Corporate and Other Taxes in Pakistan - FEDERAL BOARD OF REVENUE - FBR

 

Corporate and Other Taxes in Pakistan - FEDERAL BOARD OF REVENUE - FBR

written by M. Arshad Sohail

dated : Nov 15, 2022

1-SALES TAX

Sales tax (value added tax referred to as VAT in other countries) is usually levied at 17% of the value of the goods, unless specifically exempted or subject to a reduced rate of sales tax, after allowing related input credits.

Service sales tax is levied by all four provinces, Islamabad Capital, Gilgit-Baltistan, Azad Jammu and Kashmir at rates ranging from 13% to 16%.

Sales tax paid for services, federal sales tax, and federal excise tax are mutually adjustable with a few exceptions.

Supplies made by certain specific persons/industries are subject to special sales tax regimes (eg retail price/flat tax regime) or are otherwise subject to reduced rates of sales tax.

Commercial imports of goods are subject to VAT at a rate of 3% in addition to sales tax payable at the standard rate at the importation stage.

Local supplies made by persons operating in five export-oriented sectors (textiles, leather, footwear, surgical goods, sporting goods) are subject to sales tax at the applicable rate of 17%, with the option of a reduced rate available in some cases.

2-DUTIES AND IMPORT DUTIES

Customs duties and certain other duties are collected at the import stage at various rates classified by Harmonized System (HS) code.

3-EXCISE DUTY

Federal Excise Tax (FED) is levied on certain types of production, importation of goods and provision of services at different rates. The service sales tax, which is a substitute for the FED under the constitution, is to be levied and collected by the provinces for services provided within their jurisdictions.

4-PROPERTY TAXES

Property owners are required to pay property tax, which is levied and collected by provincial governments through municipal authorities at various rates.

5-STAMP DUTY

In case of sale or transfer of immovable property, stamp duty (with different rates depending on the location of the property) is paid on the value of the property.

6-PAYROLL TAXES

Apart from social security contributions and old age benefit institution  (see below), employers are not required to pay any other taxes on their employees or their wages.

7-SOCIAL SECURITY CONTRIBUTIONS

Nominal social security is collected from employers and employees. Employers are required to collect and pay monthly.

8-INSTITUTION FOR OLD AGE (EOBI)

The employer and employees of each industrial enterprise pay a monthly contribution of 5% of the minimum wage from the employer and 1% from each employee. Pickup is the employer's responsibility.

9-PROFESSIONAL TAX

Professional tax for employees is paid by each employer to the Department of Excise and Taxation

BUSINESS TAX BASICS

Before registering and filing your sales tax return, it is recommended that you gain a basic understanding of these processes. Knowledge of basic concepts would ensure not only easy completion of tasks but also in the prescribed manner.

Sales tax is a tax levied by the federal government under the Sales Tax Act, 1990 on the sale and supply of goods and on goods imported into Pakistan. Sales tax on services is levied by the federal government under The Islamabad Capital Territory (Service Tax) Ordinance, 2001.

    INPUT TAX

Input tax is tax paid by a registered person on taxable goods and services purchased or acquired by him. This also includes sales tax paid on importation.

    OUTPUT TAX

It is a sales tax charged and collected on the sale or supply of goods or services subject to sales tax.

    SCOPE OF TRADE TAX

Sales tax applies to the following:

1-GOODS

2-SERVICES

Sales of goods tax is collected by the FBR while service sales tax is collected by the provincial government revenue offices of each province.

All goods are subject to tax except goods which have been exempted under section 13 as set out in Schedule 6 to the Sales Tax Act 1990. For the purposes of sales tax, goods include all kinds of movable property, except suits, money, stocks, shares and securities.

IMPORT INTO PAKISTAN

All goods imported into Pakistan are subject to sales tax at the time of import, except goods specifically exempted under section 13 as specified in the Sixth Schedule to the Act.

EXCLUDED GOODS

Under Section 13 of the Sales Tax Act, 1990, the Sixth Schedule to the Sales Tax Act, 1990 specifically and expressly lists the goods on which exemption from sales tax is possible. Other exemptions are available through various notifications (SROs) issued by the government under section 13.

SALES TAX DUE DATES

Taxpayers belonging to the respective categories are required to file sales tax returns in monthly, quarterly or annual format.

MONTHLY RETURNS

According to the standard procedure, the registered person is required to submit the monthly statement Annex C on the 10th and the Payment on the 15th and the statement by electronic mail by the 18th of the month following the period in which the deliveries were made, in designated branches of the National Bank. Pakistan. In case of certain categories as mentioned below, the procedure of filing returns on monthly and quarterly basis has been proposed.

QUARTERLY RETURN

Taxpayers belonging exclusively to the CNG category are obliged to submit returns quarterly.

SPECIAL RETURNS

Some sectors of producers have to file a special tax return on a monthly basis

ANNUAL RETURN

A manufacturer must file an annual sales tax return for a financial year by 30 September of the following financial year.

CONCLUSION

countries like Pakistan imposed lot duties and taxes but unfortunately collection of revenue can not collect up to mark. there should be taken reforms and best measure to enhance tax net and revenue base in Pakistan.