The non-resident persons or permanent establishment (PE) of non-residentpersons have to go through a new cumbersome process at the tax offices toobtain certificates from the Federal Board of Revenue (FBR) for availingincome tax exemption or a lower rate of tax, the authority announced onTuesday.
The FBR has notified SRO 863(1)/2020 to issue draft amendments in theIncome Tax Rules, 2002; along with a detailed procedure for thenon-resident persons or permanent establishment (PE) of non-residentpersons seeking an exemption or lower rate certificates from the taxdepartment.
A chartered accountant informed that under income tax law, every personpaying an amount of royalty or fees for technical services to anon-resident person that is chargeable to tax shall deduct tax from thegross amount paid at the specified rates.
Tax exemption may be availed by the non-resident persons or permanentestablishment (PE) of non-resident persons by applying to the FBR’scommissioner concerned. The procedure was already available in the tax lawsfor such companies and now the system has been further streamlined andfurther checks have been placed before issuance of such exemptioncertificates.
The FBR said that an exemption certificate or a reduced rate certificateshall be issued to the non-resident person or PE of a non-resident persononly if the Commissioner Inland Revenue is satisfied that the applicant hasfurnished income returns when became due, if any, on or before the date onwhich the application or notice is made.
The applicant shall provide the details of all the contracts made for thesale of goods, rendering or providing of services or for the execution ofthe contract in Pakistan.Duty Drawback
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In another update, the Federal Board of Revenue (Customs Wing) has issued anotification SRO 859 (I)/2020dated September 10, 2020 resolving thelong-standing demand of fan manufacturers.
This SRO has revised the duty drawback structure from 1.72% to 4.396%. Itis important to note that no revision was made in the regime for FanManufacturers sector since 2009 which had resulted in the stagnation of theFan exports.
A number of such measures for various other export sectors are alreadyunder process and shall be announced very shortly, said FBR in a pressrelease, adding that these measures would result in surge of exports in allimportant sectors like Pharmaceuticals, Leather Garments, Surgical goods,Poultry, Footwear and many other important sectors.
