ISLAMABAD: The Federal Board of Revenue (FBR) has taken a decisive step by issuing new regulations that will require companies to disclose the true beneficiaries and provide their information to the tax authorities no later than Dec 31, 2023.
This move aims to enhance transparency and accountability in the business sector. These rules, outlined in the notification SRO1117 of 2023, were implemented despite staunch opposition from both the Securities and Exchange Commission of Pakistan and the Pakistan Business Council (PBC).
The primary goal of these regulations is to ascertain the true identity of the “natural person” who possesses a shareholding or voting right exceeding 25 per cent, or exercises ultimate control through means other than shareholding and voting rights.
The rules were made for the implementation of Section 181E in the Income Tax Ordinance 2001 by the Finance Act 2022.
In a recent article, former FBR chairman Shabbar Zaidi expressed his opinion on the matter, asserting that the information being requested by the FBR FBR from companies is neither necessary nor relevant to an individual’s income.
Mr Zaidi further emphasises that this particular data does not fall within the purview of the information outlined in the Model OECD and UN Conventions, as well as the broader treaty framework.
On the other hand, the PBC has raised significant concerns regarding the FBR’s rules, which mandate companies to maintain records of beneficial owners. This move has sparked concern as it duplicates the documentation already required by the SECP.
The SECP has established legal requirements that outline a comprehensive procedure for companies to identify and acquire information regarding their ultimate beneficial owners. These requirements also mandate companies to report this information to the SECP by utilising specific forms as prescribed by the commission.
In the new regulation, every company and association of persons (AOP) is now required to provide the necessary details of its beneficial owners to the FBR upon initial registration. This information must be submitted electronically through the FBR’s online system, following the guidelines outlined in Form BOF-01 of Part IXA of the First Schedule to these rules.
Moreover, every company and AOP that is already registered with the FBR will be required to provide the details of its beneficial owners to the FBR. This requirement must be fulfilled by Dec 31.
The prescribed method for submitting these particulars is through Form BOF-01, which is a part of Part IXA of the First Schedule to the rules. The submission is to be made electronically via the FBR’s online system.
Under the regulations, any modifications to the details of the beneficial owner must be promptly reflected in the updated record. This process must be completed within a maximum of 30 days from the date of the change.
According to the provisions outlined in section 2(36) of the Income Tax Ordinance 2001, individuals such as the settlor, trustee, founder, promoter, beneficiary, or a specific class of beneficiaries, will assume the role of beneficial owners within a non-profit organisation (NPO).
In a notable exemption, NPOs that serve the general public will be relieved from the obligation to disclose information about their beneficial owners, according to the rules. If there are no alterations in the beneficial owners the company or AOP, will be required to provide a “Certificate of Confirmation for Beneficial Owner” under the guidelines outlined in Form (BOF-02).
Published in Dawn, August 29th, 2023
