Filing income tax returns: FBR gives option to exporters to opt out of final tax regime

The Federal Board of Revenue (FBR) has given an option to the exporters from tax year 2015 and onwards to opt out of the final tax regime and file their returns of income under normal tax regime under Finance Act 2015.
The Federal Board of Revenue's (FBR) income tax circular, explaining Finance Act 2015, said that as per provisions of section 154 of the Income Tax Ordinance, the tax withheld on export proceeds by an exporter is final tax on their income. Through Finance Act, 2015 a new sub-section (5) has been added in section 154 of the Ordinance whereby the exporters have been given an option from tax year 2015 and onwards to opt out of the final tax regime and file their returns of income under normal tax regime. However, the taxpayer shall exercise the said option every year at the time of filing of their return of income. Furthermore, the tax deducted under this section on export proceeds shall be treated as minimum tax liability of the taxpayer on export income. Income from sales, other than exports, will be taxed in normal manner as before.
The FBR said that as per provisions of sub-section (2) of section 137 of the Ordinance the taxpayer was required to pay the tax payable determined as a result of an assessment order or an amended assessment order within 15 days from the service of the notice. Thorough Finance Act 2015 the time allowed for payment of the tax liability has been extended for further fifteen days. Now the taxpayer is required to pay the tax payable within 30 days from the date of service of the demand notice.
However, the time allowed for payment of tax liability created as a result of provisional assessment order passed u/s 122 C of the Ordinance has been reduced from sixty days to forty five days. Besides, amendment has also been made in the proviso to above referred sub-section whereby the taxpayer may pay the tax payable as a result of provisional assessment order prior to the expiry of the forty five days instead of sixty days.
While explaining payment of advance tax under section 147(4A), FBR said that prior to the Finance Act, 2015, a taxpayer whose advance tax liability was likely to be more than the amount the taxpayer was required to pay under sub-section (4) of section 147, could furnish an estimate of the higher amount payable under sub-section (4A) at any time before the last instalment was due and thereafter pay such amount by the due date of the last installment. Through the Finance Act, 2015, sub-section (4A) of section 147 has been substituted so that now a taxpayer whose advance tax liability is likely to be more than the amount the taxpayer is required to pay under sub-section (4) of section 147 shall estimate the tax payable for the relevant tax year at any time before the second installment of the relevant tax year of that taxpayer is due. The taxpayer shall also pay 50 percent of the tax payable on the basis of higher estimate by the due date of the second quarter of the relevant tax year after making adjustment of the amount, if any, already paid under sub-section (4). The remaining 50 percent shall be paid in two equal instalments by the due date of the third and fourth quarter of the relevant tax year.
The FBR said that through Finance Act, 2014, a new concept of Alternative Corporate Tax (ACT) was introduced which is applicable to companies only whereby it was required by a company to pay the higher of the ACT or the Corporate Tax. Corporate Tax was defined in section 113 C to mean total tax payable by the company, including on account of minimum tax and final taxes payable, under any of the provisions of this Ordinance subject to certain exclusions. ACT was defined to mean the tax at a rate of seventeen percent of a sum equal to accounting income less certain amounts, as specified in sub-section (8) including exempt income, income chargeable under section 65D, 65E, 100C, income subject to tax under section 37A, income subject to final tax chargeable under sub-section (7) of section 148, section 150, sub-section (3) of section 153, sub-section (4) of section 154, section 156 and sub-section (3) of section 233 and income subject to clause (18A), Part II of the Second Schedule to the Ordinance. Similarly, ACT was not applicable to taxpayers chargeable to tax under Fourth, Fifth and Seventh Schedules to the Ordinance.
Through Finance Act, 2015, section 113C has been redrafted and instead of taking the approach of excluding certain taxes from the definition of Corporate Tax, the definition has been made exhaustive by including only intended taxes payable. The amendment is made for the reason that every time a new tax is introduced or an existing tax is made final, presumptive or minimum, which is not intended to be included in ACT, corresponding amendment would have been required in this section as well. Moreover, consequent amendments in sub-section (8) have also been made. An explanation has also been inserted, which further clarifies that taxes paid or payable other than payable under Division II of Part I of the First Schedule shall remain payable in accordance with the mode or manner prescribed under the respective provisions of this Ordinance.
Secondly, in addition to tax credit under 65B, which is allowed against Alternative Corporate Tax, tax credit under section 64B shall also be allowed, FBR added.