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Newly-opened, re-designated business accounts - Inside Financial Markets

Newly-opened, re-designated business accounts

– Business Recorder

Banks are bound to provide info: FBR

ISLAMABAD: Banks are now bound to provide information of newly-opened or re-designated business bank accounts to the Federal Board of Revenue (FBR) during each preceding calendar year.

The FBR has issued income tax circular 12 of 2022 to explain the significant amendments made in the Income Tax Ordinance 2001 through the Finance (Supplementary) Act, 2022.

All the provisions contained in this circular would be applicable from January 16, 2022.

According to the FBR, the scope of information shared by the banks under section 165A of the Income Tax Ordinance, 2001 has been enhanced. Banks shall now be liable to furnish information regarding newly opened or re-designated business bank accounts during each preceding calendar year.

The legislation seeks to allow disclosure of information under section 216 of the Ordinance in respect of any high-level public officials and public servants in BPS-17 and above, their spouses, children or Benamidars, or any person in relation to whom the afore-mentioned persons are beneficial owner. 

Through Tax Laws (Third Amendment) Ordinance, 2021 it has been made compulsory for corporate taxpayers to use digital mode of payment for certain expenditures. The Finance (Supplementary) Act, 2022, inclusively defines digital mode of payment as under: (i) Online portals or platforms for digital payments/receipts (ii) Online interbank fund transfers services (iii) Online bill or invoice presentment and payment services (iv) Over the counter digital payment services or facilities (v) Card payments using Point of Sale terminals, QR codes, mobile devices, ATMs or Kiosk (vi) Any other digital or online payment modes.

Furthermore, the Board has also been empowered to notify the date for adoption of digital modes of payment. 

The rate of advance tax on cellular services under section 236 of the Ordinance has been increased from 10 percent to 15 percent.

The FBR has also enhanced advance Tax on vehicle registration.

The advance tax on vehicle registration under section 231B (2A) of the Ordinance has been increased for the persons who register such motor vehicles which have been sold prior to their first registration. The purpose is to discourage huge “on money” on such vehicles which are booked by investors as a result of which the vehicles remain unavailable to the genuine buyers. New rates under Division VII of Part IV of First Schedule to the Ordinance shall be as follows: Tax of Rs100,000 would be applicable on the engine capacity up to 1000cc; tax of Rs200,000 on the engine capacity 1001cc to 2000cc and tax of Rs400,000 would be applicable on the engine capacity of 2001cc and above.

The FBR further clarified that the concept of Special Purpose Vehicle (SPV) under the Real Estate Investment Trust (REIT) has been introduced by SECP through legislation. Through the Finance (Supplementary) Act, 2022, SPV being a pass-through entity, has been extended the same tax treatment as already given to REIT under the Ordinance. Dividend received by the REIT from SPV shall be chargeable to tax at the rate of zero percent, while dividend paid to non-REIT investors shall be chargeable at the rate of 35 percent. These will be subject to advance tax deduction at the same rates.

Furthermore, the SPV has been included in the exemptions granted to REIT under clause (99) and (99A) of Part-I and clause (47B) of Part-IV of Second Schedule to the Ordinance. 

Under clause (132) of Part-I of the Second Schedule to the Ordinance, exemption from tax on profit and gains is available to a taxpayer, who sets up an electric power generation project in Pakistan subject to conditions therein.

The sixth proviso to the clause has been substituted with a new proviso to qualify that the exemption shall be available to persons, who enter into agreement or to whom letter of intent is issued by the federal or provincial government for setting up an electric power generation project in Pakistan on or before June 30, 2021 and who obtain the letter of support on or before June 30, 2023. 

The provisions go into force with effect from January 16, 2022, the FBR added.

Syed Zaki Hussain

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Inside Financial Markets was a joint publication of Pakistan Stock Exchange (PSX)and Society of Technical Analysts Pakistan (STAP)