There is confusion in Finance Act 2018 regarding date for applicability of the amnesty schemes which needs to be immediately clarified by the Federal Board of Revenue (FBR). Shahid Jami, a Lahore-based Tax Adviser informed Business Recorder that an anomaly has been seen in the Finance Act, 2018 wherein the separate Acts of amnesty schemes are appearing at Clauses 11 and 12 of the Finance Act 2018. These Acts provide that they will come into force at once whereas section 1(3) of the Finance Act 2018 provides that the Act shall come into force on the first day of July 2018 except certain clauses mentioned therein which shall have effect on the next day of assent given to the Act by the President. Whereas, the clauses mentioned do not include Clauses 11 and 12.
He stated that this bad drafting has caused confusion whether the Act is applicable on the date of assent by the President or from July 1, 2018 after the expiry of deadline for filing declaration. He urged that the FBR on its website should provide facility of online question answers in order to immediately address the queries, which will markedly increase the pace of filing of declarations.
He said that although a lot of taxpayers are consulting their tax advisers in respect of details of the amnesty scheme and their individual situations for availing the same yet till date no declaration of foreign assets has been actually filed due to multiple reasons including confusions in the schemes.
Shahid Jami stated that based upon varied situations of the taxpayer, more than fifty questions were sent to the Board for Clarification; however, instead of a prompt response there is no urgency on their part in spite of follow up.
He explained that the most common situation is that there are undisclosed immovable properties outside Pakistan which are fetching rental income and there is undisclosed bank account where the rental receipts are deposited, out of which some of the amounts are spent overseas. Whereas, the Foreign Assets declaration and Repatriation Act/Ordinance only covers Foreign Assets and does not the foreign income. Since some of the foreign income has been spent outside Pakistan; therefore, the bank balance as on April 9, 2018 does not cover the untaxed rental income.
He stated that the aforesaid situation raises following questions which are still unanswered: Whether foreign income is not covered in both the declarations; whether a resident person who has undisclosed foreign income can declare the foreign income in the declaration meant for domestic assets which have columns for declaring undisclosed income as well.
Jami stated that as per his opinion, the resident persons are required to declare their foreign income in their returns of total income filed in Pakistan and accordingly any undisclosed foreign income can be declared in the column of undisclosed income prescribed under Voluntary Declaration of Domestic Act/Ordinance. He stated that non-mentioning of foreign income in the declaration of foreign assets does not bar the said disclosure in the domestic declaration. He was of the opinion that all sort of income, regardless of heads of income and source as within or outside Pakistan, are covered in the Amnesty declaration where the foreign income has been utilized and is not covered in the bank balance of overseas bank accounts. But he stated that the FBR must clarify so that the official interpretation is known and can be acted upon by the taxpayers.
He stated that another situation is that wherein in a foreign undisclosed bank account the balance as on 09.04.2018 was supposed to be US $10,000; however, prior to that since opening of accounts millions of dollars were deposited and withdrawn with peak balance of US $500,000 on 31.12.2015 and all the transactions are unexplained. This situation gives rise to the questions whether in the declaration disclosure of bank balance as on 09.04.2018 of US $10,000 would give protection to the whole activity of the account; whether in addition to disclosure of US $10,000 as bank balance another disclosure of US $490,000 is required to cover the peak deposit and whether in addition to above amounts of US $10,000 and US $490,00, some further declaration is required in respect of millions of dollars credited/debited since the opening of the account.
Jami stated that as per his opinion, in the declaration there should be three entries in order to cover the balance, peak deposit as well as transaction in the account since opening of account. He urged that an optional attachment be provided with the declaration at the e-portal so that the taxpayer can provide any additional information or calculation to make his declaration more clear. But, he stated that an earlier answer of the FAQs at the FBR website erroneously states that only the balance is required to be disclosed. He stated that this needs to be clarified/corrected at the earliest for certainty.
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