FBR amnesty scheme

Although state departments have clearly announced the purpose and function of FBR Amnesty scheme2019, PM Imran Khan himself addressed the nation twice just to encourage people to get benefit from this scheme, Still, some are hesitant because of their past experience of amnesty schemes and the little understanding of this amnesty scheme.

This article is a brief overview of the FBR amnesty scheme and addresses the common question and misunderstanding.

Firstly Any person can avail the scheme and make a declaration, except the following:

a) A person who is or has been the holder of public office, their spouses and
dependents

b) A public company as provided in Income Tax Ordinance, 2001.

Who is Holder of Public office?

A holder of a public office is a person who is or has been, during the preceding ten years
commencing from the 22nd May 2018.

3. Whether undisclosed income can be declared?

Assets Declaration Ordinance, 2019 is primarily for the purpose of the declaration of undisclosed
assets as reflected in the tax year 2018. Income up to the tax year 2018 will be reflected either
as an undisclosed asset or undisclosed expenditure. Any income subsequent to the tax year 2018 is
not covered under the scheme.

4. What kinds of assets can be declared in the FBR amnesty scheme?

Any undisclosed assets can be declared except the following:
(a) Any proceeds or assets that are involved in or derived from the commission
of a criminal offense
(b) Gold and precious stones
(c) Bearer prize bonds
(d) Bearer securities, shares, certificates, bonds or any other bearer assets.
(e) Any undisclosed assets / undisclosed expenditures on which proceedings are
pending in High Court or Supreme Court;
(f) Cash in hand (local or foreign) except that which is deposited in the bank
the account in the manner laid down in the scheme.

5. Whether jewelry made up of Gold, precious stones and metals can be declared?

No. Jewelry made up of gold, precious stones and metals in any shape cannot be declared.

6. My name appears in Panama and Paradise Leaks and I have undisclosed

offshore assets. I am not a public office holder as defined in the scheme and the assets
are not involved in or derived from the commission of a criminal offense.

Can I declare such assets under the scheme?

Yes.

7. I wish to declare undisclosed sales. Can I incorporate assets or expenditures resulting from the declaration of such undisclosed sales in the wealth statement or the financial statement?

(1) The scheme envisages benefit for the undisclosed assets or undisclosed
expenditures and tax at the rates prescribed under the Ordinance has to be paid on such assets
or expenditures.
(2) There is an additional benefit that undisclosed sales which are liable to
standard tax rate under the Sales Tax Act, 1990 or the Federal Excise Act, 2005, can be
declared at the reduced rate of 2% under the scheme. The undisclosed assets or undisclosed
expenditures created out of such sales are required to be declared as referred above in (1).
Illustration
(1) Undisclosed Sales = Rs. 1,000
Tax @ 2% = Rs. 20
(2) Undisclosed Assets/expenditures
out of the undisclosed sales as referred above
Undisclosed assets = Rs. 500
Undisclosed expenditure = Rs. 100
= Rs. 600
Tax @ 4% on Rs. 600 = Rs. 24
Total Tax under the scheme = Rs. 44


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8. Where taxes were paid under the Voluntary Declaration of Domestic Assets Act,2018 but declaration could not be filed within the due date i.e. 31st July 2018, weather can take credit of those taxes paid for declaration of assets under this scheme?

No. A credit of taxes paid under the Voluntary Declaration of Assets Act, 2018 cannot be taken
under this scheme. As explained in Circular No. 07 of 2018 dated the 24th October 2018 such
taxes were adjustable against a person’s normal tax liability for the tax year and necessary
correction in CPR was required for this.

9. What is the last date of declaration in FBR amnesty scheme?

The last date of declaration is the 30th of June, 2019.

10. Can a declaration be made without payment of tax?

Yes. Declaration and payment of tax have to be made by the 30th June 2019. In case if no
payment is made by the 30th June 2019, then default surcharge shall be charged for payments
made after the 30 June 2019.

11. Can tax be paid in installments?

Yes. Tax can be paid in installments subject to default surcharge.

12. A person owns shares of a non-resident company having assets in Pakistan. Can he declare such shares?

Yes.

13. Whether bearer shares can be declared under the scheme?

No. bearer shares cannot be declared under the scheme.

14. A person owns shares of a non-resident company having assets in Pakistan. Will the shares be treated as a local asset or foreign asset?

Shares of a non-resident company shall be foreign assets.

15. I have filed a declaration on 15th June 2019, declaring a foreign asset. Now I want to revise the said declaration. Can I revise the declaration of the said foreign asset?

Yes. However, the revised value cannot be less than the original declared value and tax shall
be paid on the revised value.

16. Can a person during audit proceedings under ITO, avail this facility of the scheme?

Yes, a person may opt for the scheme during audit proceedings to the extent of addition in
income related to undisclosed assets or undisclosed expenditure.

17. Where a tax demand has been raised in assessment under section 122 relating to undisclosed assets or expenditure and the taxpayer is in appeal before the Commissioner IR (Appeals). Can he file a declaration under the scheme?

Yes, he can file a declaration.

18. Where a tax demand has been raised in assessment under section 122 relating to undisclosed assets or expenditure and the taxpayer is in appeal before the Appellate Tribunal. Can he file a declaration under the scheme?

Yes, he can file a declaration.

19. What will be the consequences if we do not avail the FBR amnesty scheme?

(1) Confiscation of ‘Benami Assets’ under the Benami Transactions (Prohibition)
Act, 2017 plus seven-year imprisonment
(2) All proceedings envisaged under the Income Tax Ordinance, 2001, which inter
alia includes
(a) tax at full rate
(b) penalty @ 100%
(c) imprisonment up to five years

20. If someone has filed declaration but wished to revise his declaration up to the
30th June 2018? Can he revise his declaration?

Yes, he can revise his declaration but he cannot decrease the value of undisclosed assets or
tax liability already declared. He also has to file the revised return and revised financial statement for the tax year 2018 also which shall be filed along with the declaration.


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21. What is meant by fair market value with respect to foreign assets?

The fair market value has been defined in section 5 of the Ordinance as the price which the
assets would ordinarily fetch on sale in the open market but in no case shall be less than the
cost of acquisition.

22. At what value the local immovable property will be declared by a resident person?

(a) In case of open plots, the local immovable property shall be declared at the
higher cost of acquisition or 150% FBR value or 150% of DC value.
(b) In case of constructed immovable property, it shall be declared at the value as
in (a) PLUS 150% of DC value for the constructed property if FBR value for constructed property has not been notified.
(c) If FBR value has been provided for the constructed property, the value shall be
declared at the higher of cost of acquisition of constructed property or 150%
of FBR value or 150% of DC value.

23. I have an undisclosed open plot, cost of acquisition of which is Rs. 10 million, however, the FBR value is Rs. 7.5 million and DC value is Rs. 7 million. At what value the plot will be declared as per the Ordinance?

which will be equal to Rs. 11.25 million.

24. I have an undisclosed open plot, cost of acquisition of which is Rs. 10 million, however, the FBR value is Rs. 7.5 million and DC value is Rs. 8 million. At what value the plot will be declared as per the Ordinance?

The plot shall be declared at 150% of DC value being higher than FBR value. It shall be
declared at Rs. 12 million.

25. I have an undisclosed open plot, cost of acquisition of which is Rs. 50 million, however, the FBR value is Rs. 10 million and DC value is Rs. 9 million. At what value the plot will be declared as per the Ordinance?

If the cost of acquisition has been disclosed, then there is no case for declaration. However, if
the cost of acquisition at Rs. 50 million has not been disclosed and the declarant intends to
declare it at Rs. 50 million, that would be the appropriate method. The values prescribed in
the scheme are the minimum values.

26. I purchased an open plot in 2016 which is undisclosed at the time when FBR issued values of immovable properties for the first time. Should I declare this open at FBR value prevailing in 2016 or existing FBR value?

The open plot has to be declared at existing FBR value or cost of acquisition, whichever is
higher.

27. I have an undisclosed constructed property. Its cost of acquisition for the open plot was Rs. 8 million. Cost of construction was Rs. 2.5 million. FBR value for the open plot is Rs. 6 million, DC value for the open plot is Rs. 4 million, DC value for construction is Rs.1,000 per square foot, constructed area of my property is 5000 square foot and there is no FBR value for the constructed property. What would be the value of my constructed property to declare under the scheme?

In this case,
the value of open plot shall be 150% of FBR value = 9 million
Plus value for construction being 150% of DC value = 7.5 million
Value of constructed property for a declaration under the scheme = 16.5 million
28. I have an undisclosed constructed property. Its cost of acquisition for the open plot
was Rs. 40 million. Cost of construction was Rs. 20 million. FBR value for an open plot is
Rs. 6 million, DC value for the open plot is Rs. 4 million, DC value for construction is Rs.
1,000 per square foot, constructed area of my property is 5000 square foot and there is
no FBR value for the constructed property. What would be the value of my constructed
property to declare under the scheme?
In this case,
Value of open plot being the cost of acquisition = 40 million
Plus value for construction being cost of construction = 20 million
Value of constructed property for a declaration under the scheme = 60 million

29. I want to declare my foreign assets in the scheme and pay tax. Will my future
earnings from these assets are exempted too?

Under the income tax law in Pakistan, world income of a person is taxable in Pakistan subject
to the condition that the person is a tax resident in Pakistan.

30. In the case of undisclosed account, what will be the treatment in the following cases
(a) There is a balance of Rs. 1,000,000 on 30th June 2018 and there is no
transaction in the bank thereafter
(b) There is a balance of Rs. 1,000,000 on 30th June 2018 and thereafter,
there are credits of Rs. 300,000 and debits of Rs. 500,000.
(c) There is a balance of Rs. 1,000,000 on 30th June 2018 and thereafter, the
account was closed on 31st January 2019?

The balances held in the accounts on the 30th of June, 2018 will be declared.
However, the transactions carried out in the accounts will also obtain a benefit under the
a scheme if resultant assets or expenditures out of these transactions are also declared under the scheme.

31. Who is a non-resident individual?

As per section 82 of the ITO, an individual shall be a resident for a tax year if he is present in
Pakistan for a period in aggregate amounting to 183 days or more in that tax year.

32. Whether a non-resident individual is required to file a return of income?

Yes, for Pakistan-source income. For certain other conditions which are provided in section
114 of the Income Tax Ordinance, 2001.

33. A non-resident person owns immovable property only in Pakistan. Is he required to file a return?

As per section 115(3)(d) of ITO, a non-resident person is not required to file a return of income
solely due to the reason that he owns the immovable property.

34. Whether a non-resident person is required to file a wealth statement?

As per section 116 of ITO, a non-resident individual is not required to file a wealth statement. However, the commissioner may issue a notice to a non-resident person to file wealth statement. In such a case, the non-resident individual will be required to file a wealth
statement.

35. Are non-resident persons covered under the FBR amnesty scheme?

Yes. As per section 3 of the Ordinance, every person is eligible to opt for the scheme and
make a declaration, except the following:
(1) Holders of public office, their spouses, dependents, and benamidars;
(2) A public company as provided in Income Tax Ordinance, 2001;
36. Which assets of non-resident persons are covered under the scheme?
All undisclosed assets / undisclosed expenditures are chargeable to tax in Pakistan.

37. Can a non-resident person revise his wealth statement?

Yes. A non-resident person may revise his wealth statement if he has filed the same earlier at any time before the receipt of notice under sub-section (9) of section 122 of the ITO, 2001.

38. In what currency the tax is required to be paid by the non-resident person on
declaration of local assets?

Tax is required to be paid in Pak Rupees in case of local assets.

39. At what value the foreign assets will be declared by a resident person?

As per section 5 of the Ordinance, the value of the foreign asset shall be the fair market value,
but it should not be less than the cost of acquisition. Such value shall be determined at the
exchange rate prevalent on the date of declaration.

40. Whether an individual resident in Pakistan can declare his/her foreign assets
under the scheme?

Yes. An individual can declare his foreign assets.

41. Whether an AOP/company can declare their domestic assets under the scheme?

All AOPs and companies are eligible to file declaration except a company as defined in the
Income Tax Ordinance, 2001.

42. Whether an AOP or company can declare their foreign assets under the scheme?

Yes. An AOP or a company excluding a public company as defined in the Income Tax
The ordinance, 2001, can declare their foreign assets under the Ordinance.

 

The state minister firmly said that extension in assets declaration date would not be possible at all. The scheme has been in place for the last one-and-a-half months and there’s still one week to go. Those would be really unfortunate people who do not benefit from the current scheme. After expiry of the date, the government would seize all benami properties and send those deceiving the government to jails.

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