The tax is required to be paid in US dollars on declaration of foreign assets by resident persons under the amnesty scheme. According to the Frequently Asked Questions (FAQs) issued by Tola Associates on 'one-time amnesty scheme' or 'assets declaration scheme' here on Saturday, tax is required to be paid in Pak rupees on declaration of local assets by resident persons. However, the tax is required to be paid in USD on declaration of foreign assets.
The tax experts have responded to different legal questions raised on the amnesty schemes, as the FBR has not issued any explaining circular responding queries intended to avail the scheme.
To a query, Ashfaq Tola explained that Finance Act, 2018 added a proviso to section 5(4) of Protection of Economic Reforms Act, 1992, whereby, cash deposits into foreign currency accounts of citizen of Pakistan, who is a resident non-filer, are prohibited. Therefore, being a non-resident person, he can operate his foreign currency account even if he is a non-filer. However, currently, the FBR issues and updates a list of active tax payers time to time, containing names of persons who are filer. This list does not take into account the non-resident persons who are not required to file return of income. In such a case it will be practically much difficult for a non-resident and non-filer citizen to operate foreign currency accounts.
A question was raised if a person during audit selection under section 214 D, can avail this facility of amnesty scheme. The tax expert responded, "Yes, a person may opt for the scheme during audit selection under section 214D as the acts only prohibits declaration of such assets with respect to whom proceedings are pending in any court of law (i.e. Appellate Tribunal, High Court or Supreme Court)."
The question has been raised whether an AOP/company can declare their foreign assets under the scheme. The response is negative. As per section 4 of the foreign act, an AOP or Company cannot declare their foreign assets under the scheme. Only citizens of Pakistan, wherever they may be, can declare their assets except public office holder, his/her spouses and dependents.
Another query was whether a person can avail amnesty scheme who is already assessed under section 122(5A) where department raised tax demand, however, the person has not approached appellate tribunal yet.
The tax expert responded, "Yes, a person may opt for the scheme even after the passing of order by the department as the acts only prohibits declaration of such assets with respect to whom proceedings are pending in any court of law (i.e. Appellate Tribunal, High Court or Supreme Court)."
The tax expert received a question whether a person can file declaration more than one time for example first declaration made on 31st May and thereafter 20th June 2018. It has been responded that the Acts are silent on the issue as nothing has been provided in the acts with respect to filing of multiple declarations.
"Therefore, in our opinion, multiple declarations will not be allowed." Moreover, there is no option for multiple or revised declarations on IRIS portal too. If anyone attempts to even open declaration again after already filing the first one, a dialogue box is displayed restricting the operation.
About the consequences for not availing amnesty scheme, Ashfaq Tola explained that Pakistan is a signatory to Organization for Economic Cooperation and Development's (OECD) Multilateral Convention on Mutual Administrative Assistance in Tax Matters. The convention provides that member countries (parties) shall provide administrative assistance to each other in tax matters. Such assistance may involve, where appropriate, measures taken by judicial bodies.
The above assistance may be in form of exchange of information, including simultaneous tax examinations and participation in tax examinations abroad; assistance in recovery, including measures of conservancy; and service of document. Moreover, the United Arab Emirates, which has a lion's share of Pakistani offshore investments, has also signed the convention on April 21, 2017.
The OECD has obligated its member countries to implement regulations for extensive documentation. These documentations' requirements and reporting obligations of member OECD countries will result in discovery of hidden foreign assets of Pakistani citizens.
Therefore, in the event of non-declaration and subsequent discovery of assets, the FBR will have powers to add the values of undeclared assets in the income of the tax year to which such assets pertain under section 111 of Income Tax Ordinance 2001 (ITO) and consequently shall charge both taxes and penalties.
"Whether is a non-resident person required to file wealth statement and under what circumstances?" a question has been raised. He responded that as per section 116 of ITO, a non-resident individual is not required to file wealth statement. However, the commissioner may issue notice to a non-resident person to file wealth statement. In such a case, the non-resident individual will be required to file wealth statement.
A question has been raised whether a non-resident person acquired undeclared local assets through legally earned and tax paid foreign income, legally remitted to Pakistan. Will he be required to pay tax again upon declaration of the assets?
Ashfaq Tola replied in affirmative, saying he will be required to pay tax again at the time of declaration and no adjustment/credit of the taxes previously paid shall be available. However, if he has filed the wealth statement for the year to which such asset pertains without declaring the asset, he may opt to revise his wealth statement and declare his assets therein avoiding the option under the scheme. However, the revision may attract audits and inquiries from the department.
If a non-resident person acquired foreign assets through legally earned and tax paid money, but the same was not declared. Can he declare the same" The tax expert replied in affirmative, saying he can declare such assets after paying taxes under the scheme. However, if he has filed the wealth statement for the year to which such asset pertains without declaring the asset, he may opt to revise his wealth statement and declare his assets therein avoiding the option under the scheme. However, the revision may attract audits and inquiries from the department.
A resident person acquired undeclared foreign assets through legally earned and tax paid income, legally remitted outside Pakistan. Will he be required to pay tax again upon declaration of the assets? The tax expert replied in affirmative, saying he will be required to pay tax again at the time of declaration and no adjustment/credit of the taxes previously paid shall be available.
However, if he has filed the wealth statement for the year to which such asset pertains without declaring the asset, he may opt to revise his wealth statement and declare his assets therein avoiding the option under the scheme. However, the revision may attract audits and inquiries from the department.
Another query was that a resident person acquired undeclared foreign assets through legally earned and tax paid foreign income. Will he be required to pay tax again upon declaration of the assets? Ashfaq Tola responded in affirmative, saying he will be required to pay tax again at the time of declaration and no adjustment/credit of the taxes previously paid shall be available. However, if he has filed the wealth statement for the year to which such asset pertains without declaring the asset, he may opt to revise his wealth statement and declare his assets therein avoiding the option under the scheme. However, the revision may attract audits and inquiries from the department.
People have approached the tax firm with the question if value of shares and securities is allowed at net of leveraging or it shall be determined at gross values. Tax expert responded that local Act is silent with respect to treatment of liabilities corresponding to the assets being declared. "In our opinion, corresponding liabilities will not be taken into account while valuing the assets. Therefore, the values of shares will be determined at gross values."
The definition of holder of public office refers to person holding certain positions during preceding ten years. Since when will the period be commenced? The tax expert responded that the scheme does not provide any clarification in this regard. "Therefore, in our opinion, the period shall commence from 8th April 2008 i.e. 10 years preceding to the date of commencement of the foreign Act and Local Act. In other words, a person who has ceased to hold public office as on 8th April 2008, will be eligible for the scheme," Ashfaq Tola said.
Another query was if holder of public office is officially permitted to work privately, will he be eligible for amnesty? The tax expert opined that the Acts are silent with respect to eligibility of such person to avail the scheme.
"Therefore, in the absence of any embargo, in our opinion, the public office-holders permitted to work privately may avail the scheme to declare assets generated out of their private practice."
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