initial allowance for alternate energy projects.
SALES TAX
Exemption from Sales Tax & Customs Duty on import of : Plant, machinery & equipment for fruit
processing in Gilgit-Baltistan, Baluchistan and Malakand Division,
Plant, machinery & equipment for Industries in FATA
High efficiency irrigation equipment and greenhouse farming equipment
CUSTOMS
In Finance Act 2015 maximum general slab of 25% reduced to 20%
Number of slabs reduced to 5 from 7
Difference between floor and ceiling MFN rate reduced
Simple & transparent tariff structure with no para tariffs
TARIFF REFORMS
RECENT INITIATIVES:
TARIFF REFORMS
• Enhanced adherence to cascading structure:
• Low slab for raw material, machinery &
equipment
• Medium slab for intermediary goods,
standard inputs
• Higher slab for finished/final goods
25
COMPUTERIZED CLEARANCE SYSTEM (WeBOC)
Recent Initiatives
- WeBOC rolled out to more than 90% of the
imports/exports
- Computerized clearance through :
• Green Channel 27% • Yellow Channel 33%• Red Channel 40%
- Reduction in time of clearance - Reduction in cost of imports
Concessions/Exemptions of Customs Duty
• Following Sectors enjoying concessions/exemptions from customs duty under 5th Schedule to the Customs Act:-
S. No. Sectors
1 Agricultural machinery
2 Machinery and equipment for grain handling and storage facilities
3 Cool chain machinery and equipment.
4 Machinery and equipment for initial installation, balancing, modernization, replacement or expansion of desalination plants, coal firing system, gas processing plants and oil and gas field prospecting.
5 Machinery equipment apparatus imported by Hospital and Medical Institutes
6 Machinery, equipment, materials, capital goods, meant for mineral exploration phase.
7 Machinery, equipment, materials, capital goods, meant for mine construction phase or extraction phase.
8 Coal mining machinery, equipment, spares including vehicles imported for Thar Coal Field.
Concessions / Exemptions (Contd..)
S. No. Sectors9 Machinery, equipment and spares meant for initial installation, balancing,
modernization, replacement or expansion of projects for power generation through oil, gas, coal, wind and wave energy including under construction projects, which entered into an implementation agreement with the Government of Pakistan.
10 Machinery, equipment and spares meant for initial installation, balancing, modernization, replacement or expansion of projects for power generation through gas, coal, hydel and oil including under construction projects.
11 Machinery, equipment and spares meant for initial installation, balancing, modernization, replacement or expansion of projects for power generation through nuclear and renewable energy sources like solar, wind, micro-hydel bio-energy, ocean, waste-to-energy and hydrogen cell etc.
12 Machinery and equipment meant for power transmission and grid stations including under construction projects.
13 Machinery, equipment and other education and research related items imported by technical institutes, training institutes, research institutes, schools, colleges and universities.
14 Machinery, equipment, raw materials, components and other capital goods for use in buildings, fittings, repairing or refitting of ships, boats or floating structures imported by Karachi Shipyard and Engineering Works Limited.
Concessions / Exemptions (Contd..)
S. No. Sectors15 Machinery, equipment and other capital goods meant for initial installation, balancing,
modernization, replacement or expansion of oil refining, petrochemical and petrochemical downstream products including fibers and heavy chemical industry, cryogenic facility for ethylene storage and handling.
16 Machinery and equipment imported by an industrial concern17 Machinery and equipment for marble, granite and gem stone extraction and processing
industries.
18 Machinery, equipment and other project related items for setting up of power generation plants, water treatment plants and other infrastructure related projects located in an area of 30 km around the zero point in Gwadar.
19 Effluent treatment plants20 Items with dedicated use of renewable source of energy like solar, wind, geothermal
etc.21 Items for promotion of renewable energy technologies.22 Plant, machinery, equipment and specific items used in production of bio-diesel
23 Plant, machinery and equipment imported for setting up fruit processing and preservation units in Gilgit-Baltistan, Balochistan and Malakand Division
24 Specialized vehicles imported by the Construction Companies25 Plant, machinery and production line equipment used for the manufacturing of mobile
phones
S. No. Description of goods to be manufactured1 Powder Coatings.2 Chrysotile Cement Pipes, Sheets & Fittings3 Aluminum pre-sensitized printing plates.4 Article of stationary5 Artificial Leather Industry6 Diapers and Sanitary Napkins.7 Disposable/Auto Disable syringes8 Electrical Capacitors9 High Pressure Laminate (Formica) and Low Pressure Laminates.
10 Manufacture or formulation of Agricultural Pesticides 11 Metallic Yarn / Powder12 Stearic Acid/ Distilled Fatty Acid (DFA)13 Printing ink.14 Seamless pipes.
Concessions / Exemptions (Contd..)• Raw materials /inputs for the manufacturing of following items are
importable at concessionary rate of customs duty under SRO 565(I)/2006:-
S. No. Description of goods to be manufactured
15 Sugar Mill, Cement Plant, Plant for industrial chemical, Thermal, Hydel Power plants, Fertilizer plant etc,
16 CRC or GI sheets/coils
17 Agriculture Diesel Engines (Single Cylinder of 3-36 HP)
18 Fan
19 Liquid Food Packaging Industry for dairy and juices
20 Flexible packaging Laminates Industries excluding Cigarettes Industries
21 Gypsum Board
22 Gum Base
23 Butyl Acetate
24 Transformers
25 Electric motors
Concessions / Exemptions (Contd...)
31
EXPORTS FACILITATION Export Facilitation Schemes:
- DTRE (Duty & Tax Remission for Export):- Imports without duty and taxes for export
sector- No hassle of payment of duty and refund- Availing of the scheme on voluntary basis
- Export Processing Zones:- Goods imported into and exported from the Export
Processing Zones exempt from duty/taxes - Boosting industrialization and augmenting country’s
exports- Create facilities for investors to setup export oriented
units- Manufacturing Bonds:
- Manufacturer-cum-exporter may establish a manufacturing bond and import raw material used for the manufacture of goods without payment of duty/taxes
- SME & EOU Schemes:- Small & Medium Enterprises (SME) and Export Oriented
Units(EOU) schemes envisages exemption from customs duties on goods including machinery
- Temporary Importation Scheme:
- The scheme entails suspension/exemption from duties/taxes against securities on import of accessories used for manufacture and export of goods
- Duty Drawback :- Repayment of customs duties on the importation of inputs
used in production of goods exported out of Pakistan
EXPORTS FACILITATION (Contd..)
FACILITATION MEASURES
E-Services
Registration Income Tax Return Filing Withholding Statements Refunds processing WeBOC Tax Exemption Certificates GST Return Filing
34
Other Services
Tax facilitation Centers Taxpayers Guidance FBR Helpline Tax Awareness Campaigns Taxpayer Facilitation KIOSKs For
Return Filers Establishment of Helpdesks
35
E-SERVICES
e-Registration
Optional- Can also file manually
However, instead of visiting tax office, taxpayer can easily prepare and submit application electronically without leaving his office or home.
Quick and Detailed Guides available on web
37
e-filing of Returns
Mandatory for: corporate taxpayers salaried taxpayers association of persons GST registered persons
Optional for remaining tax payers
38
Refund Processing
It is compulsory for every taxpayer to claim refund electronically. If a refund is to be claimed the Return is also to filed electronically along with refund application.
The entire process from filing of application to issuance of refund is online.
39
Tax Exemption Certificates
From tax year 2013, any taxpayer who intends to remit a payment abroad without tax deduction, for any reason, has to apply for Exemption Certificate on-line and his application is processed electronically.
40
Other E-Services
WeBOC Goods Declaration for imports and exports
electronically. Has reduced the time for clearance from
number of days to hours.
Electronic filing of GST Returns Filing of Withholding Statements
including Employers’ Statement electronically.
41
OTHER SERVICES
FBR Helpline
FBR Helpline provides assistance to public at large and taxpayers in particular by responding to their queries related to Federal Excise Duty, Customs Duty, Income Tax and Sales Tax. The purpose of FBR Helpline is to resolve the day to day problems, issues, clarifications or information and provide tax education. Complex tax situation and issues are referred to Tax Policy wing. The online service is available on weekdays only.
43
Tax Facilitation Centers
There are only 18 RTOs and 3 LTUs in Pakistan. A taxpayer may have to travel a lot of distance to file his declarations, documents etc., in an RTO.
Therefore, to facilitate them around 80 TFCs have been established.
44
Tax Awareness Campaigns
To reach out to the taxpayers and their designated representatives in the chambers, associations, trade unions an tax bars etc.
To understand and resolve taxpayers issues
To create awareness of the amendments and changes and related tax issues
To get feedback for improving upon FBR’s systems
45
Cont.
Awareness raising media campaign has been launched in collaboration with DFID during current year. Tools include:• Public Service Messages (PSM)• PSM for Radio• Short documentary • Media event• Print campaign • Social media campaign
• Facebook page• Twitter account
46
Print Media Campaign
Print Media campaign is launched every year, after the Budget is announced, to explain the new amendments and provisions in tax laws and to apprise taxpayers of their tax obligations
47
Help Desks and Kiosks
To facilitate filing of Returns electronically, more than 200 kiosks have been established in different RTOs and LTUs.
A number of help desks have also been established in certain Ministries, Parliament, Press Clubs, etc.
48
THANK YOU