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ISLAMABAD: Pakistan has signed an agreement with Bulgaria on avoidance of double taxation and prevention of fiscal evasion with respect to taxes on income.

The agreement was signed at the sideline of the Second Session of Pakistan–Bulgaria Inter-Governmental Commission (IGC) which concluded on Tuesday.

Director General FBR Muhammad Ashfaq Ahmad and Deputy Minister of Economy Republic of Bulgaria Liliya Ivanova signed the agreement on behalf of their respective governments.

The agreement would not only provide safeguards against double taxation of income of Pakistani and Bulgarian residents but also promote economic cooperation, investment and further strengthen the existing economic relations.

Enhance bilateral trade

Meanwhile, the second session of the IGC concluded with a resolve to enhance bilateral trade between Pakistan and Bulgaria.

Secretary Economic Affairs Division (EAD) Noor Ahmed and the Bulgarian deputy minister of economy led their respective delegations.

According to an official announcement, the IGC discussion focused on enhancing trade, economic cooperation in ICT, agriculture, livestock, tourism, culture, maritime and railways sectors.

The two sides agreed to work together for promotion of bilateral trade and investment.

The Bulgarian side agreed to facilitate the export of Pakistani citrus fruit, mango, rice, raw cotton, dates, fruits and marble to Bulgaria and other East European countries, while Pakistan said it would facilitate export of Bulgarian products in the country.

Both sides also agreed to encourage their businessmen 

for participation in trade fairs and exhibitions and to work for establishment of joint ventures in automotive, engineering and food processing.

Secretary EAD in his concluding remarks said the two countries will continue to strengthen economic and trade relations in future for mutual benefit of two countries.

Mrs Ivanova assured that Bulgaria will enhance cooperation with Pakistan in the identified areas.

Representatives of various ministries and organisations also participated in the event.During her stay in Pakistan, Mrs Ivanova called on the Minister of National Food Security and Research Sahibzada Mehboob Sultan and Adviser to the Prime Minister on Commerce and Textile and Investment Abdul Razak Dawood.

 

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The Federal Board of Revenue (FBR) and State Bank of Pakistan (SBP) have conveyed to the Federal Tax Ombudsman (FTO) that non-resident individuals are not required to be “filers” for opening foreign currency bank accounts in Pakistan. This has been declared by Federal Tax Ombudsman (FTO) Mushtaq Ahmad Sukhera in an own motion (OM) investigation against systemic maladministration of the Department (Deptt) whereby the non-resident aspirants before opening a foreign currency account were required to file returns of income.According to the order, precisely, a large number of non-resident citizens of Pakistan origin were facing hardship in operating their foreign currency bank accounts maintained in Pakistan. They were required to file returns of income, at the time of opening of bank accounts, on an interpretation issued by the State Bank of Pakistan (SBP) vide Circular letter No. 5 dated 12th April 2018 read with Protection of Economic Reforms (PER) (Amendment) Ordinance 2018.

The treatment was prima facie in violation of the express provisions of Section 114 of the Income Tax Ordinance 2001 (the Ordinance) whereby the non-residents were not under an obligation to file returns of their foreign income. Thus on account of conflicting interpretations, the non-residents foreign currency account holders had to go through this hardship.

The matter was sent for comments to the secretary Revenue Division. In response thereto, the FBR submitted comments of the Member (IR-Policy) FBR. It was contended that it is the “resident individual who is required to file return of income under Section 114 as defined in terms of section 82 of the Ordinance.” It was further contended that cumulative reading of section 114 of the Ordinance, PER (Amendment) Ordinance, 2018 and the SBP’s Circular No. 05 dated 12th April 2018, clearly shows that a non-resident was not required to be a “filer”. The bank authorities might have some internal administrative issue, which can ‘only be resolved by the SBP.The deputy director SBP also submitted comments vide letter dated April 19, 2019, contending that keeping in view the issue, a clarification had been issued by the Director Exchange Policy Department (EPD) SBP to all authorised dealers (banks). Evidently, the issue was related to the banks misinterpretation of law, which has duly been clarified by the SBP vide EPD Circular’ Letter No. 7 dated 19th April 2019, contents whereof are reproduced below:

“Attention of authorised dealers is invited to the second provision of sub-section of the Section (5) of the PERA 1992 which Inter alia, states that: “Provided that no cash shall be deposited in an account of citizen of Pakistan resident in Pakistan, unless the account holder is filer as defined in the Income Tax Ordinance, 2001.

“It has come to our notice that some authorised dealers are not allowing non-residents to open and maintain foreign currency accounts on the pretext that they are not appearing as “filer” in the Active Taxpayer’s List of FBR. “However, it is evident from the aforementioned Proviso that the instructions, contained therein, are not applicable to non-residents.”

In view of the clarification issued by the SBP vide Director EPD’s Circular letter No. 07 of 2019 dated 19th April 2019, the systemic issue under reference stands resolved. The investigation is, therefore, closed and the file be consigned to record, the FTO added.

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