Your Last Chance to Become a Filer and Be Included in the FBR's Active Income Taxpayers List
Breaking News: The Tax Amnesty Program Gives You Yet Another Chance to Become a Filer
A new tax amnesty program, the Assets Declaration Ordinance of 2019, gives taxpayers yet another chance to declare their unreported assets and income without penalty. Until 30 June 2019, taxpayers can file and report previously unreported assets without surcharge or penalty. This new law is described more fully at the bottom of this article.
Earlier, the Tax Filing Date for 2018 Was Extended to 31 March 2019
Earlier it was announced that on 1st March 2019, all taxpayers who had not filed their returns on time for 2018 would become non-filers and lose all the benefits of being a "filer." However, in response to the demands of Pakistan's business community, the Government has extended the date for filing income tax returns for tax year 2018 till 31 March 2019. Previously, this filing deadline was 17 December 2018 (for individuals) and 31 December 2018 (for companies). This extension is a great chance for a taxpayer to become a filer.
Benefits to Expatriate / Non-Resident Pakistanis of Becoming a Filer and Joining the Active Taxpayers List
Why it is important for expatriate Pakistanis to file their income tax return in Pakistan
Expatriate Pakistanis often invest in real estate, stock exchange, saving schemes, mutual funds, and prize bonds. They also purchase vehicles and immovable properties. In order to make investments they also have to open an account and make certain transactions.
As per tax laws in Pakistan, any person who purchases a plot, house or vehicle has to pay double the amount of income tax at the time of purchase if he is not a “filer.”
A "filer" is a person whose name exists on the Active Taxpayers List (ATL) updated by the FBR on every Monday. The Active Taxpayers List is updated on the basis of income tax returns filed by the taxpayers. For example, if you file your tax return for tax year 2016 on Tuesday, your name will be included in the Active Taxpayers’ List on the following Monday. The list of active taxpayers is updated by FBR on Monday. There are complaints that banks' data is not updated until Tuesday, which is quite unfair.
So if you file your tax return, even if you are an expatriate/non-resident, you will receive the benefits of a filer and the tax will be reduced by more than 50%. For example, if you buy a plot valued at Rs.8.00 million, you will have to pay tax of Rs.320,000 if you have not filed your tax return, but if you are a filer, you have to pay just Rs.160,000. Similarly, on the purchase of a vehicle, the tax for a non-filer is double that paid by a filer.
The other big loss associated with non-filing of a return is that you have lost your claim of refund, as the taxes deducted on purchase of vehicle and immovable properties, in most of the cases, are adjustable. If you are a non-resident Pakistani, you are not liable to pay any tax on your income earned abroad. This means that while filing the return you can claim refund of tax paid on properties/vehicles.
As per tax laws in Pakistan, every owner of a plot measuring more than 500 square yard or owner of a property is required to file his tax return. If you have not filed your tax return, \you have violated the Pakistan tax laws.
Pakistan has double taxation avoidance treaties with many countries, which, in many cases, provide options for the persons to pay taxes in either of the countries. Tax rates in Europe and America are far higher than Pakistan's, so if you opt to pay taxes as per Pakistan Tax Laws, you may get a tax benefit.
The Concept of Filer and Non-Filer Taxpayer in Pakistan
The primary condition for becoming a filer, under Pakistan's Income Tax Ordinance 2001, is that the taxpayer’s name should appear in the “Active Taxpayers List”. Section 2(23A) of the Income Tax Ordinance 2001 reads:
“Filer” means a taxpayer whose name appears in the active taxpayers’ list issued by the Board from time to time or is holder of a taxpayer’s card.”
This means that only taxpayers whose names appear in the Active Taxpayers List are considered "filers."
The Active Taxpayers List (ATL) is prepared by the Federal Board of Revenue and uploaded on the official website of the Federal Board of Revenue. Anyone can download the ATL from the following link:
Formerly, the Active Taxpayers List was updated on the 15th of every month. However, considering the problems faced by taxpayers, the Active Taxpayers List is updated weekly. At 12.00 every Sunday the list is updated and uploaded the next morning on Monday.
All banks, government departments and other withholding agents download the said list on a weekly basis and treat taxpayers as ‘filers’ and ‘non-filers’ according to this list.
How to Know That You Are a Filer and Your Name is on the Active Taxpayers List (ATL)
You can check whether you are a filer or non-filer by:
a. Downloading the list from the FBR website.
b. Typing ATL and after one space your CNIC No. (without dashes) and sending it to 9966. In a minute you will receive a message from 9966 that your name is that of an active taxpayer. For example write "ATL 3520211111111".
c. Visiting the official website of e.fbr.gov.pk and from "Search Taxpayers" tab selecting "Active Taxpayers(IT)". In the new window type your CNIC No. and the image and press the button "Submit". You will know your status.
How to Become an Active Taxpayer and Filer
If you want your name and NTN/CNIC to appear in the Active Taxpayer List, you have to submit your last income tax returns. Persons who have not submitted their returns for tax year 2014 have been dropped from the list. However, if they file their return, their name should appear on the Active Taxpayers List uploaded on the website of the Federal Board of Revenue on the appropriate morning.
If you file your return on Saturday, September 19, 2015 for tax year 2015 by using the online facility of FBR, your name will appear in the version of the Active Taxpayers List available on the FBR’s website on Monday, September 21, 2015. Those who file manual returns always find themselves in trouble. Submitting the return online is easier and more convenient.
This is the position that is available in the statute book. However, there are many cases where taxpayers who filed income tax returns manually for tax year 2014 well within the time limit, did not have their names appear on the Active Taxpayers list. They were not legally required to submit the return online. The Federal Board of Revenue should take necessary action to address this grievance of bona fide taxpayers.
Disadvantages of Being a Non-Active Taxpayer and Non-Filer
If your name appears in the active taxpayers list, you will be treated as a ‘filer’ and pay lower withholding taxes. Some specific advantages are given below:
- You will not be subjected to the withholding tax of 0.3% on all banking transactions (which will be 0.6% after 30.09.2015). This tax is different from the tax mentioned in No.5 below.
- You pay 50% less tax on the purchase of vehicles and immovable properties.
- You pay 50% less token tax.
- On dividends, filers are charged tax @ 10% and non-filers @ 15%.
- On cash withdrawals of more than Rs.50,000, the rate for filers is 0.3% and for non-filers 0.4%.
- On winning a prize or prize bonds you have to pay more tax if you are a non-filer and not an active taxpayer.
Taxpayers should file their returns well within the statutory time period so as to avoid any penal action, as there are heavy penalties for non-filing or late filing of return. It may be noted that in case of late filing the penalty is equal to 0.1% of the tax payable for each day of default subject to a maximum penalty of 50% of the tax payable, provided that if the penalty worked out as aforesaid is less than twenty thousand rupees, or no tax is payable for that tax year, such person shall pay a penalty of twenty thousand rupees. This means that the minimum penalty is Rs. 20,000.
Easy Steps to Become an Income Tax Filer (Active Taxpayer)
In order to become a filer and included in the active taxpayers list (ATL), a person needs to know if they already have an NTN or not. Even if you have never applied for an NTN, the FBR system may show you as a registered taxpayer, as the FBR often obtain data from different organizations and assign an NTN to a persons on their own.
1. To find out if you have an NTN, visit this website and put in your CNIC number.
2. If you don't have the NTN then visit this website and get yourself registered under Registration for Unregistered Person. Fill in the simple form and follow the procedure to log into the IRIS system.
3. You will find "Registration Form" in the draft folder. Complete the form and submit it. You will get your NTN in an hour or so.
4. After getting the NTN you will have to submit your tax return for tax year 2017 to become a filer.
5. Persons already having an NTN but no username and password for the IRIS system are required to obtain the same by clicking on the link "E-Enrollment for Registered Person."
6. After obtaining the username and password you will be able to submit your tax return for 2017 and you will be a filer on the next coming Monday. This means that if you have filed your return on 8th March 2018 (Thursday), you will be filer as per FBR data by 12th March 2018 (Monday). However, the Banks update their list on Tuesdays and Wednesdays. The FBR should change to a sysstem where they update the lit of active taxpayers daily, to prevent inconvenience to their clients.
Common Queries from Persons Wanting to Become Filers/Active Taxpayers
1. Can a government official having income less than Rs.400,0000 become a filer?
Answer: Yes, of course. A Government official whose income is less than the taxable limit can also become filer.
2. Can a salaried person who did not have an NTN number after the 2018 budget become a filer?
What would be the status of a salaried person who was paying tax from his salary but did not have an NTN number after budget 2018, when the threshold is increased to Rs.1,200,000. Now how he can become a filer?
In Budget 2018 the Government has increased the taxable limit from Rs.400,000 to Rs.1,200,000. This amendment in Income Tax Law is applicable on the income earned after 01.07.2018. This means, for tax year 2018 the limit for taxable income is Rs.400,000 and it will be Rs.1,200,000 at the time of filing of return for 2019. Whatever your income is, you can file a tax return. Even a person having no source of income in Pakistan can file tax return. Such house wives and expatriate Pakistanis file their return to get the benefits of a filer.
A person who is earning below the taxable limit income can file a return. For example if your return is Rs.360,000 you can file a return declaring income of Rs.360,000 without payment of any taxes.
3. What are the initial requirements for starting the process of filing your return?
Answer: Filing a tax return is a cumbersome job. You may wish to acquire services of a professional like us. A professional will need the following details/data to make you a filer:
- Scanned copy of your CNIC
- A cell No. of any Pakistani network. It is not necessary that the No. is in your name. It may be a No. of your family member of your friend (Not used before for getting NTN).
- Total salary earned during the period 01.07.2016 to 30.06.2017.
- Your bank statement/(s) for the period 01.07.2016 to 30.06.2017
- Certificates from your bank branches indicating the tax deductions they made during 01.07.2016 to 30.6.2017.
- Details of assets, owned by you as on 30.06.2017 e.g. value of shares, purchase cost of properties and vehicles etc.
4. How long does it take to become a filer?
Answer The Active Taxpayers List (ATL) is updated every Monday. So if you want to become a filer, file or get your return filed prior to 12.00 P.M. Sunday.
New: Tax Amnesty Scheme 2019 for Pakistani nationals (Assets Declaration Ordinance 2019)
The Federal Cabinet has approved the tax amnesty scheme under the title "Assets Declaration Ordinance 2019". This Ordinance will be promulgated with the approval
The Government of Imran Khan has announced its Tax Amnesty Scheme. Salient features of the Tax Amnesty Scheme 2019 under the title “Asset Declaration Ordinance” are as follows:
Its purpose is to legalize the assets, income, expenditures and sales which were not disclosed to the Federal Board of Revenue and on which tax has not been offered. If a Pakistani National has huge assets worth millions of rupees but has not declared the corresponding income against these assets, he can benefit from this tax amnesty scheme. Persons can benefit who have filed income tax returns/wealth statements but have not declared the income/asset/expenditure incurred. An undeclared asset means any asset which is not declared or whose value is understated and it also includes Benami assets.
Types of Assets Covered by the Amnesty Scheme
The scheme overs both foreign & local movable and immovable assets owned by a Pakistani, undeclared sales, expenditure and income. The following types of assets are covered:
- Those of a person who is not registered with income tax and has acquired certain amount of properties.
- Those of a person who is registered with income tax but his income does not match with his properties/assets. For example, if the properties’ worth is Rs.20,000,000 and his income declared for the last five years is just Rs.5,000,000, the person is required to file declaration under this scheme.
- Any asset whose value has been declared at a lower price.
- Property is purchased from a gift received in cash and not through proper banking channesl.
- Properties bought by overseas Pakistanis using funds not transferred to Pakistan through proper banking channels.
- Sales which were not declared.
- Expenditures which were not declared.
If an overseas Pakistani has routed his income through proper banking channel and acquired the assets out of this money, he is not required to file declaration under this scheme, simply for the reason that he has not filed wealth statement as non-resident Pakistanis are not required to file wealth statement.
Undisclosed assets acquired till 30.06.2018 are covered under this tax amnesty scheme. Banami assets acquired till the date of filing of declaration are covered.
The benefit of this scheme shall be available in the cases where the notices have been issued by the Officers of FBR or even order is passed and matters are pending in appeal before the Commissioner (Appeals) or Tribunal. Where no appeal is filed, the person can pay the outstanding demand without payment of default surcharge and penalty.
Valuing of Assets
- Valuation of an immovable asset for Tax Amnesty Scheme shall be made by enhancing the value of the asset by 50% as compared to the FBR rates specified by FBR for different localities. For example, if the value of the asset as per FBR rates is Rs.10,000,000, it should be taken at Rs.15,000,000 for the purpose of this scheme and tax @ 1.5% shall be paid on this asset. However, this scheme is silent with regard to immovable assets acquired on installments. What would be the treatment in such cases? Whether the FBR/DC rates should be adopted that was prevailing at the time of purchase of property or at the date of filing of declaration? It needs clarification.
- In cases where no FBR rates are available for remote areas, the value of assets described by DC should be enhanced by 50% and tax @ 1.5% shall be paid on these assets.
- Construction value shall be determined as the FBR/DC rates, as the case may be.
- All other assets, local or foreign, shall be valued at the fair/open market value at the time of filing of declaration. In case of foreign assets, the rate of exchange shall be taken that is prevailing at the time of filing of declaration.
- A person can enhance the value declared in earlier declaration of undisclosed assets, If a person is satisfied that the value declared for 2018 is correct, no action is required under this Tax Amnesty Scheme, 2019.
Deadlines Under This Scheme
To avail the benefit of this Tax Amnesty Scheme, the tax has to be paid by 30.06.2019 and no tax credit of earlier refunds/tax deductions shall be available. This means, if a person purchased a property of Rs.10,000,000/- on which tax @ 1% is deducted at Rs.100,000, at the time of purchase, the credit if the tax deducted at source shall not be available.
After the deadline, i.e. 30.06.2019, the benefit of this scheme can be availed by filing declaration along with payment of principle amount of tax and default surcharge as prescribed under this Amnesty Scheme.
Payments Under the Amnesty Scheme
The tax in respect of foreign assets shall be paid in foreign currency. In case of cash declaration of foreign currency, the same has to be deposited in bank account and evidence in this context should be enclosed with the declaration.
In case of short payment of tax or default surcharge the benefit of this scheme will not be available and it would be considered as if no declaration under this scheme was filed.
Though the benefits of this scheme in the shape of reduced rates of tax are not available in the cases where the assessments finalized by the Inland Revenue Officers have attained finality, in such cases the persons can pay tax of principal amount without payment of default surcharge and penalty.
Such assets, income, expenditure or sales, in respect of which Declaration is filed under this Tax Amnesty Scheme, the person is entitled to declare the same in his income tax return/ wealth statement. This means that the date of filing of return/wealth statement shall be extended but no notification/circular till date.
Conditions for Using the Amnesty Scheme
The conditions for using this scheme are:
- The tax shall be deposited along with the Declaration. The tax in respect of foreign assets shall be paid in foreign currency as per rules made by State Bank of Pakistan.
- In case of cash, the same should be deposited in bank and it should remain in the bank account till the last date of filing of declaration.
- In case of foreign currency, the same should be deposited in foreign currency account and should remain in bank till 30.06.2019.
- This Tax Amnesty is not for:
- Public Officer bearers e.g. government officials, MPAs/MNAs etc.
- Public Limited companies.
- Any amount acquired from any criminal offence/fraud.
- God/precious stones, bearer prize bonds, bearer shares/securities etc.
- Proceedings pending in High Court/Supreme Court.
- The particulars of this declaration shall be confidential.
- Mis-representation of any fact will make the declaration as void and it will be considered as it has not been filed at all.
- The tax rates in respect of undisclosed cash/movable assets/expenditure is 4% of the value.
- Value of domestic immovable properties shall be tax @ 1.5% subject to enhancement of value by 50%.
- In case of foreign liquid assets the rate of tax is 6%.
- In respect of undisclosed sales the rate of tax is 2%.
The rate of default surcharge shall be:
- If the declaration is filed by 30.06.2019 = 0%
- If the declaration is filed by 30.09.2019 = 10%
- If the declaration is filed by 31.12.2019 = 20%
- If the declaration is filed by 31.03.2020 = 30%
- If the declaration is filed by 30.06.2020 = 40%
Why You Should Take Advantage of the Tax Amnesty Scheme 2019
- If you don't, a higher rate of tax shall be applicable. For example, on the concealed income of Rs.10,000,000 the tax payable is Rs.2,080,000 + 100% penalty, whereas under the Tax Amnesty Scheme, you just have to pay Rs.400,000 in cash of cash and in case of immovable property, the rate is even lesser. This means that almost 90% reduced rates are applicable.
- You will get peace of mind and will be able to give more time to your business.
- You will avoid unnecessary litigation and issuance of notices by FBR.
- Contributing towards the national exchange is your national duty.
A spotlight on Tax Amnesty Scheme 2019
Presentation on Tax Amnesty Scheme
This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.