Finance Supplementary (Second Amendment) Bill 2019: Amendment extends applicability of Super Tax beyond 2020

An amendment introduced in the Finance Supplementary (Second Amendment) Bill 2019 has extended the applicability of Super Tax beyond 2020. According to the comments of renowned tax expert Ashfaq Tola on important changes introduced in the Finance Supplementary (Second Amendment) Bill 2019 ("The bill"), a super tax was levied for tax year 2015, vide Finance Act 2015 ("FA-15") for every banking company and every other company whose taxable profits exceeded Rs 500 million. The super tax was charged in the backdrop of military operation 'Zarb-e-Azb' for rehabilitation of temporarily displaced persons ("TDPs"). The tax was levied at 4% for banking companies and at 3% for others. The tax was continued till tax year 2017.
The super tax will continue till tax year 2020; however, the rate of such tax is reduced by 1% each year. For banking companies, the rate for tax year 2018 was 0% whereas, for tax years 2019, 2020 and 2021; the rates were 4%, 3% and 2% respectively. The bill had proposed that for banking companies, the rates for 2018 to 2021 may be 4%. Whereas, for other companies, the rate for tax year 2020 is proposed to be reduced to 0% from 1%, tax expert explained.
The Finance Supplementary (Second Amendment) Act 2019 ("The Act") in addition to above extends applicability of Super Tax beyond 2020 in section 4B, he added.
The Finance Act (FA) 2018 imposed restriction on non-filer on first registration of new motor vehicles. The restriction was also imposed on acceptance or processing of any application for registering, recording or attesting transfer of any immovable property valuing more than Rs 5 million in the name of a non-filer.
The Finance Supplementary (Amendment) Act 2018 introduced following exceptions to the restrictions: motorcycle having engine capacity of less than 200 cc, motorcycle-rickshaw, agricultural tractor or any other motor vehicle having engine capacity of less than 200 cc; a person holding a Pakistan origin card or a national identity card for overseas Pakistani who produces a certificate from a scheduled bank of receipt of foreign exchange remitted from outside Pakistan through normal banking channels during a period of sixty days prior to the date of booking, registration or purchase of motor vehicle or, in case of immovable property, prior to the date of registering, recording, or attesting transfer; or a legal heir acquiring immovable property in inheritance.
The bill had proposed to add following further exceptions to the general restriction: Locally manufactured motor vehicle having engine capacity not exceeding 1300 cc; or a person holding a Pakistan origin card or a national identity card for a non-resident Pakistani having international passport who produces a certificate from a scheduled bank of receipt of foreign exchange remitted from outside Pakistan through normal banking channels during a period of sixty days prior to the date of booking, registration or purchase of motor vehicle or, in case of immovable property, prior to the date of registering, recording, or attesting transfer.
Through Act, the exception to the general restriction has been extended to all locally manufactured motor vehicles only. The tax expert understands, though not mentioned in amendment, that locally manufactured motor vehicle includes locally manufactured motorcycle, motorcycle rickshaw and rickshaw, locally manufactured agricultural tractor and thus exception to the general restriction is available to these also, Ashfaq Tola added.
The bill had proposed that any income derived by following institutions shall be exempt from income tax; National Disaster Risk Management Fund and Deposit Protection Corporation established under sub-section (1) of section 3 of Deposit Protection Corporation Act 2016. The Act has added "Sarmaya-e-Pakistan Limited" to the said list.
The Act has inserted new clause 103C for exemption on dividend income derived by a company if it has availed group relief under section 59B with effect from 1st July 2019. However, the exemption is available proportionate to shareholding of the company receiving the dividend in the company distributing the dividend. This amendment, however, was proposed in Bill as Clause (17) of Part III. This relief already available in group taxation u/s 59AA read with Rule 231D in Clause 103A P-12nd Schedule. However, it was not available to companies availing group relief, thus creating discrimination. The amendment can remove substantive discrimination between both modes however not absolutely as it is proportionate exemption, Ashfaq Tola added.