Rate of tax on dividend received by banking company to be 20 percent: FBR

The Federal Board of Revenue has amended the Seventh Schedule of the Income Tax Ordinance 2001 whereby rate of tax on dividend received by a banking company from its asset management company will be taxed @ 20 percent in the hands of such banking company.
According to an income tax circular issued here on Tuesday, in pursuance of the amendment made in Rule 1, clause (c) of the Seventh Schedule to Income Tax Ordinance 2001, through Finance Act, 20 (whereby limit of provisioning for advances and off-balance sheet items had been allowed @5 percent of total advances for consumers and Small & Medium Enterprises) it has been provided that where such provisioning is less than 5 percent of advances for consumer and SMEs, then actual provisioning for the year shall be allowed and this provisioning shall be allowable from the first day of July, 2010.
Through another amendment it has been provided that tax deducted on profit on debt from debt instruments Government securities including Treasury Bills and Pakistan Investment Bonds from a non-resident person having no permanent establishment in Pakistan shall be a "final tax" where the investments for purchase of these instruments are exclusively made through a Special Rupee Convertible Account maintained with a Bank in Pakistan, under Rule 2 of the Seventh Schedule a proviso has been added whereby rate of tax on dividend received by a banking company from its asset management company will be @ 20 percent in the hands of such banking company.
The circular said that the concept of "Advance Ruling" was brought to facilitate foreign investors However a foreign company with a permanent establishment in Pakistan is taxed as a "resident company" and Advance Ruling in such cases is likely to be attracted in the cases of resident companies also Therefore in order to bring clarity in the application of "Advance Ruling' regime non-resident taxpayer with permanent establishment in Pakistan shall not be entitled to "Advance Ruling'.
In order to clarify the ambiguity regarding the applicability of the provisions of section 238A of the Income Tax Ordinance 2001 the expression or auction by a tender" has been inserted to clarify that advance tax on sale through auction or auction by a tender is applicable Remaining provisions of section 236A of the Income.