Federal Board of Revenue (FBR) has stopped issuing exemption certificate to the service providers including financial institutions, telecommunication companies, brokerage houses, etc as field force is misinterpreting the amendments made to section 153 of Income Tax Ordinance, 2001.
Abdul Qadir Memon, President, Pakistan Tax Bar Association (PTBA) told Business Recorder on Monday that the board has issued circular 3 to explain amendments made to section 153. "Although the circular 3 does not specify that the tax withheld on rendering or providing services by all the taxpayers (including companies) would be 'minimum tax', the field force is misinterpreting it as 'minimum tax' even in the case of companies," he said.
President PTBA said the tax withheld on rendering or providing of services by the taxpayers other than companies ie individuals and AOP(s) would be final tax on the income of a resident person arising from such transactions. According to inserted clause (iii) in the second proviso to sub-section (6) of section 153 of the ordinance through the Finance Act, 2009: "The rendering of or providing of services referred to in sub-clause (b) of subsection (1) provided that tax deducted under sub-clause (b) of sub-section (1) of section 153 shall be 'minimum tax."
Memon said the conceptual change has been brought in the withholding tax regime as now final taxation is transformed into the 'minimum taxation'. Therefore, the tax withheld from payments other than companies considered as minimum tax because it is final liability.
He said that no amendment has been made in the first proviso to the sub-section (6) of section 153 of the ordinance, therefore the tax withheld from payments for rendering or providing of services in the case of corporate taxpayers would not constitute a "minimum tax".
As a result of amendment made in sub-section (6), the tax deducted on payments made for rendering or providing of services will be considered as minimum tax and all taxpayers falling in the ambit of section 153(1) (b) would file return under the normal tax regime instead of statement under final tax regime.
But, he said, the field officers are misinterpreting the above circular, which caused to stop the issuance of exemption certificate to companies. He urged the board to issue notice in this regard to facilitate taxpayers, saying that FBR should mention that sub-section (6) shall not apply to companies in respect of transactions referred to in clause (b) of sub-section (1).
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