Budget Flash 2023
If you require any information or have queries with regard to the proposed amendments in the Finance Bill 2023, please feel free to contact us.
Income Tax
- Super Tax under section 4C proposed to apply to all persons across the board on income above Rs. 150 (m): insertion of additional three new income slabs of Rs. 350(m) to Rs. 400(m), Rs. 400(m) to Rs. 500(m) and Rs. 500(m) above to be taxed at 6%, 8% and 10% respectively.
- Re-imposition of 10% final withholding tax on issuance of bonus shares by a company (20% for non-ATL) proposed.
- Re-imposition of 0.6% advance adjustable withholding tax on non-ATL persons on cash withdrawal proposed.
- 1% increase in withholding tax rates on supply of goods other than the sale of rice, cotton seed, or edible oils, on rendering of services including service subject to a concessionary tax rate of 3% but excluding electronic and print media advertising services and on the execution of contracts excluding sportsperson.
- Increase in withholding tax rate from 1% to 5% on payment to non-residents through debit/credit or prepaid cards. (2% to 10% for Non-ATL person)
- 5% increase in withholding tax rate for commercial importers on import of goods falling in Part III of Twelfth Schedule to the Income Tax Ordinance, 2001.
- Imposition of additional tax at the rate not exceeding fifty percent on income profit and gains of a person or class of persons on account of extraordinary gains due to exogenous factors.
- Imposition of an adjustable advance tax at Rs. 200,000 at the time of issuance of work permit/visa on employment of a foreign domestic helper.
- Five years of tax holidays proposed for agro-based industries being SMEs set up on or after 1st July 2023 from the tax year 2024 to the tax year 2028.
- Export of commodities (Agricultural produce, gems, metals, etc.) through an online platform by providing a 1% concessionary final tax rate to indirect exporters proposed.
- 10% reduction in tax liability or Rs. 5 (m) whichever is lower for a builder and 10% reduction or Rs. 1 (m) whichever is lower for an individual for own construction of a house for three years.
- 50% reduction in tax liability for three years for youth entrepreneurship (maximum limit of Rs 2 million for Individual / AOP and Rs 5 million for a company). Youth is defined as a natural person up to the age of 30 years.
- Extension of Income Tax exemption for one year i.e. up to 30th June 2024 for resident persons of FATA/PATA.
- Extension for two years for the purpose of a concessionary tax rate of 20% for the banking company’s income from additional advances to low-cost housing, agriculture, and SMEs including IT & ITeS.
- Reduction of minimum tax liability on turnover from 1.25% to 1.0% for companies listed on the Pakistan Stock Exchange.
- Extension of exemption for one year granted to a person to profits and gains on the sale of immovable property or share of special purpose vehicle to any type of REIT scheme i.e. up to 30th June 2024.
- Broadening the scope of the definition of Permanent Establishment of non-resident person proposed.
- Continuation of a concessionary fixed tax rate of 0.25% for IT & ITeS exports for Tax years 2024, 2025, and 2026 proposed.
- Withdrawal of Sales Tax return filing requirement for availing concessionary fixed tax rate of 0.25% for IT & ITeS exports proposed.
- Increase in business turnover limit of a manufacturer from Rs. 250 (m) to Rs. 800 (m) to qualify for concessionary tax regime for SMEs and inclusion of IT & ITeS in SMEs definition.
- Concessionary tax rate of 20% on the banking company’s income from additional advances to the IT & ITeS sector instead of the standard rate of 39%.
- Simplified tax return form to be prescribed for IT-related exporter’s income.
- Enhancement of monetary limit of foreign remittance remitted from outside Pakistan from five million rupees to rupee equivalent of USD 100,000 for the purpose of section 111(4) which places bar on asking nature and source of unexplained income/assets.
- Waiver of 2% final withholding tax on the purchase of immovable property for non-resident individual POC/NICOP holders where immovable property is acquired through foreign remittances remitted from abroad.
Sales Tax
- Enhancement in reduced rate of sales tax from 12% to 15% proposed on supplies made by the Point of Sales retailers dealing in leather and textile products.
- Extension in exemption of sales tax to NMDs (FATA/PATA) proposed for another one year ending 30.06.2024.
- Exclusion of Production, transmission, and distribution of electricity is proposed from the purview of sales tax in accordance with the decision of the National Tax Council.
- The requirement of shop area for tier-1 retailers is proposed to be withdrawn.
- Withdrawal of exemption of sales tax proposed on edible products sold in bulk under brand names or trademarks.
- Exemption of sales tax proposed for;
- Contraceptives and accessories.
- Plant saplings, combine harvesters, dryers for agricultural products, no-till-direct seeders, planters, trans-planters, other planters, and bovine semen.
- Import of IT equipment by exporters of IT and ITeS registered with the Pakistan Software Export Board
Federal Excise Duty
- Imposition of FED on energy inefficient fans @ Rs. 2000 per fan and incandescent bulbs @ 20% ad valorem is proposed as approved by the Federal Cabinet in Case No. 01/01/23, dated 03.01.2023.
- The scope of FED on services is proposed to be enhanced by adding royalties and fees for technical services.
- In line with other laws, the Directorate General of Digital Invoicing and Analysis is proposed to be renamed as Directorate General of Digital Initiatives.
- The procedure for publication of general orders and departmental instructions and ruling of the Board on its official website is proposed to align with provisions under the Sales Tax Act, 1990.
Islamabad Capital Territory-Sales Tax on Services
- Services provided by restaurants including cafes, food (including ice-cream) parlors, coffee houses, coffee shops, dears, food huts, eateries, resorts, and similar cooked, prepared, or ready to-eat food service outlets, etc. are proposed to be taxed @ 5% if payment is made through debit or credit cards, mobile wallets or QR scanning.
- Electric power transmission services are proposed to be taxed @ 15%.
- Status of cottage industry proposed to the freelance exporter of IT and IT-enabled services. Such freelance exporters will not be required to file sales tax returns. The definition of a freelance exporter eligible for this benefit is also proposed.
- The rate of tax on IT-based system development consultants is proposed to be reduced to 15% from 16%.
- The scope of IT and IT-enabled services is proposed to be harmonized with the scope envisaged under the Income Tax Ordinance, 2001.
Pacesetters capture more financial value
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Companies taking the most action to address climate change (Pacesetters) are 1.8 times more likely to report higher-than-expected financial value from their climate initiatives, compared to those taking the least action (Observers)
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Chapter 1
Headwinds hinder high hopes
External pressures are slowing many companies’ sustainability progress, but those continuing to take action are capturing value.