The government has enhanced vigilance on the income earned in Pakistan and subsequently sent abroad without paying liabilities to local authorities taking advantage of avoidance of double taxation treaty through availing exemptions certificates. The prevent the misuse the Federal Board of Revenue (FBR) has decided to make it mandatory for all the persons intending to send income earned in Pakistan to a foreign destination should acquire an exemption certificate through online system conneted with FBR headquarters by providing lot of information instead of obtaining certificates from local tax authorities manually. The FBR on Friday issued Circular No. 05 regarding international taxes and introduced a new onlne system for issuing exemption certificates effective from July 01, 2013. The online system would be for those persons seeking exemptions certificate under Section 152 of Income Tax Ordinance, 2001 that commands every resident persons and permanent establishment of a non-resident person obliged to remit outside Pakistan incomes earned under various heads by non-resident. The circular said that most of the times the requests made by the persons were sketchy, half backed and were carrying incomplete information. There is credible evidence to suggest that the manual system of issuing notice/exemption certificates, regularly results in significant revenue hemorrhage in a variety of ways and due to multiple reasons, according to the circular. The FBR said that by this way the exemption certificates issued, that neither contested nor audited, are never put to an independent scrutiny, which factor stonewalls the entire transaction – whether right or wrong – for all times to come, which scenario, on the one hand, militates against the state interest. On the other, it fails us on our commitments made to Pakistan’s partners of Avoidance of Double Taxation Agreements, under which the government is obliged to share with them all critical information regarding all incomes that get generated in Pakistan but not taxed for any reasons or taxed at a reduced rate, the circular stated. The new online system comes into force on July 1, 2013 and no notice/application under section 152(5) lodged manually shall be accepted, processed or any exemption certificate issued after the date, the FBR said. The circular contained administrative and technical guidlines for the implementation of new online system. The salient features of administrative guidelines included: a) The persons intending to make a particular payment would lodge a notice through a prescribed electronic form, inter alia, divulging therein: i. total amount involved / nature (category) of income; ii. full particulars of the payer; iii. full particulars of the remitting banks; iv. full particulars of the recipients; and v. full particulars of the transactions i.e. performance of the economic cause giving rise to the intended payment vi. full particulars of the recipient bank vii. basis/arguments for claiming exemptions. b) commissioner would make an institutional decision on the notice after making necessary enquiries by officers holding jurisdiction over the case. c) Commissioner shall make his decision on the request for exemption available online within the prescribed time limit of 30 days. d) The exemption certificate will be valid for a 30-day period to transact the intended remittances. e) The payer/remitter will present a copy of the exemption certificate to officer of the designated bank who would log-in at FBR official website enter the unique exemption certificate number to verify it validity and veracity. The exemption certificate will not be available for verification after its per-determined life of 30 days. f) Throughout, FBR would virtually monitor the process as regard a notice/application lodged, incremental progress achieved by the commissioner towards its disposal, due diligence and rigor of analysis conducted, and rigor of analysis conducted, and robustness of arguments/grounds recorded by the commissioner in the order towards accepting or rejecting the exemption claimed. g) PRAL, operating as back-end managers of the entire process, would keep storing all data of notice / requests made, exemptions allowed, money remitted, on person-wise, head-wise, and country-wise basis to be retrieved, analyzed and transmitted internationally by the FBR. h) FBR though omnipresent throughout would intervene only where it is compellingly felt that a decision has not been made within the time specified or it has not been made in accordance with the applicable law
Posted on: Sat, 29 Jun 2013 10:59:20 +0000