Buildings hired by foreign missions, diplomats: FBR to scrutinise data to verify WHT deduction

ISLAMABAD: The Federal Board of Revenue (FBR) has decided to scrutinise data of buildings hired by the diplomatic missions, foreign diplomats and non-resident persons, to verify whether withholding tax has been dully deducted on rental income under section 155 (income from property) of the Income Tax Ordinance, 2001.

Sources told Business Recorder here on Friday that the FBR has implemented an action plan (2012) to check enforcement of statements by the prescribed persons under the law. The action plan has been finalised by the FBR for dispatching to the field formations. The action plan has given top priority to the area of income from property under section 155 of the Income Tax Ordinance, 2001 to improve collection under this head from January 2012 onwards. Under section 155, withholding tax is applicable on rent of immovable property (including rent of furniture and fixtures, and amounts for services relating to such property).

According to FBR's action plan (2012), an important segment of taxpayers, that continues to be neglected from taxation, is the one which derives income from property. Total collection of withholding tax under section 155 of the Income Tax Ordinance, 2001 was Rs 2.4 billion during last year. If tax is withheld at an average rate of Rs.100,000 from every withholdee, it would mean that rent payment in respect of only 24,000 properties of all types was subjected to withholding tax. Diplomatic missions are also among biggest payers of rent and are one of the prescribed persons and, yet withholding tax statements are not being enforced from concerned persons, FBR said. Under the action plan (2012), the FBR has also decided to identify defaulters of statements under section 165 of the Income Tax Ordinance, 2011. The position of enforcement of statements by the prescribed persons under the Income Tax and Sales Tax laws is also far from satisfactory. At present, only 34,357 withholding agents of income tax are e-registered, out of which 29,927 are filing withholding statement. On the other hand, the number of registered corporate entities alone is 48,679. Federal and Provincial Governments, attached departments and persons other than corporate entities, who are required to file the Statements, are yet to be added to this number.

The FBR has devised a separate strategy to identify defaulters of statements under section 115(4) of the Income Tax Ordinance 2001. As per action plan (2012), a large chunk of persons under obligation to file statements U/S 115(4) of the Income Tax Ordinance, 2001 particularly importers and exporters is not filing the requisite statements. The following course of action has been envisaged by the FBR:

Firstly, identification of persons liable to file statements U/S 115(4) by the PRAL.

Secondly, identification of defaulters of statements U/S 115(4) along with names and National Tax Numbers (NTNs) from among the existing taxpayers by PRAL by January 15, 2012.  Thirdly, dissemination of above information to the concerned field units by PRAL by January 15, 2012.

Fourthly, the Pakistan Revenue Automation Limited (PRAL) would send e-intimation to all the defaulters by January 15, 2012.

Fifthly, The Large Taxpayer Units and Regional Tax Offices would complete legal action against defaulters by March 31, 2012, FBR's action plan (2012) said.