DNAs

Question 1

How much of the amount of expense will be disallowed if WH is not made of full amount

How much disallowance

Answer 1

100% DNA, except RM/FG (Cost of sales) Invoices

20% of defaulted amount - RM/FG (Cost of sales) Invoices

Question 2

When an expense, subject to WH Tax, is allowed

Answer 2

1. Tax Deducted/Collected & Paid (Both)
2. Paid from own pocket (in case missed/short paid)
3. Recovered by FBR u/S161 & S162 (FBR will also charge 12% default surcharge+Penalty)

Question 3

Any cases where WHA’s failure to deduct/payment still does not impact deductibility of expense

Answer 3

1. Paid from own Pocket
2. FBR recovered u/S161&162
3. Expense not subject to WH tax

Question 4

Is Dealership Commission an allowed expense

Answer 4

Other than retail goods - Yes

For Retail goods (3rd Sch ST) - If delarer (other than under delaer ship agreement) is not on ATL, expense upto 0.2% of Gross allowed. Above DNA

For Retail goods (3rd Sch ST) - If delarer (who is under delaer ship agreement) is not on ATL, amount=salesx10%x75%

Question 5

What are restrictions on enetertainment expenses

Answer 5

All allowed (even HO allocated alos allowed), except

1. Personal Nature
2. on persons not related to business
3. Local customer entertainment, outside business premises (For foreign, business premises is not required)

Question 6

When Contribution to Employee Funds allowed in P&L

Answer 6

1. When it is to 4 Recognized Funds (PF,Pension,SAF,Gratuity)

&

2. Effective arrangement for tax deduction in place

Unregnized allowed provided tax is deducted at the time of payment

Question 7

Is Default Surcharge admissible or DNA?

Why Contractual LD admissibile

Fines/Penalties’ DNA conditions

Answer 7

DS - Amissible

LD - Imposable by law but not law

Fine/Penalty - Violation - Law/Rule/Regulation

Fine - Offence (crime) -meeting two (2) conditions Actus Reus (Action)+Mens Reas (Bad intention)

Question 8

What are expenses where cash payment 25k single & 250K sum under sigle head does not apply

Is there any limite for CAPEX

Answer 8

Expenses:

1. Any expense less than 25k
2. Bills (utlty)
3. Freight & Travel Fare
4. Postage
5. Taxes payment
6. Agriculture (Fasal ki Kharidari e.g Sugarcane)
7. Haj group

CAPEX

1M - Otherwise no dep. allowance

Question 9

Are Salaries & Wages exp - paid in cash allowed?

Answer 9

25k/Month

If paid above whole amount disallowed

Question 10

Capitl Nature Expenses

Answer 10

Like increase Auth. Capital - DNA

Question 11

Any DNA expense

due to customer of Co.

i.e. if sales are made to particular customer/Buyer

Answer 11

Applicable to

Industrial undertaking/from 1st Oct 20/sales to customer more than 100m

if customer/buyer unregistered u/ST

Disallowance

related Exp x ex. sales to customer/total sales

Total Disllowance<=10% of total expenses

Question 12

What are expenses / deductions where special treatments (Other than IFRS & DNAs) provided

7

Answer 12

1. Dep/Amm - Rates and method
2. PCE - allowed with incl/excl
3. Scientific/Rsearch exp - activity & spending (both) in Pak.
4. Employee Training Facilities (Education & Hospital) - only Opex; for approved-both Pakistanis & Foreginers; for non-approved - Pakistanis only
5. Lease - all leases operating leases; PTV-NPfH 2.5M Prinicpal max
6. Interest exp (PoD) - charging from date of utilization; used For CAPEX, not allowed rather dep.;to cover islamic terminologies also
7. Bad Debts- only for P&L amounts (i.e previously income, not for advances/loans, etc); on subsequesnt recovery Amount not allowed +- with actual recovery

Question 13

Sales to ST unregistered person 21 (Q)

Answer 13

Industrial Undertaking selling to Unregistered person, Total sales to unreg>100m

Formula=(Total deductions in P&L/Total salesxsales to unreg) <=Total Deductionsx10%

Question 14

Advertisement Exp. of Pharmaceutical Business

Answer 14

Maximum 10% of sales, excess DNA