INCOME TAX

The tax benefits have been proposed to be extended to amalgamation of companies engaged in providing services, and not engaged in trading.

The maximum turnover for classification as Small Company has been enhanced to Rs. 250 million and further condition of maximum number of employees has been imposed at 250 employees in a year.

The benefits of set-off and carry forward of business loss would be available to a company operating hotels and registered in Pakistan or AJK against its income in Pakistan or AJK.

Only assessed losses of the amalgamating companies, other than brought forward and capital loss, would be available for set-off after amalgamation.

An irrevocable option to be taxed as single unit will be granted to 100% owned group.

A subsidiary would be able to surrender its loss for a year to its holding or other subsidiary company subject to certain conditions.

The maximum cost of investment for tax credit would be deemed to be Rs. 300,000 instead of Rs. 200,000.

Tax liability of an AOP of professional would be taxed in the same way as other AOPs.

Disposal of assets from one company to another company will be a non taxable event, if such disposal will be effected through a Scheme of Arrangement and Reconstruction under the provisions of the Companies Ordinance, 1984 or the Banking Companies Ordinance, 1962.

New rules for computation of taxable income of banking companies have been laid down in replaced Seventh Schedule.

Retailer with turnover less than Rs. 5 million would not be allowed to claim adjustment of tax deductions. Their tax rate has been reduced to 0.5% from 0.75%.

Different rate depending upon turnover has been prescribed for retailers with turnover in excess of Rs. 5 million.

Advance tax in the first year of the business of a company on the basis of its estimated quarterly accounting profit will also be required to be paid.

A large importer has been defined and its income would be taxable under normal law.

Employers have been allowed to adjust tax credits admissible while calculating tax to be deducted at source.

Income of organizations providing services of stitching, dying, printing, embroidery, washing, sizing, and weaving to exporters or export houses would be chargeable under normal law.

Payments received on account of (1) advertisement services, by owners of newspapers and magazines; and (2) sales of goods and execution of contract by a listed company will be taxable under normal law.

Manufacturers or authorized dealers of motor cars would be required to collect advance tax at the time of sale of a car @ 5% of the gross amount.

Income of CNG stations would be subject to final taxation @ 6% of the amount of gas bill.

Tax collected on the amount of electricity bills will be minimum tax on the income of a person (other than a company).

Rate of tax on dividend is now 10% for all the persons.

Rate of tax at import stage has been reduced to 5% of the value of goods including polyester filament yarn.

A reduced rate of 2% on transport services has been proposed for collection under the Section 153 i.e. withholding tax on payment of goods ad services.

The rate of tax under Section 154 i.e. with holding tax on exports will be 1% for all types of goods.

Profits and gains accruing to a person on sale of immovable property to a Real Estate Investment Trust up to June 30, 2010 will be exempted from tax.

The profits and gains derived between July 1, 2000 and June 30, 2014 by Private Equity and Venture Capital Fund will be exempt.

Exemption on capital gains has been extended till 2008.

SALES TAX

The time of supply for tax purposes would be actual time of delivery.

Input tax in excess of 90% of out put tax for that tax period shall not be allowed. The residual portion of input tax will allowed upon furnishing the statement along with the audited accounts duly certified by the auditors showing value addition less the limit prescribed on yearly basis in the 2nd month following the end of financial year.

Input tax related to acquisition of fixed assets shall be allowed for adjustment in 12 equal monthly installments after the start of production of new unit.

CBR has been required to process the refund claim within 45 days of the lodging of the refund claim.

Registered persons whose accounts are subject to audit under the Companies Ordinance, 1984, will be required to submit a certificate by the auditors certifying the payment of due tax  along with a copy of the annual audited accounts.

Retention period of sales tax records has been increased from three years to five years.

Procedure for alternate dispute resolution has been amended.

An amnesty scheme is offered through SRO 463(1)/2007 providing that on the payment of principal amount of sales tax relating to any past period by the June 30, 2007 the whole of default, surcharge and penalty will be waived.

Various items relating to food, paper, plastic and chemical industry shall be charged @ 20% whether imported or supplied (SRO 466(1)/2007).

10% value addition at import stage for the commercial importers shall be withdrawn with immediate effect and they will be required to pay sales tax on supply of imported goods on the basis of actual value addition (SRO 468(1)/2007).

CUSTOMS

Where the cumulative amount of all duties and taxes on a Goods Declaration is equal to, or less than, one hundred rupees, the same shall not be demanded.

Deferment surcharge on collection of custom duties has been reduced to 14% from 15%.

Directorate General of Valuation has been empowered to determine and notify from time to time the rate of customs-duties leviable on different goods.

Value determined by the DG Valuation would not be challengeable.

Scope of Alternative Dispute Resolution has been proposed to be limited to specific cases.

Minimum period to keep the books and record has been extended from three years to five years.

FEDERAL EXCISE

Cigarettes will be charged to duty on following rates:

Duty on motor spirit, aviation spirit, spirit type jet fuel, JP1 and other jet fuels and on Petroleum bitumen (Bitumen and Asphalt) including bituminous mixtures have been proposed to be abolished.

The bill proposes to impose condition for reduced rate of 2% on lubricating oil manufactured from reclaimed oils or sludge or sediment that if it will be sold in retail packing or under brand names the words manufactured from reclaimed oil or sludge or sediment must be clearly printed on the back.

The bill proposes to levy 5% duty on amount of charges or non-fund services provided by banking companies or NBFCs.

It has been proposed to abolish the duty on Service provided or rendered by a foreign exchange broker including any authorized dealer of foreign exchange to a customer and that provided by cable TV operators.  It has been also proposed by a notification (S.R.O. 467(I)/2007) that the services provided cable TV operators for period July 1, 2006 to June 30, 2007 be exempt from levy of the duty.

Conditional exemption from duty granted to non-aerated beverages concentrates have been proposed to be withdrawn.

The bill proposes to allow exemption from duty to Life Insurance and Health Insurance.