The amnesty scheme may specify that any foreign asset declared shall be required to be repatriated to Pakistan or invested in Pakistan Banao Certificate before filing of declaration in the specified manner in the Assets Declaration Ordinance, 2019.
Sources told Business Recorder that the Federal Board of Revenue (FBR) is examining different proposals/options during modification of the amnesty scheme for its presentation before the government. The FBR has prepared the modified draft of the said scheme, sources said.
A proposal under examination in the amnesty scheme is that any foreign asset declared under this Ordinance shall be required to be repatriated to Pakistan or invested in Pakistan Banao Certificate before filing of declaration in the manner prescribed by the State Bank of Pakistan. This condition may not be applicable on such foreign asset which represents foreign real estate.
Responding to the said proposed provision of the amnesty scheme, a tax expert said that the repatriation of foreign assets should be allowed a timeframe of at least six months instead of instant repatriation before even declaration as repatriation involves legal complications in maturity/redemption of long term investments such as investments in insurance policies, securities, debentures, mutual funds, etc.
One of the proposals under examination is to charge three different rates for declarations of assts and income up to June 30, 2019, September 30, 2019 and December 31, 2019. This may be applicable in case the government allows declarations under the amnesty scheme up to December 31, 2019.
If the scheme is announced till December 31, 2019, the FBR may propose to charge 5 percent tax for legalisation of undeclared assets (other than domestic real estate)/undisclosed income up to June 30, 2019; undeclared assets/undisclosed income up to September 30, 2019, the tax rate may be 10 percent and undeclared assets/undisclosed income declared up to December 31, 2019 may be legalised on payment of 20 percent tax. The fair market value or cost whichever is higher, as declared by the declarant.
If the scheme is announced till December 31, 2019, the domestic real estate may be legalised on payment of one percent tax up to June 30, 2019; domestic real estate may be legalised on payment of 2 percent tax up to September 30, 2019 and domestic real estate may be legalised on payment of proposed 4 percent tax on declarations made up to December 31, 2019.
Tax expert opined that cutoff date for income and sales has been provided to be June 30, 2018. However, no cutoff has been provided for the assets. If a person acquires an asset in the period between June 30, 2018 to December 31, 2018, and wants to declare the same through the scheme, there exists an ambiguity with respect the asset that whether he would be required to revise his 2018 return also, as in fact the asset is due to be declared in wealth statement of tax year 2019 only. No mechanism has been provided in case any declarant intends to revise his declaration within time frame, tax expert said.
Another proposal under examination is that the undisclosed sales may be chargeable to tax at the rate of three percent of such sales in lieu of sales tax and federal excise duty.
The amnesty scheme may specify that the value of foreign assets to be declared under this Ordinance shall be converted into Pak rupees by applying the exchange rate prevalent on the date of declaration.
Where a declarant has made a declaration, he may be entitled to incorporate such assets, income or sales in his books of accounts. Any person shall be entitled to incorporate assets in the books acquired which have been barred by the time of limitation under the Income Tax Ordinance, 2001, draft of the scheme under consideration said.
Commenting on the said provision, tax expert responded that the assets pertaining to prior periods which are time barred are allowed to be incorporated in the books of accounts without making declaration and paying taxes. These assets should not be allowed without payment of taxes. Free of cost declaration of assets pertaining to time bared periods may trigger frivolous litigations.
The government may impose restriction on transfer of assets/deposit and conversion of bearer assets. A proposal is under examination that an asset declared shall be prohibited to be transferred to any holder of public office as gift or below the fair market value by any person. Where an asset declared is transferred in violation of the said condition, such declaration shall be void and shall be deemed to have been never made. Where any cash in hand has been declared, the same shall be deposited before the filing of declaration. No bearer assets shall be allowed to be declared including bearer prize bonds.
Under the proposed amnesty scheme, the government may specify that the particulars of any person making a declaration or any information received in any declaration made shall be confidential. A person who discloses any particulars shall commit an offence punishable on conviction with a fine of not less than Rs 500,000 but not exceeding Rs 1 million or imprisonment for a term not exceeding one year or with both
The provisions of the amnesty scheme may apply to any undisclosed asset, undisclosed sales and undisclosed income of every person other than public company as defined in the Income Tax Ordinance, 2001.
It is under examination that the provisions of the amnesty scheme may not apply to holders of public office, their spouses, children, sisters, brothers and parents if the children, sisters, brothers and parents are dependent on the holder of public office during the period of the person holding such public office; any proceeds or assets that are involved in or derived from the commission of a criminal offence and assets, incomes and sales in cases or proceedings pending before a court of law.
The declaration procedure may specify that any person may make a declaration of the undeclared assets, undeclared income and undeclared sales to the federal government by the due date specified. The declaration shall be made electronically on the web portal as specified by the federal government and procedure for filing of returns and wealth statements with respect to the declaration is laid down in Second Schedule of the Income Tax Ordinance 2001.
The initial draft of the scheme revealed that the "asset" means asset of any kind including all domestic and foreign assets; "undeclared asset" means any asset that has remained undeclared, under-declared including any asset held in the name of the declarant or in the name of Benamidar as defined in Benami Transaction (Prohibition) Act, 2017 held on June 30, 2018; "undisclosed income" means any income chargeable to income tax under any provision of the Income Tax Ordinance, 2001 that has remained undeclared / untaxed or under-declared/ untaxed for any period up to June 30, 2018 and is not represented by any undeclared asset and "undisclosed sales" means sales chargeable to sales tax or federal excise duty under the Sales Tax Act, 1990 or the Federal Excise Act, 2005 respectively, but were not declared up to the 30th June, 2018 and includes under-declared sales and also input tax excessively or unlawfully claimed under the respective laws.