July 13, 2018| Malaysia Mission Posts|
Govemment of Pakistan announced two tax amnesty schemes, namely, Foreign Assets (Declaration and Repatriation) Ordinanee, 2018 for undisclosed foreign assets and Voluntary Declaration of Domestic Assets Ordinance, 2018 for undisclosed income and domestic assets. However as required by the Constitution, both Ordinances were placed before the Parliament and through Finance Act 2018, these became Voluntary Declaration of Domestic Assets Act, 2018 for undisclosed income and domestic assets and Foreign Assets (Declaration and Repatriation) Act, 2018 for undisclosed foreign assets. These Acts were further amended through Presidential Ordinances on June 30ft, 2018.
The original closing date for frling declarations under the amnesty scheme was June 30tr,2018. It has been extended till July 31, 2018 on account of representations from trade bodies, professional associations and general public due to short operational period after clearing legal and procedural challenges and problems faced by declarants in the payment of tax on foreign assets and repatriation of liquid assets. The Presidential Ordinances dated June 30tr, 2018 amended the amnesty acts to extend the applicability date of the schemes and to include explanations on ambiguities such as exchange rate. The amendment Ordinances have also provided for revision of declarations.
public response to the schemes has been positive. So far, 55,225 declarations have been filed in which declared value of foreign assets is aror-rrd Rs. 577 billion and that of domestic assets is around Rs. 1,192 billion. Declarants have paid around Rs. 97 billion out of which around Rs. 36 billion have been collected on foreign assets and 61 billion on domestic assets. In addition, $ 40 million has been repatriated. This response to the amnesty schemes has been unprecedented.
Arrinesty scheme for foreign assets applies to both liquid and immovable assets such as bank accounts, shares and mortgaged properties. Ta>< rates range from 2Yo to 5Yo, depending on the type of asset. Special tax rute of ZYo is applicable to liquid assets which arc repatriated into Pakistan. The amnesty scheme for domestic assets covers all types of assets and income, with tor rates of 2Yo and 5Yo. To protect declarants from any harassment, both schemes under Voluntary Declaration of Domestic Assets Act,2018 and Foreign Assets (Declaration and Repatriation) Act, 2018 promulgated on 8ft April 2018 which eventually was made part of Finance Act 2018 to ensure complete confidentiality of declarant’s information. Moreover, such information cannot be used as evidence against declarants under any other 1aw.
Finance Minister is closely monitoring the operation of the amnesty schemes and constantly advising both the FBR and SBP for improving payment procedures and ensuring effective facilitation. As per directions of the Finance Minister, FBR has set-up helplines, which operate 2417 with dedicated telephone lines and e-mails for quick response to queries. FAQs, online user guide and all relevant documents have been published on FBR’s website (Www.fbr.gov.pk) which are periodically updated on the basis of queries raised by intermediaries and declarants, Frequent interaction with private sector including accounting professionals and tax practitioner bodies have been helpful. Similar arrangements have been put in place in SBP.
The online user guide provides step by step information regarding regisfation under the amnesty schemes, procedure for payment of tax and submission of declarations. Officers well versed wittr the features of the amnesty schemes have been assigned the task of responding to queries. There is also a fully functional IT support teamwhich regularly monitors online IT system.
For payment of tax procedure, wherebY on foreign assets, state Bank of Pakistan has devised a tax in USD is deposited into SBP’s account through wire tralrsfer. Government has issued Government of Pakistants US Dollar Denominated Amnesfy Rulesr2018, whereby SBP has been authorized to issue these bonds having a maturity period of five years and annual profit of 3Yo to be paid semi-annually. According to the rules, citizens of Pakistan can invest in these bonds out of remittances declared under the foreign amnesty or through encashment of foreign crrrency accounts held in Pakistan.
The low rates of the Amnesty Schemes ranging between 2%’5o/o and is a major incentive for declaring undeclared assets and income. Pakistan has also become a signatory to the OECD Multilateral Convention which will provide access to information about offshore financial accounts of Pakistani residents from September 2018. This will enhance the capacity of FBR due to acaess to offshore financial accounts of Pakistani residents held in the signatory countries. Necessary amendments have also been made in the Protection of Economic Reform (PERA) Act, tggz, to regulate FX movements and bring it in line with Income Tax ordinance, 2001. Moreover, amendments have been made in the Income Tax Ordinance ,2}}l,whereby FBR may inquire about the source of foreign remittance above Rs.10 million and limitation of f,rve years to probe foreign assets and income has been removed.
Above all, revenues from the amnesty schemes will help in documentation of the economy as well as bring in onetime payment from non-declarant to officialise their assets. Equally critical is to support Pakistan in its endeavour’ to reduce poverty and uplift its population which off-course depends on effective prioritization of development spending.
Last modified: November 24, 2019
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