Chapter 5; Definations Flashcards
Define “Industrial Undertaking” in accordance with Income Tax Ordinance, 2001.
1) An undertaking setup in Pakistan and which employs:
a) 10 or more persons and involves the use of electrical energy or any other energy which is mechanically transmitted and is not generated by human or animal energy; or
b) 20 or more persons and does not involve the use of electrical energy or any other energy which is mechanically transmitted and is not generated by human or animal energy.
c) And is engaged in:
* The manufacture of goods or materials or
* The processing goods in a way which substantially changes their original position
* Ship-building
* Generation, conversion, transmission, or distribution of electrical energy; or
* The working of any mine, oil well, or any other source of mineral deposits.
2) A person doing construction of buildings, roads, bridges, or other such structures including the development of land, for the import of plant and machinery to be used
3) A resident company engaged in the hotel business in Pakistan
4) Telecommunication companies
Define “Fee for technical services” in accordance with Income Tax Ordinance, 2001.
It means amount received whether periodic or lump sum, for rendering of managerial, technical or consultancy service but does not include:
* Amount received for services rendered for a construction, assembly or like project.
* Receipt which is chargeable under the head ‘salary’.
Define “Associates” in accordance with Income Tax Ordinance, 2001.
1) Two persons shall be associates if the relationship between them is such that:
a) One person is expected to act in accordance with the intentions of the other.
b) Both persons are expected to act in accordance with the intentions of a third person.
2) Two persons shall not be associates solely because:
a) One person is an employee of the other.
b) Both persons are employees of a third person.
3) Without ignoring the generality of any of the above provisions, the following shall be treated as associates, namely;
a) An individual or a relative of the individual
b) Members of an AOP
c) A member of an AOP and the AOP, where the member;
* Either solely; or
* Together with an associate or associates under another application of this section
Controls 50% or more of the rights to income or capital of the association.
d) A trust and any person who benefits under the trust;
e) A shareholder of a company and the company, where the shareholder:
* Either solely; or
* Together with an associate or associates
Controls either directly or through one or more interposed person
50% or more of the rights to voting power in the company
50% or more of the rights to dividends
50% or more of the rights to capital
4) Relatives and members of an association shall not be associates in case, where the commissioner is satisfied no one is expected to act in accordance with the intentions of the other.
5) In this section, relative in relation to an individual means;
a)
* An ancestor
* A descendant of any of the grandparents;
* Or an adopted child, of the individual, or of a spouse of the individual
b)
* A spouse of the individual or
* Spouse of any person specified in sub-clause ‘a’
Define “Public company” in accordance with Income Tax Ordinance, 2001.
Public company means:
1) A company in which at least 50% of the shares are held by the Federal or Provincial government; or
2) A company in which at least 50% of the shares are held by a foreign government; or
3) A company in which at least 50% of the shares are held by a foreign company owned by a foreign government; or
4) A company whose shares:
a) Were traded on a registered stock exchange in Pakistan at any time in the tax year and
b) Remains listed on that exchange at the end of the year; or
5) A unit trust whose units are widely available to the public.
Define “Private company” in accordance with Income Tax Ordinance, 2001.
A private company means a company that is not a public company.
Define “Accumulated profits” in accordance with Income Tax Ordinance, 2001.
Accumulated profits for payment of dividends include-
1) Any reserve made up from any allowance, deduction, or exemption under this Ordinance.
2) All profits of the company including incomes/gains of a trust up to the date of distribution; and
All profits of the company including incomes/gains of a trust up to the date of its liquidation.
Define “Dividend” in accordance with Income Tax Ordinance, 2001.
Dividend include:
1) Any distribution by a company of accumulated profits to its shareholders, whether capitalised or not, if such distribution requires the release of assets (including money) by the company.
2) Any distribution by a company to its shareholders of debentures, whether with or without profit, up to the extent of accumulated profits whether capitalised or not;
3) Any distribution by a company to its shareholders on its liquidation, up to the extent of accumulated profits whether capitalised or not;
4) Any distribution by a company to its shareholders on the reduction of capital, up to the extent of accumulated profits whether capitalised or not;
5) The payment by a private company as defined in the companies act, 2017 or trust:
a) By way of advance or loan to a shareholder or
b) For the individual benefit of a shareholder
The payments should be from accumulated profits
6) Remittance of after-tax profit of a branch of a foreign company in Pakistan.
In accordance with the Income Tax Ordinance, 2001, which payments are not included in dividend income?
Following payments will not be considered as dividend:
1) A distribution on liquidation or reduction of capital for shares issued against cash, where shareholder has no right in surplus assets on liquidation;
2) Any advance/loan by a company involved in lending business;
3) Any dividend paid by a company which is set off against amount previously paid to it and treated as a dividend;
4) Remittance of after-tax profit by a branch of petroleum exploration or foreign production company.
Define “Royalty” in accordance with Income Tax Ordinance, 2001.
Royalty means any amount paid or payable, however, described or computed, whether periodical or lump sum, as consideration for:
1) The use of, or right to use any:
a) Patent
b) Invention
c) Design or model
d) Secret formula or process
e) Trademark; or
f) Other like property or rights
2) The use of, or right to use any copyright of literary, artistic, or scientific work, including films or video tapes for use in connection with television or tapes in connection with radio broadcasting, but shall not include consideration received for the sale, distribution or exhibition of cinematograph films.
3) The receipt of, or right to receive any:
a) Visual images; or
b) Sounds; or
c) Both,
transmitted by satellite, cable, optic fiber, or similar technology in connection with television, radio, or internet broadcasting.
4) The supply of any technical, industrial, commercial, or scientific knowledge, experience, or skill.
5) The use of or right to use any industrial, commercial, or scientific equipment.
6) The supply of any assistance that is ancillary and subsidiary to any property or right as mentioned in the above clauses; and it is furnished as a means of enabling the enjoyment of any property or right, and
7) The disposal of any property or right as mentioned in the above clauses.
In accordance with the provisions of the Income Tax Ordinance, 2001, which one is the permanent establishment?
1) Simple Liaison Office
2) Liaison office for sale contracts
3) Liaison office for purchase contracts
1) Simple liaison office is not a permanent establishment.
2) Liaison office for the negotiation of contracts is a permanent establishment.
3) Liaison office for purchase contracts is not a permanent establishment.
Define “Permanent establishment” in accordance with Income Tax Ordinance, 2001.
Permanent establishment in relation to a person means a fixed place of business through which the business of the person is wholly or partly carried on and includes:
a) A place of management, branch, office, factory or workshop, premises for soliciting orders, warehouse, permanent sales exhibition or sales outlet, excluding a liaison office, however, if a liaison office is engaged in the negotiation of contracts (except purchase contracts) then it is a permanent establishment.
b) A mine, oil or gas well, quarry, or any other place of extraction of natural resources;
c) An agricultural, pastoral, or forestry property;
d) A building site, a construction, assembly, or installation project, or supervisory activities connected with it that continue for a period or periods aggregating more than 90 days within any 12 months period;
e) The furnishing of services, including consultancy services by any person through employees or other his other person personnel engaged by the person for such purpose
f) A person (agent) acting in Pakistan [other than an independent agent acting in the ordinary course of business] on behalf of the person, if the agent:
1) Exercises an authority to conclude contracts on behalf of the other person or
2) Plays the principal role and concludes contracts without material modification and these contracts are:
a) In the name of the person; or
b) For the transfer of ownership of or granting of the right to use property owned by that enterprise; or
c) For providing services by that person; or
3) Has no authority but habitually maintains stock(merchandise) for regular deliveries on behalf of the other person
g) Any substantial equipment installed, or other asset or property capable of activity giving rise to income;
h) A fixed place of business that is used or maintained by a person if the person or an associate of a person carries on business at that place or at another place in Pakistan and:
1) That place or other place constitutes a permanent establishment of the person or his associate; or
2) Business is carried on by the person or an associate of the person at the same place or at more than one place constitutes complementary functions that are part of a cohesive business operation.
Define “Iris” in accordance with Income Tax Ordinance, 2001.
Iris means a web-based programme for the operation and management of Inland Revenue taxes and laws administered by the Board.
Define “IT-enabled services” in accordance with Income Tax Ordinance, 2001.
IT-enabled services include but not limited to inbound or outbound call centers, medical transcription, remote monitoring, graphic designing, accounting services, human resource services, telemedicine centers, data entry operations, cloud computing services, data storage services, locally produced television programs, and insurance claims processing.
Define “assessment” and “assessment year” in accordance with Income Tax Ordinance, 2001.
Assessment includes provisional assessment and amended assessment.
Assessment year means assessment year as defined in the repealed (old) ordinance.
Define “Tax” and “Taxpayer” in accordance with Income Tax Ordinance, 2001.
Tax means any tax imposed under this law, and includes any penalty, fee, or other charge or any sum or amount leviable or payable under this law.
Taxpayer means any person who derives an amount chargeable to tax and includes:
a) any representative of a person who
derives an amount chargeable to tax
under this ordinance.
b) any person who is required to deduct
or collect tax; or
c) any person required to furnish a return
of income or pay tax under this ordinance.
