Assets Management Company: dividend to be taxed 20 percent of gross amount

The Federal Board of Revenue has proposed amendment to the Banking Schedule of the Income Tax Ordinance 2001 whereby dividend received from an Assets Management Company would be taxed @ 20 percent of the gross amount. Earlier, it was being taxed at the rate of 10 percent under rule 6 of the Seventh Schedule of the Income Tax Ordinance 2001. Now the change has been made through Finance Bill (2011-12) issued here on Friday.
Highlighting the key amendments to the Income Tax Ordinance through Finance Bill (2011-12) Syed Naved Andrabi, Advocate Supreme Court explained that the dividends received by a banking company from an Assets Management Company shall be taxed @ 20 percent as against 10 percent.
The request of the Banking Companies has been adhered to and amendments to Seventh Schedule have been made to allow provisions @1 percent and consumer provisions @5 percent. Also the carry over has been allowed. An interesting aspect of the Finance Bill (2011-12) is that the FBR has not carried over the provision of section 4A pertaining to flood surcharge in the Finance Bill. Thus, the section 4A (income tax surcharge) would automatically be abolished on June 30, 2011 unless the federal government separately presents the Income Tax Amendment Ordinance 2011 before the National Assembly.
Another major change in the budget is that the provisions of section 153 of the Ordinance have been revamped and straightened out which had been deformed due to many amendments. The latest controversy arising out of these multiple amendments was ''as to whether the companies providing services would fall into normal law or Minimum Tax Regime.
The following is the position now as per Section 153 (3) of the Ordinance: The tax deducted on the income of a resident person or permanent establishment of a non-resident person, shall be a final tax on transactions arising from sale of goods, except for payments received on account of supply of goods in respect of a company being a manufacturer of such goods; or payments received on account of sale of goods by a public company listed on a registered stock exchange in Pakistan.
The tax deducted for the rendering of or providing of services shall be a minimum tax for all the taxpayers. The tax deducted on the execution of a contract, other than a contract for the sale of goods or the rendering of or providing of services shall be a final tax, except on payments received by a public company listed on a registered stock exchange in Pakistan on account of execution of contracts. The tax deducted by an exporter or export house shall fall into final tax. A corresponding amendment in Section 115 & 169 of the Ordinance has also been made.
The provisions of Section 156B (1) (b) of the Ordinance have been amended to increase the withdrawal limit in excess of 25 percent of the accumulated balance to 50 percent of the accumulated balance under a pension fund for the purposes of withholding of tax under the head salary.