Pakistan: FBR proposes budget for 2017/2018

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Pakistan’s Federal Board of Revenue (FBR) on 26 May 2017, presented the budget for 2017/2018 to the parliament. The following tax measures are proposed in the Budget:

Corporate income tax rate: Corporate tax rate for companies other than banking companies is further reduced from 31% to 30%, for Tax Year 2018 and onwards.

Introducing the concept of start–ups: In order to promote innovation and entrepreneurship in Information Technology the concept of start–up has been introduced. A start-up has been defined as a business set-up by an individual, AOP or a company having turnover up to Rs.100 Million, registered and certified by the Pakistan Software Export Board (PSEB) as an information technology entity engaged in offering technology-driven products or services to any sector of the economy.

Reduction of withholding tax rates for mobile phone subscribers: The number of mobile phone subscribers in Pakistan has shown a gradual and sustained increase and presently there are about 140 Million mobile telephone subscribers in Pakistan belonging to various strata of society. In order to promote mobile phone density, the rate of withholding income tax for mobile phone subscribers is being reduced from 14 percent to 12.5 percent.

Exemption on cash withdrawal by branchless banking agents:  Asaan Mobile Account Scheme is to be introduced for providing withholding tax exemption on cash withdrawal of amount exceeding Rs.50,000 per day under section 231A, made through “Branchless Banking Agent Account”.

Simplification of rate structure on Capital Gains Tax: At present, there is a three-tier rate structure for capital gains tax on securities based upon the holding period of securities i.e. less than 12 months, more than 12 months but less than 24 months and more than 24 months but less than 5 years. For the purposes of simplification and promotion of stock market transactions, a flat /single rate of tax of 15 percent for filers and 20 percent for non-filers is being introduced.

Relief from Withholding tax on Life Insurance Premium: Threshold for the collection of advance tax by insurance companies on premium paid by non-filers in respect of life insurance under section 236U is being enhanced from Rs. 200,000 to Rs. 300,000 per annum.

Reduction in the threshold for paying advance tax in the case of an individual: At present, an individual is obliged to pay advance tax if his latest assessed taxable income is Rs.500, 000 or more. In order to provide relief and to facilitate small taxpayers, the threshold for payment of advance tax on the basis of latest assessed taxable income is being enhanced from Rs.500, 000/- to Rs.1, 000,000/-.

Further relief on the tax credit for education expenses: At present, individuals having taxable income of fewer than one million rupees are entitled to a deductible allowance in respect of education expenses incurred by them. In order to provide respite up to middle-income groups paying tuition fees, the threshold of taxable income for individuals entitled to a deductible allowance in respect of education expenses incurred is being increased from Rs.1,000,000/- taxable income to Rs.1,500,000/-.

Relief from Withholding tax on Life Insurance Premium: Presently, advance tax is collected by insurance companies from non–filers if life insurance premium paid by such non-filers exceeds Rs.200, 000/- per annum. In order to provide respite to taxpayers having life insurance policies the threshold for collection of advance tax from such non-filers is being enhanced from Rs.200,000/- to the aggregate amount of Rs.300,000/- per annum.

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