FBR imposes capital value tax on foreign assets of Pakistani residents

The Federal Board of Revenue (FBR) has imposed capital value tax on foreign assets held by resident Pakistanis.

Sources in the FBR told BOL News that one per cent CVT has been imposed on the value of over Rs100 million from July 1, 2022 by amending the tax laws through the Finance Act, 2022.

According to the FBR, an inclusive definition of the foreign assets had been provided, which includes assets held abroad indirectly and under the beneficial ownership by the resident individual.

The value of foreign assets will be the total cost of the foreign assets on the last day of the tax year in the relevant foreign currency, which is converted into rupees as per the exchange rates notified by the State Bank of Pakistan (SBP) for the day.

In case the cost of foreign assets cannot be determined with reasonable accuracy, the fair market value on the last day of the tax year will be taken for this purpose and the rupee conversion is applied in the aforesaid manner.

The resident person holding foreign assets will pay CVT at the time the income tax return for the tax year is due.

An Inland Revenue officer has been empowered to pass an appealable order to recover CVT along with the default surcharge from a person who fails to pay CVT or to collect CVT or fails to pay to the credit of the federal government after having collected CVT, by holding the person personally liable.

The provisions of the Income Tax Ordinance, 2001 and the Income Tax Rules, 2002 are applicable to collection, payment, recovery, or refund of CVT. The board is also empowered to prescribe the rules for any matter relating to the capital value tax.

Further, the FBR has imposed one per cent CVT on motor vehicles. The engine capacity exceeds 1300cc; or in case of electric vehicles, the battery power capacity exceeds 50kwh.

The sources in the FBR said that the capital value tax on motor vehicles is to be collected at the time of import, purchase from the local manufacturer or assembler and auction.

Every motor vehicle registering authority of the Excise and Taxation Department is required to collect CVT at the time of registration of motor vehicle with effect from July 1, 2022 except where the CVT had already been collected from the same person applying for the registration at the time of import, purchase from the local manufacturer or at the auction stage in respect of the same motor vehicle.