The Federal Board of Revenue (FBR) has been requested to respond to the frequently asked questions (FAQs) pertaining to the amnesty schemes for foreign and local declarations of the assets, but still not answered by the tax authorities.
A tax expert told Business Recorder that the questions covers a number of key legal issues which need to be clarified by the FBR for persons intended to avail the amnesty schemes.
The FAQs to be responded by the FBR include:
1. As per preamble of the Act, the same is only in respect of assets whereas in section 4(b) pertaining to application of the Act undisclosed income has also been catered for. Whether there is any deficiency in Legislation, which could affect the legality of the Declaration filed about the Undisclosed Income?
2. In section 7 pertaining to charge of tax, there is no mention of undisclosed income. Whether there is a lacuna which may affect the legality of declaration of undisclosed income?
3. Bank account number and description of the property has not been called for in the Form prescribed in the Ordinance/Act. However, in the Form on the e-portal the same has been provided. Whether asking for bank account number and property identification number in the form at e-portal is lawful?
4. Section 19 pertaining to incorporation of undisclosed assets is only in respect of incorporation in the books of accounts. What about incorporation in the Wealth Statement as on 30.06.2018?
5. As per section 9(2), the cost of acquisition of domestic asset shall be deemed to be the value on the date of filing of declaration and similarly date of filing of declaration would be deemed as date of acquisition of undisclosed asset. What is the significance and interpretation of this deeming provision?
6. If an undisclosed asset was fetching rental income as well and the aforesaid deeming provision treats the date of filing of declaration as the date of acquisition whether it gives protection to the undisclosed income from the undisclosed asset?
7. Whether any calculation and period of undisclosed income is to be given?
8. Whether taxpayer can and should provide any additional information to explain his declaration either through e-portal or separately?
9. Whether the aforesaid additional information is imperative in certain situation?
10. The value of superstructure of undisclosed asset is to be made at the rate of Rs 400 per
sq. ft. Where the actual cost of construction is more whether the declaration should be at the aforesaid rate?
11. In respect of bank accounts, bank balance as on 9th April 2018 is required to be disclosed in the declaration. However in practical situation balances in a period prior to the aforesaid cut off date are much higher. Whether the declaration of balance gives protection to the entire activity of the bank account including the concept of peak balances?
12. Suppose there is an undisclosed bank account, which has been closed prior to 9th April 2018 and as such not required to be disclosed; however there was transaction in the bank account prior to closure. Whether it is safe to skip the transaction of that account from the declaration, if not how to declare that?
13. As per section 4(2), the scheme shall not apply to any proceeds or assets that are involved in or derived from the commission of a criminal offence. On tax evasion, one can be imprisoned how to interpret the exclusion?
14. As per section 14, where a declaration has been made by misrepresentation or suppression of fact such declaration shall be void and shall be deemed never to have been made. What constitutes misrepresentation or suppression of facts?
15. Any example/illustration of misrepresentation and suppression of facts?
16. What is the difference between misrepresentation and suppression of facts?
17. What would be the consequences where any declaration is declared as void?
18. Where the undisclosed income has been utilized in undisclosed expenditure whether any declaration of undisclosed income is warranted?
19. Whether any declaration in respect of undisclosed expenditure is warranted?
20. Whether declaration can be made where the cases are pending in an investigation before the NAB/FIA etc other than tax Department?
21. Whether declaration can be made where the cases are pending at Accountability Court?
22. There is an undisclosed bank account from which bank interest was being earned on which tax at source was also being deducted by the bank which is final discharge of tax liability on the profit. Whether such type of bank account is required to be covered in the Amnesty in respect of source of Fund in the bank account?
23. Whether bank profit of an undisclosed account on which tax has been deducted can be accounted for to reconcile the undisclosed assets?
24. Whether undisclosed business income declared in the amnesty declaration can be utilized to reconcile the undisclosed assets being declared simultaneously?
25. Whether undisclosed income has sales tax implications?
26. Whether filing of declaration has any adverse effect on the tax profile of taxpayer?
27. What is significance of confidentiality of declaration and the efficacy of assurance?
28. Whether it is last amnesty and one can take the calculated risk as before?
29. Whether filed declaration can be revised before the cut-off date of 30 June?
30. Whether one can file more than one declaration before the cut-0ff date?
31. Are there any material changes between the Ordinance and the Act?
32. Whether Act is applicable w.e.f. 23 May or 1st July 2018 and why?
33. What are the consequences if Act is applicable w.e.f. 1st July whereas last date of declaration is 30 June?
34. What is the scope of section regarding removal of difficulties by the Federal Government through an order?
35. Whether last date of 30 June can be extended?
Foreign Assets
Situation 1
Mr A had purchased a property in the UAE on mortgage and the initial deposit paid in year 2005. Property was let out and the rental income received in a UAE bank account was utilized towards mortgage payments. Bank account was opened by using the Aqama. Ownership was transferred in 2017 on completion of installments. Mr A is filer in Pakistan and status is of resident and has not declared any foreign income in his return of total income and the cost of acquisition in his wealth statement. He is evaluating whether to file declaration whereas there are no sufficient funds in his UAE bank account to pay the tax in US Dollars as per procedure notified by the State Bank of Pakistan.
1. Whether the Amnesty declaration should cover only the property and the bank balance as on 9th April 2018 or the rental income as well?
2. In the bank accounts there are credits of other than rent and some of these have been used towards some undisclosed expenditure. Whether these transactions get coverage by filing declaration of closing bank balance?
3. Whether the rental income is to be declared in the column of undisclosed income appearing in the declaration pertaining to domestic assets as there is no column for declaring foreign income in the declaration form pertaining to foreign assets?
4. In the preamble of the Ordinance/Act, there is twice mention of income held outside Pakistan but in the charging section the tax has been levied on foreign assets only. Whether this means that the foreign income is not covered in both the Amnesties?
Situation 2
Mr B, a resident Pakistani, had purchased property in the UK by making full payment in year 2007 out of undisclosed income earned in Pakistan. The property has been given on rent off and on. The return of income is being filed in the UK wherein also the status is shown as resident. Rental income is deposited in the bank account from wherein some personal/business expenditure, have been made but still the bank balance is significant. Mr B is filer in Pakistan with status as resident and neither the property/bank account nor the rental income has been declared in Pakistan.
1. Whether the investment made in year 2007 is hit by limitation?
2. Whether filing of tax return in the UK and paying tax there, on rental income, absolves him from declaring rental income in Pakistan?
3. As per banker's understanding Mr B is resident of UK and that is why he has not received letter from the bank asking him to identify his country of tax residence and tax identification number (NTN). Whether such type of bank accounts would be reported in financial exchange of information?
4. Whether declaration of property would absolve from declaring property income considering the deeming provision of section 11(2) regarding the date of acquisition?
Situation 3
Mr C, a Pakistani resident, has a bank account in the Switzerland that he opened by using Aqama of UAE. There has been significant movement of funds in the bank account though the current balances are nominal. The bank account has not generated any bank profit. Bank asked Mr C to indicate country of his tax residence and to provide the tax number. Mr C replied that he is tax resident of UAE and he has no tax number as in UAE there is no income tax.
1. Whether his financial information would be shared with UAE only?
2. What the UAE tax authorities would do with that information considering there is no personal income tax there?
3. Whether there is any mechanism or chances that either from Switzerland or from the UAE financial information is shared with Pakistan?
4. What financial information would be shared?
5. Whether after knowing bank account and bank balance of the latest year through the financial exchange of information, the FBR can obtain bank statement of the previous year (since opening of account) and tax the unexplained banking transaction?
6. Iqama was obtained for visa purpose and no salary is being received from UAE entity. Whether taxman can trace Iqama and tax the salary?
7. How taxman can find clue of Iqama and linked salary income?
Situation 4
Mr D had purchased a property in year 2009 for GBP 150,000 when the exchange rate was Rs 80 per GBP. He intends to file declaration and has no bank account outside Pakistan.
1. Whether cost of acquisition and fair market value are one and the same thing?
2. What would be the value in Pak Rupees of the property? Whether it is to be worked out by taking exchange rate of 2009 or exchange rate of the date when declaration is being filed? (date of deemed acquisition)
3. How the tax payable in US$ on the aforesaid value would be calculated?
4. How to pay the tax in USD as per procedure prescribed by the SBP where there are no funds outside Pakistan?
5. Whether tax can be paid out of disclosed sources in Pakistan?
6. Whether for payment of tax some cash outside Pakistan is to be declared and repatriated?
General
7. Whether repatriation of liquid asset is mandatory?
8. Whether the word "and" used in section 7 pertaining to charge of tax in expression "assets declared and repatriated" is in conflict with Table therein where one of the category of assets is "liquid assets not repatriated"
9. Whether one can declare cash outside Pakistan and not to repatriate in Pakistan?
10. What is the significance of word "may" used in section 5(5) in the context of repatriation as against "shall" used in section 6?
11. Whether any investment or life insurance premium made/paid outside is to be shown at cost or unrealized higher value?
12. Considering that declaration is only in respect of undisclosed foreign assets whether educational expenses of the children studying abroad or medical expenses can be and should be covered some way like declaring income or cash in local declaration and what would be its treatment in books/wealth statement?
13. Why one should declare the beneficial ownership or beneficial interests or contribution in offshore entities and trust owning property and how to value that?
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