ISLAMABAD: The government has introduced 38 new amendments to the Finance Act 2016, with most of them relating to income tax measures.

Of all, 21 amendments are related to income tax measures, 15 to sales tax and two to federal excise duty (FED). These amendments will come into effect from July 1.

Through the Finance Act 2016, the formula was amended to allow benefit of tax credit of 100 per cent for establishing a new industry in case of reduced equity–investment ratio of 70pc. Similar amendments were made to allow the tax credit, for equity investments on expansion of machinery or a new project.

It was also proposed that in the event of discontinuation of business within five years of availing credit, the tax credit will be deemed to have been wrongly allowed.

The government has barred commissioner of income tax from determining fair market value of immoveable property. Under the amendment, the State Bank of Pakistan (SBP) will approve a panel of ‘valuers’ to determine fair market value.

The disputed clause regarding foreign trusts in the definition of a company has also been withdrawn.

The government has empowered commissioners to issue notices if a taxpayer has not filed returns for the past 10 years. Earlier, the notice for any tax prior to five years could not be sent. Yet another amendment allows commissioner to recover only 25pc of the tax demand created in case an appeal before commissioner appeal is pending.

Individuals to have Rs50,000 daily aggregate limit on withdrawals from all banks; govt removes advance taxes on foreign dramas, films

The excess tax collected or deducted on account of higher rate for non-filers will be adjustable to the return filed for the relevant tax year only.

Morever, no advance tax will be collected from foreign TV plays and films. Advance tax rates were reduced for cable TV operators on the basis of licence category.

Furthermore, an additional advance tax has also been imposed to be collected by the Pakistan Electronic Media Regulatory Authority (Pemra) at 50pc of permission fee or renewal fee, from every TV channel on which a foreign TV drama serial is screened.

An explanation was introduced in the Finance Bill 2016 to calculate the limit of Rs50,000 to be aggregate withdrawals from all the bank accounts in a single day for withholding tax.

Through the Finance Act 2016, the explanation has been further refined that the limit of Rs50,000 will be calculated on the basis of aggregate transactions, instead of aggregate withdrawals, from all bank accounts in a single day. The amendment has the effect that limit of cash withdrawals will still be calculated on a single-account single-day basis.

The exemption limit of income from gratuity from an approved gratuity scheme was further extended to Rs300,000 from Rs200,000.

The government has introduced a 2-percentage-point reduction in tax rate for Shariah-compliant companies — 30pc for tax year 2016, 29pc for tax year 2017 and 28pc for tax year 2018 and onwards. The reduced rate will be available if the company is Shariah-compliant as per criteria of the SBP, the Securities and Exchange Commission of Pakistan and the Federal Board of Revenue.

The scope of alternate dispute resolution mechanism was made more effective for all the four federal taxes. In the sales tax regime, exemption of sales tax was allowed retrospectively from March 19, 2015 on import or acquisition of aircraft on wet or dry lease by Pakistan International Airlines. Sales tax rate has been reduced to 7pc on laser land levellers. Similarly, there will a reduced sales tax of 5pc on TV/Internet set top boxes or satellite receivers up to June 30, 2017, subject to approval of type by Pemra.

Reduced rate of 5pc on import of milk chillers, tabular heat exchanger, milk processing plant, milk spray drying plant, milk ultra-high temperature processing (UHT) plant, milk filters and any other machinery and equipment for manufacturing of dairy products, has been introduced, subject to condition that the importer is registered with Pakistan Dairy Association.

Published in Dawn, June 26th, 2016