Pakistan: Tax Laws (Second Amendment) Ordinance, 2019

Income Tax Ordinance, 2001 

• In the Finance Supplementary (Second) Amendment Act, 2019, green field industrial undertaking are exempt on profit and gains. However, green field industrial undertaking were not defined in Income Tax Ordinance, 2001. In the Tax Laws (Second Amendment) Ordinance 2019, definition of Green Field Industrial undertaking has been introduced. 

• Capital gain on disposal of debt instrument and government securities including treasury bills and Pakistan Investment Bonds though SCRA account by non-resident company having no permanent establishment in Pakistan shall be subject to withholding tax at the rate of ten percent which the withholding tax is final tax. 

• Due to increase in compliance structure of international taxes, an amendment has been made in section 216 of the Income Tax Ordinance, 2001 enabling sharing of information between income tax authorities and Financial Monitoring Unit of State Bank of Pakistan. 

• Traders have been incentivized by way of reduction in rate of minimum tax at the rate of 0.5% for turnover not exceeding Rs. 100 million. These traders are excluded from definition of prescribed person for withholding under section 153 of the Income Tax Ordinance, 2001. Traders are defined as person engaged in business of buying and selling goods in same state as a retailer or wholesaler but does not include distributor. 

• Procedure for exemption certificate under Section 148 read with Clause 72B of Part-IV of Second Schedule to the Income Tax Ordinance, 2001 has been simplified through amendment. The automatic process of such certificate has been introduced after expiry of prescribed time. 

• The mechanism of procedure for appointment of judicial members of Appellate Tribunal Inland Revenue has been amended 

• Tax payable on capital gain on sale of immovable property has been reduced by seventy five percent if holding period of the property is more than three years by ex-service men and serving personnel of armed forced on originally allotted property by Federal or Provincial Government. 

Sales Tax Act, 1990 

• There was no specific penalty clause for tier 1 retailers in case of non-integration of POS with FBR, now the penalty of Rs. 1 Million has been imposed for non-integration. If default continue for six months after imposition of penalty, the unit shall be sealed and embargo shall be placed on its sales.

• A penalty has been prescribed for integrated unit conducts any act to avoid monitoring, tracking, reporting or recording of transactions.

• The importer (commercial) of edible oil has been excluded from exemption from sales tax under the Sixth Schedule to the Sales Tax Act, 1990, now the supply by importer of edible oil to un-registered person shall be subject to 3% Further Tax. 

• The supply by manufacturer to un-registered person has been restricted to the extent of Rs. 10 Million in a month and Rs. 100 Million in financial year. 

• Plant and machinery imported by manufacturer for in house installation has been made out of purview of value addition tax under twelfth schedule to the Sales Tax Act, 1990 

• Supplies of goods from tax exempt areas has been made to certain restrictions and conditions. 

Customs Act, 1969 

• The penalty has been imposed to smuggle foreign currency amount exceeding US$ 10,000. 

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