FBR clarifies tax rates

There has been no change in tax charged under Section 5 and withholding tax under Section 150 of the Income Tax Ordinance and both tax rates still remain at 7.5 percent in cases of dividends declared or distributed by purchaser of a power project privatised by WAPDA or on shares of a company, supplying coal exclusively to power generation projects.
Through an income tax circular 2 of 2015, the Federal Board of Revenue (FBR) has clarified that the rate of Dividend Tax [Section 5 and 150 and Division III, Part I of the First Schedule] of the Income Tax Ordinance.
Prior to the Finance Act, 2015, tax on dividends was charged to tax @ 10 percent of the amount of dividend under section 5 of the ITO, 2001. Now, the tax on dividends has been enhanced to 12.5 percent under section 5. In the case of dividend received by a person from a mutual fund, tax shall be charged under section 5 @ 10 percent of the gross amount of dividend.
The withholding rate under section 150 on dividends was 10 percent for filers and 15 percent for non-filers prior to the Finance Act, 2015. Now, the withholding tax rate under section 150 has also been enhanced to 12.5 percent for filers and 17.5 percent for non-filers. In case of mutual funds and collective investment schemes no change in rates has been made.
Further, prior to Finance Act, 2015, there was no withholding tax on specie dividend received by a person. By introducing a new section 236S, every person making payment of dividend-in-specie shall collect tax on the gross amount of dividend-in-specie paid @ 12.5 perent for filers and 17.5 percent for non-filers.
It is clarified that there has been no change in tax charged under section 5 and withholding tax under section 150 and both tax rates still remain at 7.5 percent in cases of dividends declared or distributed by purchaser of a power project privatised by WAPDA or on shares of a company, supplying coal exclusively to power generation projects, FBR added.
The Federal Board of Revenue (FBR) has clarified that the private motor vehicles, for the purpose of collecting tax, covers car, jeep, van, sports utility vehicle, pick-up trucks for private use, caravan automobile, limousine, wagon and any other automobile used for private purpose.
The income tax circular 2 of 2015 of the FBR explains the types of private motor vehicles in respect of which tax is collectable. Previously, at different places in Income Tax Ordinance 2001, the vehicles to be subject to collection of advance tax under section 231B and 234 were variously specified. This led to some confusion. In order to remove ambiguity it has been specified that, wherever tax is collectable in respect of private motor vehicles, it shall include car, jeep, van, sports utility vehicle, pick-up trucks for private use, caravan automobile, limousine, wagon and any other automobile used for private purpose.
In order to remove any ambiguity regarding the date of registration of motor vehicle for the purpose of collection of tax under section 231B, the expression "the date of first registration", has been defined through Finance Act 2015 as under: Firstly, the date of issuance of broad arrow number in case a vehicle is acquired from armed forces of Pakistan. Secondly, the date of registration by the Ministry of Foreign Affairs in case the vehicle is acquired from a foreign diplomat of a diplomatic mission in Pakistan. Thirdly, the last day of the year of manufacture in case of acquisition of an unregistered vehicle for a Federal or a Provincial Government. Fourthly, in all other cases the date of first registration by the Excise and Taxation Department.
The FBR has also explained amendments in Withholding Taxes Collected on Transactions Related to Private Vehicles, Goods Transport Vehicles and Passenger Transport Vehicles under relevant sections: 231B, 234, Division III of Part IV and Division VII of Part IV of the First Schedule.
Through Finance Act 2015, the following major changes have been made in the advance Income Tax collected on transactions related to motor vehicles: Firstly, the rate of advance income tax collected at the time of payment of Motor Vehicle Tax for private motor vehicles has been revised. Secondly, the rate of advance income tax collected at the time of transfer of private motor vehicles has been revised. Thirdly, types of private motor vehicles in respect of which tax is collectable have been specified to remove ambiguity. Fourthly, the date of first registration, for the purpose of collection of tax under section 231B, in various scenarios has been specified. Fifthly, the rate of advance income tax collected at the time of payment of Motor Vehicle Tax for Goods Transport vehicles has been revised and separate rates for filers and non-filers of Income Tax Return have been introduced. Sixthly, the rate of advance income tax collected at the time of payment of Motor Vehicle Tax for Passenger Transport vehicles has been revised and separate rates for filers and non-filers of Income Tax Return have been introduced.
Through Finance Act 2015, the rates of advance income tax to be collected under section 234 with Motor Vehicle Tax for all goods transport vehicles have been increased, and separate rates for filers and non-filers have been specified, FBR added.