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Taxation
The government, through Finance Act 2019, has reduced the rate of tax credit to 5 percent from 10 percent for investment in purchase of plant & machinery for extension, expansion, balancing, modernizing & replacement for Tax Year 2019. This was stated by Asif Haroon, former vice president Karachi Tax Bar Association (KTBA) and partner A.F Ferguson & Co during his electronic presentation on “the changes in the Income Tax Ordinance, 2001 through Finance Act, 2019” at a seminar on “Implication of Finance Act, 2019” organized by KTBA held at local hotel here.He said that Final Tax Regime (FTR) was now converted into Minimum Tax Regime (MTR) for commercial imports, brokerage and commission, non-resident persons for certain services, local supply of goods, execution of contracts (residents as well as non-residents) and income from CNG stations; adding that the concept of carry forward of minimum tax over actual tax liability was not envisaged, which he considered as very harsh.

Furthermore, he said that the concept of ‘filer’ and ‘non-filer’ has been abolished in Finance Act 2019 and the government had introduced tenth schedule whereby rate of tax withholding was enhanced by 100% for persons, not appearing in Active Taxpayers’ List (ATL).

He said that a mechanism had been placed whereby a withholding agent or the person from whom tax was required to be collected or deducted, were empowered to furnish a notice to the commissioner to allow payment without the enhanced rate of deduction or collection of tax where such a person not appearing in ATL had no requirement to file a return of income or a statement of final taxation and added that the tenth schedule provided the procedure for provisional assessment and penalty proceedings if a person failed to file return of income for the respective tax year.

Asif said that any income beyond imputed income was now subjected to tax under section 111 of Income Tax Ordinance 2001 and the concept of further amendment of provisional assessment had also been introduced in this budget.He said that the late filers could now become part of ATL by paying surcharge at the applicable rates and on filing of returns, the taxpayers could claim refund of tax withheld in excess of the actual tax liability; adding that the period during which the names of such persons did not appear in ATL, refund would not be issued during that period and, this period would also not be considered for the purposes of additional compensation for delayed refund.

The non-monetary gifts, which had not received from grandparents, parents, spouse, brother, sister, son or a daughter, will be considered as ‘other income’ for recipient and the commission paid or payable in excess of 0.2 % of the gross amount of supplies of third schedule products would not be disallowed, if the person to whom such commission was paid or payable was not appearing in ATL, he maintained. Asif further said that the government had slashed the immunity limit to Rs 5 million from Rs 10 million worth of foreign remittance through banking channels under section 111(4) of the Ordinance and added that displaying of business license by every person engaged in any business, profession or vocation was now mandatory even where they were not required to obtain NTN. M. Zeeshan Merchant, former VP KTBA, who gave presentation on sales tax said that a new sub-section (6) has been inserted at section 8B providing that if tier-1 retailer failed to get its system integrated with FBR in prescribed manner during a tax period or part thereof, the admissible input tax for the period of default would be reduced by 15%.He said that the condition of CNIC had been waived where retailers supply goods to ordinary consumers for own consumption with transaction value not exceeding Rs 50,000 (including sales tax).

Zeeshan said that collection of CNICs of unregistered buyers had also been postponed till August 1, 2019 and the supplier would not be penalized for the wrong declaration of CNIC number by the buyer in case of sales made in good faith.

Saud ul Hassan Director – Tax EY Ford Rhodes, who gave presentation on Sales Tax on services, said that exemption available to life insurance services provided to individuals for insurance policy coverage up to Rs 500, 000 and group life insurance services had been withdrawn and now group life insurance services are taxable at 13% whereas insurance policies coverage up to Rs 500, 000 were now taxable at 3 percent.

Moreover, he said that the advertisement in newspaper and periodicals, except colour advertisement and black and white advertisement occupying specified space in newspaper or periodicals. Such advertisement shall now be chargeable at the rate of 3%. Similarly, internet services, up to 4 mbps and other such services are now taxable at 19.5 percent.

Furthermore, he said that service provided or rendered by banking companies and non-banking financial companies in respect of Hajj and Umrah, Cheque Book issuance and Musharika and Modaraba financing are now taxable @ 13%; adding that the construction and repair services of roads, ports, airports, railways, transport terminals and bridges provided to government including local government and cantonment board buildings are now taxable at 5 percent.

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Taxation
The Benami Transactions (Prohibition) Zones of Federal Board of Revenue (FBR) have so far made 50 cases against the owners of benami properties and sent notices for holding Benami assets/income across the country. Sources told Business Recorder here on Thursday that the FBR has started selecting cases on the basis of credible information and the board is expected to frame around 50 Benami cases on monthly basis.

In this regard, Benami Transactions (Prohibition) Zones issued orders of provisional attachment of immovable properties under the Benami Transactions (Prohibition) Act 2017.

The cases would be referred to the adjudicating authority under Benami Transactions (Prohibition) Act-2017 after completion of the due process. Following the approval granted by the FBR, the Benami Zones of Adjudicating Authority established under Benami Transactions (Prohibition) Act 2017 has issued notices for the provisional attachment of Benami properties in in different cities under sub-section (3) of section 22 of the Act for Prohibition for holding properties in Benami.
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Taxation
France’s parliament on Thursday passed a law making it the first major economy to impose a tax on digital giants, defying a probe ordered by an angry US President Donald Trump that could trigger reprisal tariffs. The new law aims at plugging a taxation gap that has seen some internet heavyweights paying next to nothing in countries where they make huge profits as their legal base is in smaller EU states.

The legislation – dubbed the GAFA tax in an acronym for Google, Apple, Facebook and Amazon – was passed by a simple show of hands in the Senate upper house after it was agreed by the National Assembly lower chamber earlier this month.

But the French move drew an angry response from the White House even before the legislation was passed, with Trump ordering an investigation unprecedented in the history of French-US relations. The law will levy a 3.0 percent tax on revenues generated from services to French consumers by the largest tech firms.

The adoption of the law came as Britain unveiled draft legislation for a tax on digital giants, that would amount to 2.0 percent and reflect “the value derived from their UK users”, the British government said.

Google, Apple and Facebook have their European headquarters in Ireland, where they pay some of the EU’s lowest corporate tax rates despite earning the bulk of their European revenues in Britain, France and Germany.Amazon’s European base is Luxembourg, another low-tax jurisdiction. Ireland, Luxembourg and other small EU members have been active in thwarting efforts to impose an EU-wide digital tax, hastening go-it-alone efforts by France, Britain and others.

The so-called Section 301 investigation is the primary tool the Trump administration has used in the trade war with China to justify tariffs against what the United States says are unfair trade practices. US Trade Representative Robert Lighthizer said in a statement ahead of the adoption of the French law that Washington was “very concerned” it would “unfairly” target American companies. But French Economy Minister Bruno Le Maire France rejected the US reaction, saying “threats” were not the way to resolve such disputes.

“Between allies, I believe we can and must resolve our differences in another way than through threats,” he told the French Senate ahead of the vote.

“France is a sovereign state and it alone decides on its taxation mechanisms and it will continue to do so,” he said. Le Maire said he was warned about the investigation during a “long conversation” with US Treasury Secretary Steven Mnuchin on Wednesday, saying it was the first time such a step had been taken in the history of French-US relations.

Last month, top G20 finance chiefs meeting in Japan agreed there was an urgent need to find a global system to tax internet giants like Google and Facebook but clashed over how to do it. The issue now risks overshadowing a meeting of G7 finance minister outside Paris next week which is supposed to prepare the summit of leaders hosted by President Emmanuel Macron in August.Washington has been pushing through the G20 for an overarching agreement on taxation.

Such a move is supported by Google which believes it would mean Silicon Valley tech giants would pay less tax in the US and more in other jurisdictions, in a departure from the longstanding practice of paying most taxes in a company’s home country.

The Section 301 probe will hold hearings to allow for public comment on the French tax issue for several weeks before issuing a final report.

The move was applauded by the Computer & Communications Industry Association which said the French law would retroactively require US internet giants to turn over a percentage of their revenues from the start of 2019. “This is a critical step toward preventing protectionist taxes on global trade,” CCIA official Matt Schruers said in a statement, calling on France “to lead the effort toward more ambitious global tax reform, instead of the discriminatory national tax measures that harm global trade.” A finance ministry spokesman for Ireland indicated Dublin remained opposed to unilateral arrangements, saying the challenges were best addressed within the Organisation for Economic Cooperation and Development (OECD).
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