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Amendments in Income Tax ordinance, 2001 vide Finance Act, 2008 (Insurance Sector) Amendments in Income Tax ordinance, 2001 vide Finance Act, 2008 (Insurance Sector)

Payment to non-resident 152 (1 AA) Every person making a payment of insurance premium Payment to non-resident 152 (1 AA) Every person making a payment of insurance premium or reinsurance premium to a nonresident person shall deduct tax from the gross amount paid.

Payment to Non-Resident The rate of tax to be deducted from payments referred to Payment to Non-Resident The rate of tax to be deducted from payments referred to in sub-section (1 AA) of section 152 shall be 5% of the gross amount paid.

Payment to Non-Resident 152(1 BB) Tax deducted under sub-section (1 AA) shall be a Payment to Non-Resident 152(1 BB) Tax deducted under sub-section (1 AA) shall be a final tax on the income of the non-resident person arising out of such payment.

Certificate of collection or deduction of tax 164 Every person collecting tax shall, at Certificate of collection or deduction of tax 164 Every person collecting tax shall, at the time of collection or deduction of the tax, furnish to the person from whom the tax has been collected or to whom the payment from which tax has been deducted has been made, a certificate setting out the amount of tax collected or deducted

Section 107 of Income Tax Ordinance, 2001 • The Provisions of Double Taxation treaties Section 107 of Income Tax Ordinance, 2001 • The Provisions of Double Taxation treaties override the provisions of Income Tax Ordinance 2001.

Section 152 (IAA) of Income tax Ordinance, 2001 • Not applicable to the non-resident Section 152 (IAA) of Income tax Ordinance, 2001 • Not applicable to the non-resident companies having residence in the countries with which Pakistan has entered into Double Taxation Treaties.

Agreements on Avoidance of Double Taxation between Pakistan and following countries 1) Austria 2) Agreements on Avoidance of Double Taxation between Pakistan and following countries 1) Austria 2) Azerbaijan 3) Bangladesh 4) Belgium 5) Canada 6) China 7) Denmark 8) Egypt 10) France 11) Germany 12) Greece 13) Holland 14) Hungary 15) India 16) Indonesia 17) Iran 18) Ireland 19) Italy 20) Japan 21) Jordan 22) Kazakhstan 23) Kenya 24) Korea 25) Kuwait 26) Lebanon 27) Libya 28) Malaysia 29) Malta 30) Mauritius 31) Netherland 32) Nigeria 33) Norway 34) Oman 35) Philippines 36) Poland 37) Qatar 38) Romania 39) Saudi Arabia 40) Singapore 41) South Africa 42) Srilanka 43) Sweden 44) Switzerland 45) Syrian 9) Finland

Exemption Certificates Exemption Certificate for non deduction of Income Tax Under Section 152(1 AA) Exemption Certificates Exemption Certificate for non deduction of Income Tax Under Section 152(1 AA) not required.

WITHOLDING PROVISONS APPLICABLE TO INSURANCE BUSINESS 11 WITHOLDING PROVISONS APPLICABLE TO INSURANCE BUSINESS 11

APPLICABLE WITHOLDING SECTIONS AT A GLANCE § Salaries u/s 149 § Dividends u/s 150 APPLICABLE WITHOLDING SECTIONS AT A GLANCE § Salaries u/s 149 § Dividends u/s 150 § Non Residents (General) u/s 152 § Non Residents (Premiums) u/s 152 § Non Residents (Advertisements) u/s 153 A § Local Contracts & Services u/s 153 § Rent of properties u/s 155 § Prizes & Winnings u/s 156 § Commission u/s 233 12

OBLIGATIONS § Deduct Tax at prescribed rates. § Deposit Tax within 7 days of OBLIGATIONS § Deduct Tax at prescribed rates. § Deposit Tax within 7 days of the end of fortnight § Issue Prescribed Deduction Certificate to payee n n n Salary within 45 days of the end of F. Y. Others within 15 days of the end of F. Y. On request of Payee within 7 days of request. § Submit Monthly Statement by 20 th of following month § Submit Annual Statement by 31 st August § Furnish Reconciliation of Statements, if required 13

SALARIES § Payment through cross cheque or transfer except upto Rs. 15, 000 p. SALARIES § Payment through cross cheque or transfer except upto Rs. 15, 000 p. m. which may be paid in cash. § Deductions to be made on average basis § Rates of Deductions as per First Schedule § Adjustments may be made for credits and other deductions as per section 149 (1) § Deductions also to be made from payment out of Pension Fund. (Sec 156 B) 14

SALARIES § No deductions upto Rs. 180, 000 § In case of woman, no SALARIES § No deductions upto Rs. 180, 000 § In case of woman, no deductions upto Rs. 240, 000 § Minimum rate of deduction 0. 5 % § Maximum rate of deduction 20 % 15

DIVIDENDS Deduction of Tax at the time of Payment Tax to be deducted at DIVIDENDS Deduction of Tax at the time of Payment Tax to be deducted at 10 % by Resident companies ( Division III Part I 1 st Schedule ) Dividend to include after tax profit of a branch of a foreign company ( Section 2 (19) (f) ) 16

INSURANCE OR RE-INSURANCE PREMIUM PAYMENT TO NON RESIDENT PERSON (SECTION 152(1 AA) § Inserted INSURANCE OR RE-INSURANCE PREMIUM PAYMENT TO NON RESIDENT PERSON (SECTION 152(1 AA) § Inserted through Finance Act 2008. § Rate of Tax Deduction 5 % ( Div II Part III 1 st Schedule) § Full & Final Tax as Pakistan source income (Section 152(1 BB)) 17

PAYMENT OF LOCAL COMMISSION Tax to be deducted / collected at 10 % ( PAYMENT OF LOCAL COMMISSION Tax to be deducted / collected at 10 % ( Part IV of First Schedule ) Rate in case of Advertising Agents at 5 % (Clause 26 Part II 2 nd Schedule ) Tax is full & Final in case of Recipients ( Section 233 (2) ) 18

PAYMENT TO NON RESIDENT MEDIA PERSONS § Payment for advertisement services attract this deduction PAYMENT TO NON RESIDENT MEDIA PERSONS § Payment for advertisement services attract this deduction ( Section 153 A) § Rate of Tax Deduction 10 % (Division IIIA, Part III , First Schedule ) § Full & Final tax as Pakistan source income (Section 169 (1)(b)) 19

RENT OF IMMOVEABLE PROPERTY § Rent to include advance rent , rent of furniture RENT OF IMMOVEABLE PROPERTY § Rent to include advance rent , rent of furniture / fixtures and amount for services relating to such property. 20

RATES OF TAX DEDUCTION ON RENT ( Div V Part III 1 st Schedule RATES OF TAX DEDUCTION ON RENT ( Div V Part III 1 st Schedule / Clause 28 Part II 2 nd Schedule ) § PAYMENT TO INDIVIDUAL § From 150, 000 to 400, 000 5 % of amount exceeding 150, 000 § From 400, 000 to 1000, 000 12500 + 7. 5 of amount exceeding 400, 000 § Exceeding 1, 000 57, 500 +10 of amount exceeding 1, 000 § PAYMENT TO COMPANY § Upto 400, 000 5 % § From 400, 000 to 1, 000 20, 000 + 7. 5 % of amount exceeding 400, 000 § Exceeding 1, 000 65, 000 + 10 % of amount exceeding 1, 000 21

EXPOSURES ON DEFAULT 1. In case of non deduction of tax at source, following EXPOSURES ON DEFAULT 1. In case of non deduction of tax at source, following expenditures are inadmissible ; . Salary . Services and Fee. Rent . Commission. Contractual Payment to Non Residents 2. Defaulted amount will be recoverable with additional tax @ 12 %. 3. Prosecution proceedings may be initiated. 22

FORMAT OF STATEMENTS § Monthly Statement ( Consolidated for salary & other payments ) FORMAT OF STATEMENTS § Monthly Statement ( Consolidated for salary & other payments ) § Annual Statement for Salary § Annual Statement for Other payment. Formats may be downloaded from http: // fbr. gov. pk / 23

EFILING ON FBR PORTAL § Get enrolled at https: //e. fbr. gov. pk § EFILING ON FBR PORTAL § Get enrolled at https: //e. fbr. gov. pk § Obtain Digital certificate from NIFT (www. nift. com. pk) § Submit Returns, Statements , application on line § Make the payments on line 24

BENEFITS OF EFILING § Filing of Income Tax Returns and Statements electronically § Tax BENEFITS OF EFILING § Filing of Income Tax Returns and Statements electronically § Tax Payment by Taxpayers and Withholding Agents § Payment Collection by Banks § Online Payments from bank accounts electronically (e. Payments) § In order to facilitate the taxpayers and users of these services; FAQs and help is available online, however in case of any further assistance , please contact at following: § Helpline : (051) 111 -772 . . . 24 hrs 25

FEDERAL EXCISE DUTY (F. E. D) Services provided or rendered in respect of insurance FEDERAL EXCISE DUTY (F. E. D) Services provided or rendered in respect of insurance to a policy holder by an insurer, including a re-insurer “[in case where direct insurance service has been provided] RATE OF DUTY i) Goods insurance “[Ten] per cent of the gross premium paid. ii) Fire insurance do iii) Theft insurance do iv) Marine insurance do v) Other insurance do

FEDERAL EXCISE DUTY (F. E. D) - Exclusion: Life Insurance Rule 40 : Special FEDERAL EXCISE DUTY (F. E. D) - Exclusion: Life Insurance Rule 40 : Special procedure for insurance companies Monthly return in the form STR-7 (Sales Tax Rules 2006) Return to be filed by 15 th day of the following month. - In case of default Default surcharge @ 1. 5% per month - Penalty provision - Non-filing of return: Rs. 5000/-. - Non or short payment of duty ; Rs. 10, 000/- or 5% of the duty involved whichever is greater - If return filed within 15 days of due date; Penalty of Rs. 100/- for each day of default.

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