Pakistan has recently experienced a long awaited announcement of financial and tax reform package. Prime Minister of Pakistan, in his recent public announcement in Islamabad, announced the Scheme. Apart of scheme, Prime Minister claimed that out of population of over 200 million only 1.2 million are filler of return out of which 0.5 million are NIL filers. He emphasized the need of broadening the tax base and termed the scheme as much needed catalyst for that.
The scheme was subsequently concur by the president of Pakistan and promulgated through following Ordinances.
- Voluntary Declaration of Domestic Assets Ordinance, 2018
- Foreign Assets (Declaration and Repatriation) Ordinance, 2018
- Protection of Economic Reforms (Amendment) Ordinance, 2018
- Income Tax (Amendment) Ordinance, 2018
Scheme shall be effective from April 10, 2018 to June 30, 2018.
For Foreign Assets: Scheme shall be available for all citizen of Pakistan except for holders of public office (as defined in the Ordinance), their spouses and dependent children(s)
For domestic Assets: Scheme shall be available for all Companies, Association of persons and citizen of Pakistan except for holders of public office (as defined in the Ordinance), their spouses and dependent children(s).
Scheme shall cover all foreign assets, undisclosed domestic assets and income held on or before April 08, 2018 except for assets having pending processing under court of law.
FOR VALUATION OF ASSETS CLICK BELOW
Confidentiality and non-admissibility of declaration as evidence; Particulars of any person making a declaration, shall be confidential notwithstanding any law for the time being in force. Further, declaration shall not be admissible in any proceedings, against the declarant, for penalty or prosecution under any law.
Through amendment in section 5(2) of Economic Reforms Act, 1992, a non-filer is prohibited from depositing any cash into any foreign currency account.
Income Tax (Amendment) Ordinance 2018
a) Reduction in Tax Rate
From July 2018, income of individual (Salaried and Business Individuals) shall be exempt up-to
Rs. 1,200,000. Income exceeding that amount shall be taxed in following manner.
|Income Slabs||Tax Rate%|
|1,200,001 to 2,400,000||5% of amount exceeding Rs. 1,200,000|
|2,400,001 to 4,800,000||Rs. 60,000 plus 10% of amount exceeding Rs. 2,400,000|
|More than 4,800,000||Rs. 180,000 plus 15% of amount exceeding Rs. 4,800,000|
b) Other changes
Unexplained Income (Section 111(2)): Amounts representing foreign source income, expenditure or asset shall be added in the income of immediately preceding tax year of discovery.
Foreign Exchange Remittance from outside Pakistan (Section 111(4a): Immunity from inquiry is restricted to Rs. 10 million on foreign remittances through normal banking channel converted in Pakistan rupee.
Foreign Income and assets statement (Section 116A): Every resident individual having foreign income equal to or in excess of $ 10,000; or having foreign assets with a value of $100,000 or more shall furnish a ‘foreign income and assets statement’ giving particulars of 1) total assets and liabilities as on the last day of the tax year, 2) Foreign asset transferred during the year and consideration thereof, and 3) Foreign income and expenditure derived wholly and necessarily for the said income.
Power of commissioner: Every person who is required to file a ‘foreign income and assets statement’ is also required to file return of income under section 114. The time limitation for five years for the Commissioner to issue notice to file return of income shall not be applicable if the Commissioner is satisfied on the basis of reasons to be recorded in writing that a person who failed to furnish his return has foreign income or owns foreign assets. In case of failure in filling of prescribed statement on due date, a penalty of 2% of foreign income or value of foreign asset shall be levied for each year of default.
Author: Syed Mahir Alam