The government has enforced Finance Supplementary (Second Amendment) Act, 2019. The Federal Board of Revenue (FBR) Monday issued Finance Supplementary (Second Amendment) Act, 2019, incorporating certain amendments to tax laws passed by the National Assembly on March 6, 2019. In the Income Tax Ordinance, 2001, the amendments shall be made which shall come into force at once except clauses (13)(A)(b) and (13)(B)(f) which shall take effect from the July 1, 2019.
The clause (13)(A)(b) deals with the exemption to inter-corporate dividend derived by a company if the company avails group relief according to the proportion of shareholding of the company.
The clause (13)(B)(f) says that the provisions of section 236A shall not apply in respect of auction of franchise rights to participating teams in a national or international league organized by any board or other organization established by the Government in Pakistan for the purposes of controlling, regulating or encouraging major games and sports recognized by the government with effect from July 1, 2019.
The remaining amendments made to the Income Tax Ordinance, 2001 through Finance Supplementary (Second Amendment) Act, 2019 have been enforced.
Under the Act, the government has allowed non-filers to purchase locally manufactured vehicles irrespective of engine capacity.
Finance Supplementary (Second Amendment) Act, 2019 has implemented measures included exemption on income of federal government from sale of spectrum and licenses to renewal of licenses; scheme for small traders and shopkeepers; provisional assessment of off-shore assets; tax collection on certain commercial imports as final tax; filing of withholding statement bi-annual instead of monthly; to relax restriction on purchase of immovable property as well as locally manufactured vehicles for non-resident Pakistani citizens; advance income tax rates on import of mobile phones; abolition of advance income tax on cash withdrawals for filers; increase rate of advance income tax on purchase registration or booking of motor vehicles by non-filers and other income tax measures specified in the Finance Supplementary (Second Amendment) Act, 2019.
Under the Act, the reduction of customs duty on the import of inputs/raw materials of industrial sector would be applicable from March 31, 2019.
The government has also reduced/abolished customs duty on the import of 45 industrial raw materials and inputs including zero percent duty on the import of latex, adhesive tape, evaporators and machinery for preparing, tanning or working hides, skins or leather and machinery for making/repairing footwear. The measure would also be applicable from March 31, 2019.
The government has enforced sales tax and Federal Excise Duty (FED) measures introduced through Finance Supplementary (Second Amendment) Act 2019. However, sales tax exemption on plant and machinery to Greenfield industries would be applicable from July 1, 2019.
The government has rationalised the collection of duty and taxes on mobile phones through collection of all duties/taxes on uniform slabs based on C&F values at the fixed rates.
In the Customs Act, 1969, the amendments shall be made which shall come into force at once except clauses 2(1)(a) and 2(2)(i)which shall take effect from July 1,2019 and clause 2(2) (iii)which shall take effect from March 31, 2019.
The government allowed new tax incentives on import of plant and machinery by green field industrial undertakings and units in Special Economic Zone, exemption from advance tax on profit paid on Pakistan Banao Certificate, Sarmaya-E-Pakistan Limited and Duty Drawback Bonds and exemption in tax liability for inter-corporate dividend for company availing group relief.
Through amendments in the Finance Supplementary (Second Amendment) Act, 2019, the government has established FBR Refund Settlement Company (Pvt) Limited for issuance of sales tax refunds through Promissory Notes or bonds by FBR. The Bonds will have maturity period of three years with annual simple profit of 10 percent, as these bonds can be freely traded in the country's secondary market.
In order to provide further incentive to the industrial undertakings set up in the Special Economic Zones, exemptions from customs duty and advance income tax on import of firefighting equipment were given. Moreover, import of plant and machinery by green field industrial undertaking has been proposed to be exempt from customs duty.
The government has set up a specialized tax department i.e. Directorate General of International Operations for the imposition and recovery of taxes from undisclosed offshore assets and income held by Pakistanis abroad and to interact directly with foreign tax jurisdictions for exchange of information.
Under a major amendment in the Finance Supplementary (Second Amendment) Act, 2019, the government has decided to establish Directorate of International Operations to exclusively deal with the cases of undisclosed offshore assets and income of Pakistanis held abroad.