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FAR 2: Theory > Minimum Tax Regime > Flashcards

Minimum Tax Regime Flashcards

1
Q

Export of Goods [Section 154]: Realization of foreign proceeds from export of goods by an exporter (WHT agent, WHT tax, Regime) [3]

A

WHT Agent: Authorized dealer in foreign exchangeWHT Tax rate: 1% of export proceedsTax regime: MTR

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2
Q

Export of Goods [Section 154]: Realization of foreign proceeds from sale of goods to Exporter under Inland B2B LOC, Other arrangement prescribed by FBR (WHT agent, WHT tax, Regime) [3]

A

WHT Agent: Banking CompanyWHT Tax rate: 1% of export proceeds realized by indirect exporterTax regime: MTR

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3
Q

Export of Goods [Section 154]: Export of goods by industrial undertaking located in EPZ (WHT agent, WHT tax, Regime) [3]

A

WHT Agent: EPZ AuthorityWHT Tax rate: 1% of export proceedsTax regime: MTR

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4
Q

Export of Goods [Section 154]: Making payment for a firm contract to an indirect exporter (WHT agent, WHT tax, Regime) [3]

A

WHT Agent: - Direct exporter - Export house registered under Duty and Tax Remission for Export Rules WHT Tax rate: 1% of paymentTax regime: MTR

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5
Q

Export of Goods [Section 154]: At the time of clearing of goods exported [Circular 3 of 2009 – In case of export of goods to Afghanistan whereby goods are exported without Form-E, export proceeds are received in cash instead of inward remittance through authorized dealer in foreign exchange] [3]

A

WHT Agent: Collector of CustomsWHT Tax rate: 1% of value of such goodsTax regime: MTR

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6
Q

Other relevant circulars (points) pertaining to Export of Goods [4]

A

Banks deduct tax when they discount export bills.Advance payments for future exports are considered realized and deducted for withholding.Goods sold through international tenders are exports.Tax doesn’t apply to exports by tax-exempt manufacturers.

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7
Q

Who would be required to collect/deduct advance income (at what %) tax along with WHT? [5+1]

A

Authorized dealers in foreign exchange: Collect tax when converting foreign currency.Banking companies: Collect tax on export proceeds.Export Processing Zones Authority: Collect tax on exports from EPZs.Direct exporters and export houses: Collect tax on payments to indirect exporters.Collector of Customs: Collect tax on exported goods.Collect 1% advance income tax in addition to withholding tax at time of realization of foreign proceeds of export. (directly/indirectly)

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8
Q

Provision of Textile Value Added Services to Exporter [Section 153(2)]: Withholding agent, withholding amount, tax payer (resident and non resident)? [3]

A

Withholding Agent: Exporter/Export HouseWithholding amount: (Value of Services + Sales tax) * 1%Taxpayer: Service provider of value addition (MTR if Resident, NTR if PE of non resident)

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9
Q

Imports [Section 148]: On what amount IMPORTS shall income tax and withholding apply?

A

Value for the purpose of income tax: (Value of goods + Custom Duty + FED + Sales Tax) Each cess is applied in the sequence written above.

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10
Q

Imports [Section 148]: Who would be the withholding agent for imports?

A

Collector of Customs; shall collect advance income tax in the same manner and at the same time as customs duty is paid on imports.

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11
Q

Imports [Section 148]: Who would be the income taxpayer?

A

Importer

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12
Q

Imports [Section 148]: What tax regime shall apply for importers? [3]

A

Normal Tax: For industrial undertakings (MANUFACTURERS) using imported goods. Minimum tax:On income from imports of edible oil, packaging material, paper and paperboard, or plastics. (Manufacturers and Commercial Importers)In all other cases.

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13
Q

Withholding Tax Rates for Imported Goods for persons: 1. Persons importing goods classified in Part I of 12th Schedule 2. Persons importing goods classified in Part II of 12th Schedule 3. Persons importing goods classified in Part III of 12th Schedule 4. Manufacturer of goods covered under SRO 1125(1)/2011 5. Persons importing finished pharmaceutical products 6. Importers of CKD kits of electric vehicles

A

PersonWHT Tax RatePersons importing goods classified in Part I of 12th Schedule1% of import value + customs duty + sales tax + federal excise dutyPersons importing goods classified in Part II of 12th Schedule2% of import value + customs duty + sales tax + federal excise duty; or 3.5% for commercial importersPersons importing goods classified in Part III of 12th Schedule5.5% of import value + customs duty + sales tax + federal excise duty; or 6% for commercial importersManufacturer of goods covered under SRO 1125(1)/20111% of import value + customs duty + sales tax + federal excise dutyPersons importing finished pharmaceutical products4% of import value + customs duty + sales tax + federal excise dutyImporters of CKD kits of electric vehicles1% of import value + customs duty + sales tax + federal excise duty

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14
Q

Withholding Tax Rates for Import of Mobile Phone - where to look for them?

A

First Schedule Part II

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15
Q

Value of goods [148.9]: Definition [4]

A

Retail price goods: Retail price + sales tax on import and supply.Other goods: Customs Act value + customs duty + FED + sales tax.Minimum value: As notified by the FBR, including customs duty, FED, and sales tax.FBR may notify minimum value for advance tax collection on imports.

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16
Q

Industrial Undertaking (Section 2(29C)) Definition [5]

A

An undertaking in Pakistan employing:10+ people with electrical energy20+ people without electrical energyEngaged in:Manufacturing or processing goodsShipbuildingGenerating, converting, transmitting, or distributing electricity or hydraulic powerMiningAdditional criteria (from May 1, 2020):Construction or land development companies importing plant and machineryAdditional criteria (from July 1, 2020):Resident hotel companiesTelecommunication companies operating under PTA license

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17
Q

Exemption from Withholding tax collection on imports on what goods? - Part IV of Second Schedule [HUGE LIST, JUST READ]

A

16: Institutions of the Agha Khan Development Network (Pakistan)56:Goods under Chapter 86 and 99 of Pakistan Customs TariffPetroleum oilsGoods imported by direct or indirect exportersGoods temporarily imported for re-exportationGoods temporarily imported by international athletesCircular 14 of 1997: Re-imported goods rejected by foreign buyers or unsold consignments bought back.56:Manufacturing BondMineral oil for pesticide manufacturersGovernment entities (Federal, Provincial, Local)Foreign companies with majority foreign government shareholdingPlant and machinery for government contractsHigh-speed diesel, light diesel, high octane blending component, kerosene, or crude oil for refiningPetroleum (E&P) companies (excluding motor vehicles)Goods exported and re-imported within one yearPlant and machinery for bagasse/biomass cogeneration power projectsGoods under Export Facilitation Scheme 2021Motor vehicles up to 1000ccPrinted books (excluding brochures, leaflets)Newspapers, journals, periodicalsBlind talking mobile phones60: Fully or partly designed/assembled cipher devices60D: Fire-fighting equipment in special economic zones60DA: Capital equipment in Special Technology Zones60E: Mobile phones in personal baggage77: Renewable energy items91: Agricultural equipment92: Aviation-related items98: Ships and crafts (until 2030), subject to conditions99: Aircraft leased by Pakistan International Airlines Corporation123: Goods for flood relief (certified by authorities)

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18
Q

Sale of Goods [Section 153]: Amount taxable for income tax (and WHT)

A

Income tax (WHT u/s 153) = (Value of goods (or toll manufacturing service fee) + Sales tax) * WHT rate

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19
Q

Sale of Goods [Section 153]: Withholding tax rates for each type of goods [3]

A

Payment on Account of (DIVISION 3, PART 3 OF FIRST SCHEUDLE)SupplierSale of rice, cotton seed, or edible oils1.5% (Co.), 1.5% (Ind/AOP)Toll manufacturing9% (Co.), 11% (Ind/AOP)Sale of other goods5% (Co.), 5.5% (Ind/AOP)

20
Q

Sale of Goods [Section 153]: Tax regime for each type seller [5]

A

SupplierTax RegimeManufacturing company (manufacturer of such goods)Adjustable (NTR)Public company listed on stock exchange in PakistanAdjustable (NTR)IndividualMinimum TaxAOPMinimum TaxUnlisted trading companyMinimum Tax

21
Q

Sale of Goods [Section 153]: Taxpayer

A

Resident Seller of Goods

22
Q

Provision of Services [Section 153]: Amount taxable for income tax (and WHT)

A

Income tax (WHT u/s 153) = (Value of services + Sales tax) * WHT rate

23
Q

Provision of Services [Section 153]: Taxpayer

A

Resident Service Provider

24
Q

Provision of Services [Section 153]: WHT Rates for each type of service (where to look for them?

A

Withholding Tax Rates for Services (Division III, Part III of First Schedule)Service ProviderWHT Rate (Co.)WHT Rate (Ind./AOP)Electronic & print media for advertising services1.5%1.5%Transport services4%4%Freight forwarding services4%4%Air cargo services4%4%Courier services4%4%Manpower outsourcing services4%4%Hotel services4%4%Security guard services4%4%Software development services4%4%IT services & IT enabled services4%4%Warehousing services4%4%Services rendered by asset management companies4%4%Oilfield services4%4%Telecommunication services4%4%REIT Management Services4%4%Rendering of or providing of other services9%11%

25
Q

Provision of Services [Section 153]: Tax regime

A

Minimum Tax Regime

26
Q

Execution of Contracts [Section 153]: Amount taxable for income tax (and WHT)

A

Income tax (WHT u/s 153) = (Fee for contract + Sales tax) * WHT rate

27
Q

Execution of Contract [Section 153]: Taxpayer

A

Resident Contractor

28
Q

Execution of Contract [Section 153]: WHT Rates for each type of contract [2]

A

Withholding Tax Rates for Services (Division III, Part III of First Schedule)ContractorWHT Rate (Co.)WHT Rate (Ind./AOP)Sportspersons N/A 10%Execution of contracts 7.5% 8%

29
Q

Provision of Services [Section 153]: Tax regime as per contractor [3]

A

ExecutorTax RegimePublic company listed on stock exchange in PakistanAdjustable (NTR)SportspersonMinimum Tax- Individual - AOP - Unlisted Company Minimum Tax

30
Q

Provision of Services [Section 153]: Withholding tax on retention of service charges / fee by an agent or 3rd person [2]

A

If a service provider receives payment through an agent who retains their fees, the service provider must collect withholding tax on those fees.This applies when the principal is a “prescribed person.”

31
Q

Reduced Rate Certificate for Section 153 [3+3]

A

Commissioner may allow reduced withholding tax rate:If tax deductible under Section 153 is not minimum taxUpon application and inquiryReduction cannot exceed 80%For companies:Commissioner must issue certificate within 15 days if advance tax liability is dischargedCertificate is deemed issued after 15 days, automatically processed by IRISCommissioner may modify or cancel the certificate with written reasons and a hearing opportunity

32
Q

Exemption Under Section 153(5) (Sales of Goods/Service/Contracts) [6]

A

Withholding tax not deducted for payments under:Rs. 75,000 (goods) or Rs. 30,000 (services) per financial yearExcess payments: Tax deducted from subsequent payments if annual limit exceededSale of goods by importer (COMMERCIAL):If tax paid under Section 148If goods sold in original conditionCircular 5 of 2002: Exemption certificate not required for commercial importers; written undertaking may be givenRefund of security depositGovernment payments to contractors for construction materialsAsset purchase under lease and buy-back agreement by modaraba, leasing company, bank, or financial institutionSecuritization of receivables by Special Purpose Vehicle (SPV): Tax deducted by payer is credited to the Originator

33
Q

Exemption of WHT on sale of Goods under Section 153 could be found in?

A

Clause 46AA Part IV, 2nd Schedule

34
Q

Exemption of WHT on sale of goods under Section 153 for trading houses - Clause 57, Part IV, 2nd Schedule: Criteria [6]

A

Companies operating Trading Houses with:Paid-up capital exceeding Rs. 250 millionFixed assets exceeding Rs. 300 million at the end of the tax yearComputerized records of imports and sales100% cash receipts on salesAnnual tax auditsRegistration under the Sales Tax Act, 1990Explanation:Exemption applies to Trading Houses as recipients, not withholding agents.In-house preparation and processing of food items (up to 2% of total sales) does not disqualify a company as a Trading House if other conditions are met.Minimum tax under Section 113:1% TURNOVER TAX for companies operating Trading Houses

35
Q

Concession Under Clause (45A) of Part IV of 2nd Schedule (Concessional rate, taxpayers, exceptions) [6+1+1]

A

Withholding tax rate: 1% for local sales, supplies, and services to the following taxpayers:Textile and articlesCarpetsLeather and articles (including footwear)Surgical goodsSports goodsExplanation:Reduced rate applies only to local sales, supplies, and services by the specified taxpayers.For yarn traders: 0.5% withholding tax rate on sales to the above-mentioned categories.

36
Q

Sale of Goods / Provision of Services / Execution of Contracts [Section 153]: Prescribed Person (Withholding Agent) [11]

A

Federal GovernmentCompanyAssociation of Persons (AOP) constituted by or under lawNon-profit organizationForeign contractor or consultantConsortium or joint ventureExporter or export house (for purposes of Section 153(2))Individual or AOP with turnover of Rs. 100 million or more in any preceding tax yearPerson registered under Sales Tax Act, 1990 with turnover of Rs. 100 million or more in any preceding tax yearBuilder (construction and sale of residential, commercial, or other buildings)Developer (development and sale of residential, commercial, or other plots)

37
Q

Turnover Definition under Section 153 [4]

A

Gross sales or gross receipts: Including sales tax, federal excise duty, and trade discountsGross fees: For rendering services or giving benefits (including commissions)Gross receipts: From contract executionCompany’s share: Of the above amounts for associations where the company is a member

38
Q

Brokerage and Commission [Section 233]: Withholding Amount

A

WHT on Commission under Section 233 = Commission Agreed * WHT Rate

39
Q

Brokerage and Commission [Section 233]: Tax Regime

A

Minimum Tax Regime

40
Q

Brokerage and Commission [Section 233]: Withholding Agent [5]

A

Federal GovernmentProvincial GovernmentLocal GovernmentCompanyIndividual / Association of Persons (AOP) with turnover of Rs. 100M or more

41
Q

Brokerage and Commission [Section 233]: WHT tax rates for each type of agent [3]

A

Agent (Taxpayer)[O” class=”simple-table-header-color simple-table-header”>WHT TaxAdvertising agent[O” class=”“>10%Life Insurance Agents (commission < Rs. 0.5 million/year)[O” class=”“>8%Other cases[O” class=”“>12%

42
Q

Brokerage and Commission [Section 233]: Advertising agent (deduction prescribed rate) [3]

A

Principal deducts tax:In addition to Section 153(1)(b) tax on advertising services (@1.5%)At prescribed rate on the amount calculated by the formula:Amount paid to electronic or print media for advertising services (excluding commission) x 15/85Amount calculated above x 10%Formula applies universally: Regardless of actual commission amount.Tax deduction: Serves as minimum tax on the advertising agent’s income.

43
Q

Brokerage and Commission [Section 233]: Concessions [1]

A

5% withholding tax for online marketplaces (commission to be intermediary in e-commerce)

44
Q

Brokerage and Commission [Section 233]: Exceptions - Search Section 233 in Part IV of 2nd Schedule [7]

A

Special Purpose Vehicles (for securitization or sukuk issuance): Section 233 doesn’t apply.Venture Capital Companies: Section 233 doesn’t apply.Islamic Development Bank: Section 233 doesn’t apply.Investment Schemes, Pension Funds, REIT Schemes, Provident/Superannuation/Gratuity Funds: Section 233 doesn’t apply.International Finance Corporation: Section 233 doesn’t apply.Asian Development Bank: Section 233 doesn’t apply.M/s TAISEI Corporation (under the agreement with the National Highway Authority): Provisions of ITO-2001 don’t apply.

45
Q

Advance tax for TV Plays and Advertisements (Section 236CA) [2+3]

A

Licensing Authority collects Advance Tax:Foreign TV drama serial or play - dubbed:Rs. 1,000,000 per episode (serial)Rs. 3,000,000 (single episode)Foreign actor in commercials: Rs. 500,000 per secondTax is Minimum Tax: For income arising from such drama serials, plays, or advertisements.

46
Q

Advance tax on sales to distributors, dealers and wholesalers [Section 236G]: WHT Tax rate [3]

A

CategoryFor Person Appearing on ATLFor Person NOT Appearing on ATLFertilizer - For person appearing in both Active Taxpayer Lists issued under ITO-2001 & STA-1990 0.25%N/AFertilizer - Other Wise0.7%1.4%Other than fertilizer0.1%2%

47
Q

Advance tax on sales to Retailers [Section 236H]: WHT rate [2]

A

Sale to Retailers (by Manufacturer, Distributor, dealer, wholesaler, or Commercial Importer): 0.5% (2.5% for Non-ATL)Sale to Wholesalers (by Distributor/Dealer only): 0.5% (1% for Non-ATL)

FAR 2: Theory (4 decks)

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