BOL EXCLUSIVE: Disposal of assets abroad: FBR to recover around Rs10 billion from foreign firms

Shahnawaz AkhterWeb Editor

30th Jun, 2021. 04:15 pm

KARACHI: The tax authorities have estimated recovery of around Rs10 billion from the foreign companies who sold their assets abroad and avoided tax payment, sources said on Wednesday.

In this regard, the Federal Board of Revenue (FBR) has amended the Income Tax Ordinance, 2001, to recover capital gains tax from the foreign companies, which took advantage of avoiding tax, as the law was silent on the issue.

The sources in the Large Taxpayers Office (LTO), Karachi, said non-resident companies, especially oil exploration companies, transferred their shares of assets located in Pakistan, to other non-resident companies and dodged the tax authorities by avoiding the payable taxes.

The sources said the tax authorities had contested the issue in the courts and after an amendment in the Income Tax Ordinance, 2001, the recovery of payable amount became possible.

Through the Finance Act, 2018, a new section 101A was introduced to the ordinance, which is related to the gain on disposal of assets outside Pakistan.

It said any gain from the disposal or alienation outside Pakistan of an asset located in Pakistan of a non-resident company would be treated as a Pakistan source income. The gain derived through the sale of assets would be chargeable to tax in Pakistan.

To implement Section 101A, the revenue board on Wednesday issued SRO 849 (I)/2021 to notify rules. According to the rules, a foreign company, which disposes of assets in Pakistan is required to intimate the tax office within 60 days of the transaction.

The FBR also said in case the 60 days period expired, the foreign company has to provide details in a prescribed form that should include details of the transactions.

The sources said that the new rules would be applicable on the transactions by non-resident companies made after July 1, 2018. With the implementation of the law the practice of tax avoidance would be stopped and the foreign companies, selling or transferring their shares of entities located in Pakistan to other foreign companies, would pay capital gains tax to the tax authorities, they added.

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