JURISDICTION

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Amendments in Income Tax ordinance, 2001 vide
Finance Act, 2008 (Insurance Sector)
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Payment to non-resident

• 152 (1AA)
• Every person making a payment of insurance
  premium or re-insurance premium to a non-resident
  person shall deduct tax from the gross amount
  paid.

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Payment to Non-Resident

• The rate of tax to be deducted from payments
  referred to in sub-section (1AA) of section 152
  shall be 5 of the gross amount paid.

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Payment to Non-Resident

• 152(1BB)
• Tax deducted under sub-section (1AA) shall be a
  final tax on the income of the non-resident
  person arising out of such payment.

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Certificate of collection or deduction of tax

• 164
• Every person collecting tax shall, at the time
  of collection or deduction of the tax, furnish to
  the person from whom the tax has been collected
  or to whom the payment from which tax has been
  deducted has been made, a certificate setting out
  the amount of tax collected or deducted

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Section 107 of Income Tax Ordinance, 2001

• The Provisions of Double Taxation treaties
  override the provisions of Income Tax Ordinance
  2001.

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Section 152 (IAA) of Income tax Ordinance, 2001

• Not applicable to the non-resident companies
  having residence in the countries with which
  Pakistan has entered into Double Taxation
  Treaties.

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Agreements on Avoidance of Double Taxation
between Pakistan and following countries

• Austria 2) Azerbaijan 3) Bangladesh
• Belgium 5) Canada 6) China
• Denmark 8) Egypt 9) Finland
• 10) France 11) Germany 12) Greece
• Holland 14) Hungary 15) India
• 16) Indonesia 17) Iran 18) Ireland
• Italy 20) Japan 21) Jordan
• Kazakhstan 23) Kenya 24) Korea
• 25) Kuwait 26) Lebanon 27) Libya
• Malaysia 29) Malta 30) Mauritius
• Netherland 32) Nigeria 33) Norway
• Oman 35) Philippines 36) Poland
• Qatar 38) Romania 39) Saudi Arabia
• Singapore 41) South Africa 42) Srilanka
• Sweden 44) Switzerland 45) Syrian
• Thailand 47) Tunisia 48) Turkey
• Turkmenistan 50) UAE 51) United Kingdom
• 52) USA 53) Uzbekistan

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Exemption Certificates

• Exemption Certificate for non deduction of
  Income Tax Under Section 152(1AA) not required.

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• WITHOLDING PROVISONS APPLICABLE TO INSURANCE
  BUSINESS

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APPLICABLE WITHOLDING SECTIONS AT A GLANCE

• Salaries
  u/s 149
• Dividends
  u/s 150
• Non Residents (General)
  u/s 152
• Non Residents (Premiums)
  u/s 152
• Non Residents (Advertisements)
  u/s153A
• Local Contracts Services
  u/s 153
• Rent of properties
  u/s 155
• Prizes Winnings
  u/s 156
• Commission
  u/s 233

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OBLIGATIONS

• Deduct Tax at prescribed rates.
• Deposit Tax within 7 days of the end of fortnight
• Issue Prescribed Deduction Certificate to payee
• Salary within 45 days of the end
  of F.Y.
• Others within 15 days of the end
  of F.Y.
• On request of Payee within 7 days of
  request.
• Submit Monthly Statement by 20th of following
  month
• Submit Annual Statement by 31st August
• Furnish Reconciliation of Statements,if required
  

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SALARIES

• Payment through cross cheque or transfer except
  upto Rs. 15,000 p.m. which may be paid in cash.
• Deductions to be made on average basis
• Rates of Deductions as per First Schedule
• Adjustments may be made for credits and other
  deductions as per section 149 (1)
• Deductions also to be made from payment out of
  Pension Fund.(Sec 156B)

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SALARIES

• No deductions upto Rs. 180,000
• In case of woman, no deductions upto Rs. 240,000
• Minimum rate of deduction 0.5
• Maximum rate of deduction 20

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DIVIDENDS

• Deduction of Tax at the time of Payment
• Tax to be deducted at 10 by Resident companies
  ( Division III Part I 1st Schedule )
• Dividend to include after tax profit of a branch
  of a foreign company ( Section 2 (19) (f) )

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INSURANCE OR RE-INSURANCE PREMIUM PAYMENT TO NON
RESIDENT PERSON (SECTION 152(1AA)

• Inserted through Finance Act 2008.
• Rate of Tax Deduction 5 ( Div II Part III
  1st Schedule)
• Full Final Tax as Pakistan source income
  (Section 152(1BB))

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PAYMENT OF LOCAL COMMISSION

• 
  Tax to be deducted / collected at 10
• ( Part IV of
  First Schedule )
• Rate in case of Advertising Agents
  at 5
• (Clause 26 Part II
  2nd Schedule )
• Tax is full Final in case of
  Recipients
• ( Section 233
  (2) )

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PAYMENT TO NON RESIDENT MEDIA PERSONS

• Payment for advertisement services attract this
  deduction ( Section 153A)
• Rate of Tax Deduction 10 (Division IIIA,
  Part III ,First Schedule )
• Full Final tax as Pakistan source income
  (Section 169 (1)(b))

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RENT OF IMMOVEABLE PROPERTY

• Rent to include advance rent , rent of furniture
  / fixtures and amount for services relating to
  such property.

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RATES OF TAX DEDUCTION ON RENT( Div V Part III
1st Schedule / Clause 28 Part II 2nd Schedule )

• PAYMENT TO INDIVIDUAL
• From 150,000 to 400,000 5 of amount
  exceeding 150,000
• From 400,000 to 1000,000 12500 7.5 of
  amount exceeding 400,000
• Exceeding 1,000,000 57,500 10 of
  amount exceeding 1,000,000
• PAYMENT TO COMPANY
• Upto 400,000 5
• From 400,000 to 1,000,000 20,000 7.5 of
  amount exceeding 400,000
• Exceeding 1,000,000 65,000 10
  of amount exceeding 1,000,000

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EXPOSURES ON DEFAULT

• 1. In case of non deduction of tax at source,
  following expenditures are inadmissible
• . Salary .
  Services and Fee
• . Rent .
  Commission
• . Contractual Payment . Payment to Non
  
• 
  Residents
• 2. Defaulted amount will be recoverable with
  additional tax _at_ 12 .
• 3. Prosecution proceedings may be initiated.

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FORMAT OF STATEMENTS

• Monthly Statement ( Consolidated for salary
  other payments )
• Annual Statement for Salary
• Annual Statement for Other payment . Formats
  may be downloaded from http// fbr.gov.pk /

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EFILING ON FBR PORTAL

• Get enrolled at https//e.fbr.gov.pk
• Obtain Digital certificate from NIFT
  (www.nift.com.pk)
• Submit Returns, Statements , application on line
• Make the payments on line

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BENEFITS OF EFILING

• Filing of Income Tax Returns and Statements
  electronically
• Tax Payment by Taxpayers and Withholding Agents
• Payment Collection by Banks
• Online Payments from bank accounts electronically
  (ePayments)
• In order to facilitate the taxpayers and users of
  these services FAQs and help is available
  online, however in case of any further assistance
  , please contact at following
• Helpline [phone]-772  ...  24 hrs

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• FEDERAL EXCISE DUTY (F.E.D)

Services provided or rendered in respect of insurance to a policy holder by an insurer, including a re-insurer in case where direct insurance service has been provided RATE OF DUTY
i) Goods insurance Ten per cent of the gross premium paid.
ii) Fire insurance do
iii) Theft insurance do
iv) Marine insurance do
v) Other insurance do
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• FEDERAL EXCISE DUTY (F.E.D)

Exclusion Life Insurance Rule 40 Special procedure for insurance companies Monthly return in the form STR-7 (Sales Tax Rules 2006) Return to be filed by 15th day of the following month. - In case of default Default surcharge _at_ 1.5 per month - Penalty provision - Non-filing of return Rs.5000/-. - Non or short payment of duty Rs.10,000/- or 5 of the duty involved whichever is greater - If return filed within 15 days of due date Penalty of Rs.100/- for each day of default.
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