Pakistan implements Foreign Income, Assets Taxation System: Aga Faquir Advocate

City News Mar, 12 2024
Pakistan implements Foreign Income, Assets Taxation System: Aga Faquir Advocate
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KARACHI: For prevention of fiscal evasion and avoidance of double taxation, government of Pakistan has entered into various multilateral conventions and inter-governmental agreements with member countries of ‘Organisation for Economic Co-operation and Development’ (OECD) for automatic and spontaneous exchange of information under Common Reporting System (CRS) report relating to taxes on income imposed under Ordinance or any other law for time being in force for determination of Pakistan-source income of either resident or non-resident person.

Aga Faquir Muhammad Advocate Supreme Court of Pakistan disclosed while interviewing with daily National Courier. He said that Pakistan joined OECD Convention on September 14, 2016 becoming an active member of inclusive framework on Domestic Tax Base Erosion and Profit Shifting (BEPS), Global Forum on Transparency and Exchange of Information for Tax Purposes, Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS and Convention on Mutual Administrative Assistance in Tax Matters.

In July 2014, OECD established single global standard for automatic exchange of information to fight tax evasion and illicit financial flows calling upon all member countries to obtain information from their financial institutions and automatically exchange such information with other member countries annually.

Pakistan through Finance Acts of 2015 and 2016 amended section 107, inserted section 165B in Income Tax Ordinance, 2001 (Ordinance) and added Chapter XIIA in Income Tax Rules, 2002 (Rules), respectively to collect information from and provide reports to foreign tax jurisdictions regarding financial accounts of resident and non-resident persons under Automatic Exchange of Information (AEOI) as per international standards.

To safeguard rights of resident and non-resident taxpayer, Pakistan inserted section 116A in Ordinance through Finance Act 2018 mandating every resident taxpayer having foreign income of not less than ten thousand United States Dollars (10,000 USD) or having foreign assets with value of not less than one hundred thousand United States Dollars (100,000 USD) to furnish statement in prescribed manner.

From tax year 2019 and onwards, all resident taxpayers falling under scope of section 116A of Ordinance are required to furnish separate prescribed statement of foreign income and foreign assets comprising; income from salary, business, capital gain on disposal of securities, capital gain on disposal of immovable property, dividends, profit on debt, rent from property, gross receipts derived from other sources, immovable assets held outside Pakistan, business capital, investment in account/annuity/bond/certificate/debenture/deposit/fund/instrument/policy/share/stock/unit, share or interest in foreign trust/foreign company, foreign assets transferred by person to any other person and consideration received on transferred of that foreign assets.

Foreign Income and Assets Statement for resident individuals is to be furnished along with return of income and statement of assets/liabilities, respectively for each tax year following amendments made through Finance Act, 2018 failing which penal proceedings shall be initiated by concerned tax authorities.

Federal Board of Revenue has formed special AEOI Zones empowering Commissioners Inland Revenue, AEOI Zones to seek details of financial accounts and sources of investments of resident and nonresident persons from all financial institutions in Pakistan under bilateral agreement and multilateral conventions with other tax jurisdictions and OECD member countries.

Published in The Daily National Courier, March, 13 2024

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Nasir Mahmood
Nasir Mahmood https://www.dailynationalcourier.com/author/nasir-mahmood
Senior Journalist at Daily National Courier. Covering almost all beats including politics, current affairs, sports, metropolis for more than 45 years. Member of Karachi Press Club & KUJ.

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