Suplly Chain

TAXATION NOTES (1)

OVERVIEW

• Government needs to raise revenue
• Revenue comes from taxes
• The annual budget shows revenues and expenditure for the forthcoming year
• In Pakistan the annual budget is presented in June for the year starting on following July 1
• The Finance  Bill is debated in Parliament and passed as the Finance Act
• Changes in existing taxes/new taxes are set out in the Finance Act
• The Federal Board of Revenue (FBR), under the Ministry of Finance, is responsible for the implementation of fiscal policies, levy and collection of federal taxes

 INCOME TAX

Governed by the Income Tax Ordinance 2001 (as amended each year through the Finance Act)

                                                Tax on income[pic 1]

                                                  Total income[pic 2]

                                               Taxable income[pic 3]

                                                        Income from salary

                                                        Income from property

                                                        Income from business

                                                        Capital gains

                                                        Income from other sources

• Different rules apply for determination of income chargeable to tax under each head of income
• Resident individual: present in Pakistan for a total of 183 or more days in a tax year
• Resident company: incorporated in Pakistan /control and management in Pakistan
• Resident Association of Persons (AOP): control and management of affairs is situated wholly or partly in Pakistan in the year
• Resident liable to tax on Pakistan source income and foreign source income( an individual shall be exempt in respect of his foreign source income which is not brought/received in Pakistan if he is resident only by reason of his employment and he is present in Pakistan for period not exceeding 3 years)
• Non resident liable to tax on Pakistan source income only
• Employee: Individual engaged in an employment.
• Employer: Any person who engages and remunerates an employee.
• Employment: Rendering of services by an employee against the remuneration receivable from the employer. Includes directorship of a company
• Tax Year (Normal): The twelve month period ending on 30th day of June. e.g tax year 2013 is from July 1, 2012 to June 30, 2013.