Declaration against foreign assets: ‘Taxpayers not filing CVT being held liable to default’

LAHORE: Tax authorities are holding taxpayers liable to default for not filing capital value tax (CVT) declaration against their foreign assets, said sources.

They said filing of CVT declaration is mandatory for the taxpayers possessing foreign assets despite immunity from any taxation, they added.

The Federal Board of Revenue (FBR) had issued Capital Value Tax Rules, 2022, through an SRO1797(I)/2022. Through these rules, the FBR has laid down the procedure for the payment of CVT on foreign assets and motor vehicles.

The FBR has also issued the CVT recovery and refund rules. In this regard, the FBR has issued three different computerised payment receipts (CPRs) for the owners of foreign assets (movable), foreign assets (immovable), and the CPR for CVT on motor vehicles.

The one percent CVT is applicable on the value of the foreign assets of a resident individual where the value of such assets on the last day of the tax year in the aggregate exceeds Rs100 million.

The Wealth Tax Act 1963 also makes it clear that all the assets either inside or outside Pakistan would be taxed as no immunity is available to taxpayers against their foreign assets.

The departmental sources said the officers of Inland Revenue needed no delegation of power from any other authority to proceed against taxpayers not filing CVT declaration.

In case of default to file CVT declaration, a taxpayer is required computation of value of foreign assets in US dollar on the basis of tax deduction rather than on the basis of actual document/purchase of foreign asset in foreign currency. The burden of proof also lies with the taxpayer to substantiate the exact cost in foreign currency, they said.

According to the sources, imposition of CVT on foreign assets of resident individuals is to bring fairness in taxation by imposing direct tax on the rich individuals in Pakistan. However, they added, the individuals having foreign assets up to Rs100 million have been exempted from such tax subject to filing of declaration of CVT and its payment.

It may be noted that taxpayers declare foreign assets by availing amnesty scheme while presuming that their assets are immune from any taxation. The sources added that the officers of Inland Revenue can examine such assets for collection of CVT, either inside or outside the country.

Copyright Business Recorder, 2023