FBR Issues 2 SROs Revising Duty Drawback & Making Tax Exemption Certificates More Difficult

The non-resident persons or permanent establishment (PE) of non-resident persons have to go through a new cumbersome process at the tax offices to obtain certificates from the Federal Board of Revenue (FBR) for availing income tax exemption or a lower rate of tax, the authority announced on Tuesday.

The FBR has notified SRO 863(1)/2020 to issue draft amendments in the Income Tax Rules, 2002; along with a detailed procedure for the non-resident persons or permanent establishment (PE) of non-resident persons seeking an exemption or lower rate certificates from the tax department.

A chartered accountant informed that under income tax law, every person paying an amount of royalty or fees for technical services to a non-resident person that is chargeable to tax shall deduct tax from the gross amount paid at the specified rates.

Tax exemption may be availed by the non-resident persons or permanent establishment (PE) of non-resident persons by applying to the FBR’s commissioner concerned. The procedure was already available in the tax laws for such companies and now the system has been further streamlined and further checks have been placed before issuance of such exemption certificates.

The FBR said that an exemption certificate or a reduced rate certificate shall be issued to the non-resident person or PE of a non-resident person only if the Commissioner Inland Revenue is satisfied that the applicant has furnished income returns when became due, if any, on or before the date on which the application or notice is made.

The applicant shall provide the details of all the contracts made for the sale of goods, rendering or providing of services or for the execution of the contract in Pakistan.

Duty Drawback

In another update, the Federal Board of Revenue (Customs Wing) has issued a notification SRO 859 (I)/2020dated September 10, 2020 resolving the long-standing demand of fan manufacturers.

This SRO has revised the duty drawback structure from 1.72% to 4.396%. It is important to note that no revision was made in the regime for Fan Manufacturers sector since 2009 which had resulted in the stagnation of the Fan exports.

A number of such measures for various other export sectors are already under process and shall be announced very shortly, said FBR in a press release, adding that these measures would result in surge of exports in all important sectors like Pharmaceuticals, Leather Garments, Surgical goods, Poultry, Footwear and many other important sectors.

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