On 12 June 2020, the Finance Bill 2020 was presented to the national parliament with several tax measures that would affect certain income tax, indirect tax, and customs provisions.
The outlay of the budget is:
- Total revenues are projected at Rs 6,573 billion including FBR revenue of Rs 4,963 billion and non tax revenue of Rs 1,610 billion.
- Transfer to provinces under the NFC Award is estimated at Rs 2,874 billion.
- Net Federal revenue is estimated at Rs 3,700 billion.
- Total federal expenditure has been estimated at Rs 7,137 billion.
- Budget deficit is projected at Rs 3,437 billion which is 7 % of the GDP with primary balance at 0.5%.
Tax measures proposed in the Finance Bill 2020 as follows:
- In an effort to simplify withholding tax regime, it is proposed that 9 withholding sections may be omitted, while 5 may be amalgamated.
- To encourage foreign remittances, it is proposed that withholding tax on cash withdrawal or on issuance of banking instruments/ transfers from a domestic bank account to the extent of remittance amount received from abroad in such account in a year may be exempted.
- To promote the use of alternate dispute mechanism and reduce litigation, it is proposed that the decision of ADRC may not be binding upon the aggrieved person. The ADRC’s decision will become binding only when the aggrieved person will be satisfied with its decision.
- Reduction in withholding tax rate from 8% to 3% for certain services rendered by PE of a non-resident in line with similar rates for local companies.
- To broaden the tax base, the condition of CNIC was introduced in Finance Act 2019, since persons involved in furtherance of taxable activity need to be captured through such measures. However, in order to ease compliance cost, it is being proposed that the threshold may be enhanced from Rs. 50,000 to Rs. 100,000.
- FED on imported cigarettes, cheroots, cigarillos, cigars and other tobacco substitutes is being enhanced from 65% to 100% in line with WHO (World Health Organization) standards.
- To reduce the consumption of Caffeinated Energy drinks it is proposed that the FED may be increased from 13% to 25% both at import and at local supply.
As proposed, the tax measures generally would be effective 1 July 2020.
