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Befiler Revolutionizing the Tax Industry

Company Incorporation By a Non-US Resident:

The best way to expand your business to any offshore territory, for instance in the United States of America (USA) is to open up a company. You can easily open a company in USA, and still, be able to operate it as a non-resident.   

There are certain factors that you will need to focus on while incorporating your USA-based Company either as LLC or C-Corp. A few of them are incorporation, compliance, bank account opening, and meeting up the state and federal requirements so that after this you can legally initiate and operate your USA-based business.        

Globalization has led to the operation and management of multiple businesses across the globe. This provides sufficient opportunities for entrepreneurs to further scale their business and leverage their market reach.  

Meanwhile, the USA has a big market of businesses and an enabling business environment. You can enhance your business reliability, market access, and investments by incorporating your company into the USA.    

Which company to form LLC or C-Corp? 

Limited Liability Company (LLC):

LLC protects its members and owners from being held personally liable for the operations and debts of the business. The LLC equals the business structure of partnership or sole-proprietorship with the advantage of increased risk protection.    

Like the sole-proprietor and partnership company owners, members of the LLC pay their taxes as per the proportion of their personal income. This is called a “pass-through taxation structure”. Many small business owners opt for LLCs for their simplicity and flexibility. 

Company Corporation (C-Corp): 

C-Corp is a type of tax classification which is available to both types of corporations including LLCs and corporations. C-Corp is not a type of business entity. Although it is more frequently used by corporations.  

C-Corp has no broader restrictions on shares ownership. There are no limitations to the total shareholders’ numbers. Businesses inside and outside of the US can also obtain ownership. C-Corp is considered to be the most suitable business framework for collecting huge amounts of capital from a bunch of investors.  

Pros and Cons of LLC Incorporation: 

Pros: 

1. Pass-through taxation. 

2. Limited Liability 

3. Fewer Regulations 

4. Greater Flexibility 

Cons: 

1. Can’t issue shares of stock 

2. Difficult to source investment 

3. Retention of earning is more difficult 

4. Owners pay self-employment tax 

Pros and Cons of C-Corp Incorporation: 

Pros: 

1. Limited Liability

2. Unlimited Shareholders 

3. Great for Equity Financing 

4. Lower maximum tax rate 

Cons: 

1. Double Taxation 

2. No personal write-offs 

3. Stricter rules and regulations 

4. More expensive 

Requirements in setting up a Corporation in the US: 

After deciding on forming a company from available options let’s discuss the few basic requirements needed during the procedure: 

Choosing a company name: 

There are a large variety of name selections available on the internet or you can propose your own desired name. But before selecting a name, double-check its availability.    

Hiring a registered agent: 

An agent is hired which could be a person or agency who must possess a physical address in the business hosting country. That designated entity must be available during office business hours and will comply with official legal and state documents for the company.    

Provision of important documents: 

You will need to provide the names, and addresses of the concerned people involved i.e. officers, directors, members, etc. 

Procedure after forming the corporation?  

After forming the company there are still some tasks left to be completed which we will discuss below: 

Arranging a US-based Business Address:

If you would like to receive commercial mail, customer mail, etc. to an address in the United States, or if any bank you contact requires a separate physical address in the United States (which is not the same as your registered agent), you need to arrange “mail forwarding” and/or “virtual office” service. 

U.S. bank account opening: 

You need to open up a U.S.-based bank account if you want to transact in US$. Currently, the geopolitical situation around the globe has become uncertain to an extent that it leads to the exercising of strict compliance and regulatory laws. But nevertheless, there is hope as there are other various options available on the table that could turn the table and open up ways for easy proceeding.        

Selecting a State: 

During the procedure of forming the company, you will have to select a state in which your proposed company will be operated. For a conductive and enabling business environment, it is considered to select a state which has minimum tax rates. Delaware, Nevada, and Wyoming are popular choices for registering your proposed company as they are best known for being quite economical states. 

Conclusion: 

Registering a company on US soil is neither difficult nor a rocket science at all. Every entrepreneur residing outside the US has always been willing to set up his/her venture in the U.S. because of the big market and economy. Befiler provides LLC and C-Corp incorporation, EIN registration, US bank account opening, and federal and state tax filing services. Reach out to us through email ([email protected]) or Whatsapp in order to set up your business abroad while residing in Pakistan or elsewhere.

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Tax News and Social Trends

FBR’s measures to facilitate people

Primary source for a country to generate public revenue is by collecting taxes and fees with an aim to invest it in human capital and infrastructure of the country. The core objective of any tax collection authority is to optimize public revenue by making tax collection process easier and smarter. Federal Board of Revenue (FBR) being the primary tax collection authority in Pakistan is busy in doing the same by providing quality services to its taxpayers and making their life easier.

According to the progress report issued by Ministry of Finance, FBR has performed up to the mark by creating an enabling and accessing environment for the taxpayers. The measures taken by FBR in order to increase revenue is unprecedented in the history of Pakistan.

The Ministry of Finance highlighted the measures which have been taken by the Inland Revenue and few of them given as follows:

Track and Trace System:

A track and trace system has been introduced which will cater multiple sectors including tobacco, sugar, cement, beverage, fertilizer. The purpose of this system is to increase and optimize tax revenue, decrease fabrication, avoiding goods smuggling through robust implementation on national level and electronic control system by affixing tax stamps to various products at the production stage.  By implementation of track and trace system FBR will have a strong control over supply chain infrastructure of the manufactured goods.

Point of Sales (POS):

POS is an online invoicing system, it digitizes the economic transactions, and it also caters to the growing needs of digital economy. It is a real-time information and data processing system that connects the tier-1 retailers with FBR database through internet. The purpose of the system is to ensure that the sales are reported in real-time to the FBR and are subjected to monthly filing of sales tax returns.         

Automated Issuance of refunds:

For the convenience of taxpayers, a centralized automatic reimbursement system has been introduced which does not require manual application and verification. It issues refunds directly to taxpayers’ bank accounts without the need for face-to-face discussions with tax authorities. Steps have also been taken to activate the legal framework by enacting relevant provisions in tax laws.

Single Sales Tax Portal/Return:

FBR has launched the One-Stop Sales Tax Portal. Sales tax returns for December 2021 were filed in January 2022 under this new portal. While pursuing its vision of facilitating taxpayers and ensuring the ease of doing business through automation, digitization, and minimizing human interaction with taxpayers. This facility will allow taxpayers to file a monthly sales tax return instead of multiple returns on different portals. This will significantly reduce compliance time and costs. The system will automatically distribute tax payments to sales tax authorities along with the input tax adjustment, eliminating the need for payment reconciliation and transfer.

E-hearing:

Online hearings are designed to provide free tax administration, which results in reduced compliance costs and save taxpayers’ valuable time. Provision of E-hearing is covered under section 227E of the Income Tax Ordinance, 2001.

E-filing of appeal:

An online appeals procedure has been made available to taxpayers. However, there was a lack of legal provision to allow this, as introduced by section 127 of the Income Tax Ordinance 2001.

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Pakistan's Tax Affairs

Reviving Sicked Industrial Sectors through granting Tax Incentives

On last Friday the Federal Board of Revenue (FBR) revised the incentives allowed for renewal of poorly governed and managed industrial sectors.

An SRO has been issued Circular No. 13 of 2022 by the FBR on 07-04-2022, to put weight and emphasize the amendments made in the Income Tax Ordinance 2001, which was put up via Income Tax (Amendment) Ordinance 2022.

The FBR added that, to kickstart renewing of the ill-fated industrial sectors, a new section 59C has been inducted in the Income Tax Ordinance 2001, which becomes Income Tax Amendment Ordinance 2022. Through the description of this ordinance, the acquiring company would be allowed to adjust their concurrent year losses and put ahead examined business losses while excluding the capital loss of the acquired company incurring the rouged industrial sector through acquisition of its majority share capital.         

The acquiring company would be able to adjust their said losses until the tax year 2026 and for a time period of up to three years.      

In case of failure to renew the ill-fated industrial sector till 2026, it will include the acquiring company to reroute the adjustment of losses in the previous three years and present income to be taxed which was sidelined due to loses adjustments of the acquiring company in the tax year 2027.

Referring to the subjective conditions in sub-section (2) of the section 59C of the Income Tax Amendment Ordinance 2022, the acquiring company is entitled to adjust above mentioned sort of loses in the context of share capital acquired.      

If there is any leftover of loss remained intact by the acquired company till the end of tax year 2026 then it will not available to the acquired company for furtherly setting off the losses in the tax year 2027 against their own income, although in accordance with the section 57 of the ordinance the acquired company can carry forward its losses.  

Only the acquired company can benefit from this section, other than this amalgamation or merger companies can not be benefitted from this section.

In this section, for ill-fated industrial sectors, their losses for adjustments are available in this scheme. 

Maximizing the production is the antidote for renewing the ill-fated industrial sector and that capacity should be adopted before getting the company sicked.

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Pakistan's Tax Affairs

Topic: Companies: Its types, basics, purpose and registration benefits.

People builds companies to make wealth, contributes to the society, generates employment and ultimately contributes to the country’s GDP. 

Companies are always built in a stepping stone process so no company can be built in an overnight time period. As it has people, stakes, and liabilities on its shoulders so it does takes time.

Companies’ business can relate to any nature, it is not dependent upon which type of companies can be.       

There are many types of companies are there in the world but I have listed few of them here to discuss about which is listed below:

  1. Sole Proprietorship.
  2. Single Member Company (SMC).
  3. Private Limited Company.
  4. AOP/Partnership.
  5. Limited Liability Partnership (LLP).
  6. Non-Profit Organization (NPO). 

In the following section I have discussed in details about the above-mentioned companies.

Sole Proprietorship:

Sole proprietorship is registered if your company comprises of a single member in order to get recognized by either your own name or your proposed desired name in the marketplace. It is not a company rather; it is a proprietor firm. It is such a form of business in which the owner has complete grip on the business, is liable for all the profit and loss incurred upon the business, and no one has the authority to interfere with the business owner’s decision.  The owner has to file the income tax returns in person of the company and also to pay the company taxes. Tax rates are lower for this type of business reasoning to the unlimited liability of the owner. In case of any adverse situation like financial failure or debt crisis, then the owner has to shoulder all the load

How you can avail benefits by registering your sole proprietorship firm?

  • By registering your sole proprietorship firm, you will have all the control, all the liability and debts from your business.
  • By registering your sole proprietorship firm, you will be the final decision maker and no one will have interference in your business matters.
  • By registering your sole proprietorship firm, you will pay your business taxes through your personal income tax return.
  • By registering your sole proprietorship firm, you will be benefitted from lower tax rates.

Single Member Company:

‘SMC’ is abbreviated for Single Member Company. A single member private company is comprised of only one member and director and that will avail privileges of limiting the liability. The owner and director’s capital is the only liability. SMC has a separate legal entity. That one member will be benefitting from the entire operations of the company. SMC can enjoy corporate tax benefits to a greater extent. The idea of single member company has supported the sole proprietor in a manner that it enabled them to equip the corporate status and also to limit their proprietorship liability.  

How you can avail benefits by registering your SMC company?

  • By registering your SMC, the existence of your company would not be ceased on the death of yours and/or a member.
  • By registering your SMC, you will have to pay lower corporate tax.
  • By registering your SMC, you will have a complete control over how the business is operated. You will make all business decisions independently and will receive the full share of distributed profits.
  • By registering your SMC, you will not have to deal with shareholders or a board of directors as a company would be required to do so.

Private Limited Company:

Private limited company is registered if your company comprises of having more than one member in order to get recognized by your desired name in the market. A private limited company is comprised of members which are limited to 50. Therefore, members are not the parameter to decide the upper limit or lower limit but the shareholders are. This type of company is required to get registered with at least two shareholders, two directors, and a CEO. Whenever registering the company, the capital amount has to be declared by the directors, the declared amount must be divided upon the ration of 50-50% and the same declared amount must be deposited from the directors’ personal account to company account. 

How you can avail benefits by registering your private limited company?

  • By registering your private limited company, your company will have a separate entity than you and your directors. Loss of any person will not affect the company in return.
  • By registering your private limited company, your company will have limited liability in simple words in case of any loss incurred to company, you will only lose your company share but will not compensate it with your personal assets.
  • By registering your private limited company, the company ownership transfer is easy you can transfer your company ownership from one person to another and also from yourself to others.
  • By registering your private limited company, your company would have higher rating scores than other form of companies.   

 AOP/Partnership:

AOP/partnership is registered in order to operate and manage any business with minimum 2 persons and maximum 20 persons. Partners in this form of business, have conjoint business relationships and they tend to share the business earnings with each other. Persons in the association/partnership have to provide the business capital, shoulder the loss and profit based upon the mutual agreed terms.  Partnership taxes are paid by the general partners in their personal tax returns, with respect to the proportion of share as per their agreement. Persons individually are associated partners and collectively they are partnership firm.

How you can avail benefits by registering your AOP/partnership company?

  • By registering your AOP/partnership company, two or more concerned persons will be agreed to share the business overall.
  • By registering your AOP/partnership company, you can kick start small and medium size start-ups.
  • By registering your AOP/partnership company, all the authorized partners are bound to the partnership deed and agreement signed therein.
  • By registering your AOP/partnership company, it’s relatively inexpensive to set it up and subjective to fewer government regulations. Partners will pay personal income taxes on their share of profits. 

Limited Liability Partnership (LLP):

LLP is registered to bridge the gap between small and medium enterprises such as sole proprietorships and partnerships. Every partner in the LLP has their own limited liability, each partner is not responsible for partner’s wrong doing and forgery.  It allows people to organize their business in a flexible, innovative, and efficient manner. An LLP is a separate legal entity. Which reflects that liability of each partner is limited to his/her ownership in the LLP. Partners in an LLP can appoint a Partner who will be responsible for all administrative matters. If the partners opt not anybody, all partners may have to act as a designated partner from time to time.

How you can avail benefits by registering your LLP company?

  • By registering your LLP company, the company will become separate legal entity in which each partner is limited with their ownership.  
  • By registering your LLP company, each partner will have a limited liability not any partner is liable for other’s conduct.
  • By registering your LLP company, your company will only be complied with single taxation layer.

Non-Profit Organization (NPO):

NPO is registered for collective, public, or social benefit. An NPO can also be called non-business entity, or not-for-profit organization, or nonprofit institution. A non-profit organization is subject to any revenues that exceed expenses must be committed to the organization’s purpose. The types of organization which can be NPO includes: political organizations, schools, business associations, social clubs, consumer cooperatives and etc. NPOs by their nature of the entity are tax exempted by the government, some may require exemption, and few entities may operate without seeking tax exemption status.    

How you can avail benefits by registering your NPO company?

  • By registering your NPO company, your company will be seen as accountable, trustworthy, and opened for every person who has invested time, money, and faith in your company.
  • By registering your NPO company, your company will be accountable to the donors, volunteers, sponsors and the public communities.    
  • By registering your NPO company, your company’s operations will be financed through donations, fund raising programs, sponsors, investments, and public confidence.  

If you have any query regarding the registration of any company or you are interested in getting your proposed company registered, then you are at the right platform. Befiler is offering company registration services conveniently while at the comfort of your home. Now you can register your desired company without any hassle and further turning to anywhere else.  

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Befiler Revolutionizing the Tax Industry

Intellectual Property: Interesting and Relevant Things to Know About

Registering the company is not enough unless you tend to fulfill other factors which are of high need and importance for your company, market, and people.

Whenever you are about to register your company, consider other factors too during the process. For any type of company, in order to make it unique, to make product and service inimitable, and to make your personal work secure. All you need is to register a trademark, copyright, and/or patent for your company under multiple and different scenarios.

Intellectual property is the most valuable, sought-after factor, and one of the most demanding intangible assets any company can own and already have. The world is becoming more cautious of Intellectual Property. The business and company owners in the current era are rapidly sensing that Intellectual Property plays a pivotal role and is considered a key success factor in the achievements, accomplishments, and brand value of the company.

The business and company’s stakeholders must focus on the significance of intellectual property in order to effectively preserve the company’s assets. Spending on intellectual property will guarantee the core resources of a company from being stolen, imitated, and exploited by its competitors. By complying with intellectual property, a company could increase its brand value, brand equity, and also secure its brand reputation for the future.

You can empower your Business by Protecting your Brand:

A brand can be a name, logo, design, symbol, slogan or any other element that can assist people to identify a particular company or individual and differentiate it from other products. It also refers to the overall experience a customer undergoes when interacting with a business.

Brand helps people identify a particular company, product, or individual. The brand has a power that leaves a lasting impression on your consumers. It is not just about the physical appearance or visual identity of a product but it is the process of creating a strong, positive perception of a company, its products or services in the customer’s mind by combining such elements as logo, design, packaging, tagline, price, and a consistent theme throughout all marketing communications. Effective branding helps companies differentiate themselves from their competitors and build a loyal customer base.

You can secure your brand by registering Intellectual property rights. Intellectual property rights prevent others from stealing your brand, your identity and imitating your work and stop others from getting a free ride on the back of your success. Protecting your brand can be of more value than you may realize.

Intellectual Property Types:

The intellectual property is divided into following three categories:

  • Trademark
  • Copyright
  • Patent

Trademark:

The word ‘Trademark’ proportionally is resonated to Trade = Business and Mark = Identity. Trademark recognizes and differentiates your product or service from one party to the other party. Trademark is registered on behalf of your goods or service in order to protect your brand name, logo, tagline and that in return it will provide you legal protection against all those who will try to replicate, copy, and counterfeit your brand. Trademark is registered for any individual, AOP partnership firm, Private Limited Company or any limited company.  

Copyright:

Copyright grants the possession of “rights over what you made is equal to what is actually yours”. It facilitates you with the exclusive rights on being an owner to perform and authorize any work of your choice like reproduce, publish, copy, broadcast etc. Copyright advances the progress of knowledge and new work by giving authorship to one. Copyright registration is inclusive of categories which involves; literature, art, cinematography, recordings, and etc. Copyright registration guarantees proprietorship over any produced asset which in return provides you with the authority that no other person than you can produce or copy without your permission.

Patent:

Patent facilitates you with the exclusive rights to stop others from inventing, manufacturing, copying, selling or importing your invention without granting of your permission. Only the patent owner can decide who or who can’t harness the patent invention for a limited time in which the patent is protected. The patent protection is guaranteed for a time period of 20 years. The patent owner could sell the patent rights to others in a bid to utilize the patent invention under the mutually agreed terms and conditions.  Once the patent expires the invention becomes the public property.

Intellectual Property Registration:

Following are the documents which are required for the processing and registration of Intellectual Property:

Trademark:

  • TM-1 in duplicate
  •  Six representations affixed on a durable paper of 13×8 inch
  •  CNIC of the Trademark Holder/partners
  •  Specification of goods or services sought to be protected in any class
  •  Residential address of holder or Letterhead of the Business
  •  Other Information or Documents as required

Copyright:

  • Two Copies of work
  •  Demand Draft / Pay order of fee as applicable per work
  •  CNIC of the Copyrights Holder / partners
  •  NOC from publisher if work has been published and publisher is different from applicant
  •  Search certificate from trademark Office if the work is capable of being used on goods
  •  Residential address of holder or Letterhead of the Business
  •  Power of attorney
  •  Other Information or Documents as required

Patent:

  •  Form P – 1 or Form P – 1A application without priority
  •  Form P – 2 or Form P – 2A application with priority
  •  Form P- 3 for provisional or Form P- 3A for complete specification)
  •  Patent Specification
  •  Drawing(s), if any
  •  Demand Draft / Pay order of fee as applicable per work
  •  Form P – 28(power of Attorney) if any
  •  Priority document (for convention application)
  •  CNIC of the Copyrights applicant
  •  Other Information or Documents as required

Benefits of Intellectual Property Registration:

Following are the benefits which you will avail after registering any of the mentioned intellectual property:

Trademark:

  • By registering your trademark, you will have exclusive identity rights to exercise in Pakistan; by this no one can take advantage of your brand.
  • By registering your trademark, you will have legal protection, and it will serve as evidence that you are the actual owner of your product or service.             
  • By registering your trademark, in case of any trademark infringement you won’t have to prove your ownership as you are the rightful owner of your product or service.
  • By registering your trademark, you will avoid intellectual property right issues and conflicts in the future.   

Copyright:

  • By registering your copyright, it will enable you to put the matter in the court against those who knowingly stole and/or copied your stuff.
  • By registering your copyright, only you will have the authority to reproduce your work.
  • By registering your copyright, you can charge the compensation amount against those who breach your copyright.
  • By registering your copyright, you will have the authority to reassign the work to whomever which were previously assigned to somebody.  

Patent:

  • By registering your patent, only you will have the exclusive rights on your invention whatsoever it could be.
  • By registering your patent, you will be able to sell your patent invention rights to others and in return you can earn from it.
  • By registering your patent, it will enable other producers in the society to emphasize more on innovation.
  • By registering your patent, only you will be making profit on your invention and also will be preventing others from making profit on your inventions.   

Best ways to Protect Intellectual Property:

How can someone protect its Intellectual property rights against possible violation?

Here are the best ways to protect Intellectual Property:

  1. Keep your creation or innovation under wraps until its ready for launch
  • Sign a confidentiality agreement before sharing
  • crucial information with anyone to ensure IP rights
  • Apply for Registration of Intellectual property
  • without delay
  • Register your business and domain name as soon as possible
  • Avoid Joint ownership for Intellectual Property Rights, it may create complications for the business
  • Consult Intellectual Property Expert

You can register your desired intellectual property with Befiler. As Befiler’s professional consultants are ready to serve you with their professional consultancy services.  

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Tax News and Social Trends

Tax Amnesty Scheme 2022

Last Thursday, 3rd of March 2022, the Federal Government initiated a tax amnesty scheme for the industrialists to establish new industrial units. This Tax Amnesty Scheme had been put on the table through the Presidential Ordinance. 

In the context of this Tax Amnesty Scheme, the government through the Federal Board of Revenue (FBR) will not question the sources of funds for establishing the industrial units. Instead of this, the government will give industrialists a green signal to whiten their black money by investing their money in the manufacturing sector at a tax rate of 5%.  

The Tax Amnesty Scheme will include undisclosed funds, which may belong to crime, corruption, money laundering and other sources. Furthermore, those funds which are from any department or court proceedings will not be made a part of tax amnesty scheme.  

The minimum amount which will require as an eligibility criteria for the people involves: 50 Million. Particularly, those people who want to avail the tax amnesty scheme. They have to declare the amount in the upcoming tax year. 

Those eligible people who will avail and invest through this scheme, their investment shall ultimately start into commercial production and will be processed by June 30, 2024. 

The amount invested under this scheme will not be refundable or adjustable in the tax declaration. Any investor who would have invested through the scheme, will have to also declare this investment in the wealth statement, financial statement, or book keeping.   

The sectors which are not included in the amnesty scheme includes arms and ammunition, explosives, sugar, cigarettes, aerated beverages, flour mills, vegetable ghee, cooking oil manufacturing; exclusive of extracting units.  

Sources: 

Pkrevenue 

The news international 

Bol news 

Categories
Tax News and Social Trends

PM Imran Khan to distribute Rs. 407Bn Interest-Free Loan under Kamyab Pakistan Program

Prime Minister Imran Khan, on Wednesday at Islamabad Faisal Mosque, while addressing the launching ceremony of Kamyab Pakistan Program. Announced a Rs. 407 Billion Interest-Free Loan Package for the low-income group in Pakistan.

The Prime Minister emphasized that, “this package would make the low-income group self-reliant”. Further adding to it, he said, “a number of 4.5 million families will benefit from interest-free loans, under this package they will be equipped financially to set up small businesses, construct homes, start farming and acquire technical education.”

Prime Minister Imran Khan then talked about the distribution pattern of the Interest-Free Loan which is simplified in the following infographic presentation:

While concluding his package details, PM Imran Khan said, “a technical training will also be provided to a single member of each deserving family under this program announcement.”

After obtaining the loans and planning about starting any small size business or company. You will be required to register your individual NTN, business NTN, or sales tax registration number or company registration in this process.     

Following this package details, you can register your individual NTN, business NTN, sales tax registration number (STRN) and can register your company online with Befiler at the comfort of your home. For smooth implementation and execution of interest-free loans under this package.   

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Tax News and Social Trends

Prime Minister’s relief package, a sigh of hope for the nation

Prime Minister of Pakistan, Mr. Imran Khan on Monday announced a relief package for the nation in the times of increasing domestic pressure from political parties and global crisis.

In his 40 minutes long address to the nation, he talked about many aspects including the geopolitical situation of the world, Pakistan’s political situation, and also the country’s economic health.

PM Imran Khan talked about reducing the petroleum prices with a reduction of Rs.10/Litre which would reduce the overhead costs on several commodities, he talked about reducing the electricity charges with a reduction of Rs.5/Unit which would reduce the electricity bills’ load by 20%-50%, and emphasized that no further prices would be hiked until the coming budget.

He talked about the Ehsaas Kifalat Program, in which the government used to pay Rs. 12,000 to the needy and deserving poor. But now it has been increased up to Rs. 14,000. He further added that the government has decided to provide internships to the graduated unemployed youth who still haven’t found a job. Adding to this, he said, “we are going to give 2.6Mn scholarships in the federal and provincial institutions, with that we are going to spend Rs. 38Bn in this regard and also stipend of Rs. 30,000 to the graduates.”  

PM Imran Khan also shed lights on incentives for the IT sector, enlighten it with 100% tax exemption for both freelancers and companies, 100% foreign exchange exemption, 100% exemption from capital gain tax for investments in IT startups, Kamyab Pakistan Program Rs407 billion subsidized loans to be provide in next two years; loans for youth, farmers and for low-cost housing.

He also announced incentives for industries. None will be interrogated for industrial investment; rehabilitation of weak sectors through tax benefits, to attract overseas investment (Joint ventures) tax holiday for the next 5 years; Rs 1 million free medical coverage to all citizens by end of March, 2022 (except Sindh).

In the end, it can be said that this relief will only sound for a short span of time. It will cost the government around Rs237 billion during the four months through June to absorb the impact of relief measures announced by the prime minister. 

Source: Dawn news

The news international

Categories
Tax News and Social Trends

Calling out Freelancers: Government registering them for controlling Money Laundering

The government has told the Senate Information and Telecommunications Committee that it has made up its mind to register freelancers in the country. Following the serious threat of money laundering. 

In a recent meeting of the Senate Information and Telecommunications Committee, which was led by Senator Kahuda Babar. Officials from the Department of Information Technology and Telecommunications notified the committee that the Federal Board of Revenue (FBR) and the State Bank of Pakistan (SBP), were worried that unregistered freelancers could be a potential source of money laundering.

Committee members expressed serious concerns about the registration of freelancers. Concerned members believed that, the government was creating obstacles for freelancers rather than facilitating them in return.

However, Senator Afnanullah Khan said that the Financial Action Task Force (FATF) has also made reservations related to international payments to freelancers. He further added that it was possible to fund terrorism through unregistered freelancers. The senator recommended the inclusion of the financial technology industry, for a secured and documented transfer of payments. 

Syed Junaid Imam, member Information Technology, Ministry of Information Technology and Telecommunications. In the meeting, he notified that the Ministry of Commerce has formulated a Policy for Registration and Facilitation of Payment Gateways in Pakistan. 

Imam told the committee that there were several issues regarding the entry of PayPal and other payment gateways into the Pakistani market. He further stated that a committee has been formed within the Finance Division to look into the issues of registration of international payment gateways. The committee was mandated to facilitate international and local payment gateways.

In this regard, the Ministry of Commerce has developed a Gateway Registration and Facilitation Policy. The ministry will present the policy to the Ministry of Finance next week. The policy will be presented to the Federal Cabinet after review by the Department of Finance. He said he hoped the federal government would approve the policy within a month.

The government is making such decisions to eliminate money laundering, but freelancers are not on the same page. Majority of the freelancers in the country are students, some work part-time, and some have this sole source of income.

On an average, they don’t earn enough, so if they are taxed, it will further reduce their income. They complain that the government does not allow them to survive and that many deductions were made before they received their final payment. It seems like an extra burden to them.

How things could be opposite for them?

IT enabled export services are subject to 100% tax credit in Pakistan, and therefore, IT service providers are not liable to any taxes if they register as such and bring at least 80% of these export proceeds into Pakistan through normal banking channel subject to meeting following conditions:

  • They have filed the income tax return for the last tax year
  • Any tax required to be deducted or collected by them (as service providers) has been deducted or collected and paid to the Govt. treasury. In other words, they have discharged their duty as a withholding agent, if any.
  • They have filed with FBR the withholding tax statements for the immediately preceding tax year.
  • They have filed the sales tax returns (as service providers) for the tax periods corresponding to the relevant tax year. Therefore, registration with applicable provincial sales tax authority based on the principal place of business will also be required besides ongoing monthly sales tax filing under the provincial laws.

Sources: propakistani.pk

academiamag.com

Categories
Tax Deduction and Credit in Pakistan

Withholding Taxes in Pakistan: Why it is Important to Educate Yourself, and how can You get a refund on your paid Withholding Tax Money?

The word Withholding means “refusal to give something that is due or desired”. So, in this context of Tax, it becomes Withholding Tax which means “to intentionally deduct the tax which can be claimed and/or refunded later”. 

,For tax purposes “Withholding tax is deduction or collection of tax at source, which has generally been in the nature of an advance tax. It is an effective mechanism and important/timely source of revenue of FBR.”

The contribution of withholding tax is about 41% of total direct tax revenues collected throughout the entire country. 

Knowingly or unknowingly, everybody is paying Withholding taxes. Withholding Tax is deducted on multiple sources of your income/expenditure (cash flow) for example: Salary, Dividend, Interest, Vehicle (buy, sell, register, and transfer of ownership), Property (buy and sell), Phone Bill (Prepaid, Postpaid, and Landline), and other sources in the list.        

It is very important to understand the concept of Withholding Tax and believe me if you do understand, you will definitely save tens of thousands of rupees every year.

For you it can be more than hundred thousand rupees depending on your salary and spending you have made during the year.

How can I claim back my paid withholding tax amount?

Withholding tax, which is also sometimes referred to as Advance Income Tax or just Income Tax in bills and receipts, can be refunded back from the government at the end of year. So, the fact is that the government keeps collecting withholding tax from you in different bills and receipts you pay and via many other methods, then you can get it back at the end of year only if you fulfill certain conditions. Which includes paying annual tax or being in an income slot where income tax doesn’t apply to you. Along with the second condition which is to be a tax filer or in other words, timely filing your tax returns every year.

There is a very confusing and logical question at the same time that may be aroused in your mind, which is that “why does the government deduct  withholding taxes when at the end of the year the government has to return it?”. So, the answer to this question is very clear like ‘crystal’ which is that “the objective is to force the majority of the population to  file their income tax returns, and declare any tax paid or unpaid by them. In this case excess tax paid is refunded back by filing an online refund application in FBR portal and on acceptance by FBR that the refund amount is legitimate then the same is transferred to one’s account  in the form of bank transfer or cheque issued.” 

In the second case other than this, “those people who earn taxable income and the same is  disclosed in their income tax return  and also declare their paid withholding tax amount throughout the tax year, then the excess withholding tax amount could be adjusted into their annual income tax returns.”

How can I collect information to get a refund on my paid withholding tax amount?

You know that the tax year starts from the month of July and ends in the  month of June of the following year. So, you have to keep your eyes on the receipts and bills of any expenditure spent by you throughout the whole year. Lookout on the mention of withholding tax, or advance income tax and keep receipts and bills in your possession, then after that you could have evidence of the withholding tax paid by you during the whole year. You can produce it before the FBR to verify your paid withholding tax and later on clinch the tax refund.

Procedure through which I can get my withholding tax refund:

You need to fill a form by visiting the FBR’s IRIS Portal, where you will  file your application for refund along with evidences of deduction of withholding tax  So, after proper verification and submission of further requisite documents / information by you. .

It doesn’t matter whether you’re salaried or any other sources of income  intentionally if you’re not availing this money refund opportunity then consider yourself at the stake of affordable loss.