How to Become a Filer and Be Included in the Federal Board of Revenue's (FBR's) Income Tax Active Taxpayers List
Benefits to Expatriate / Non-Resident Pakistanis of Becoming a Filer - 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 coming 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 and in case of filer, you have to pay just Rs.160,000. Similarly, on purchase of vehicle tax is double in case of non-filer as compared to the tax 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. In case you have not filed your tax return, under the tax laws in Pakistan 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.