The Federal Board of Revenue may propose an amendment to the Income Tax (Amendment) Ordinance, 2011 to clarify applicability of 15 percent income tax surcharge on those companies whose income year ended on December 31, 2010.
Sources told Business Recorder here on Thursday that the FBR is likely to lose revenue on account of 15 percent surcharge on income tax payable by those companies whose income year ended on December 31, 2010. This is due to the reason that the tax year of such companies whose income year ended on December 31, 2010 was Tax Year 2011. Therefore, starting January 1, 2011 their Tax Year 2012 has begun. Hence, they are not obliged to pay 15 percent income tax surcharge because it is only applicable for Tax Year 2011. In order to collect 15 percent surcharge from the companies referred above, the FBR can either issue the clarification or request for a minor amendment to the Income Tax (Amendment) Ordinance, 2011. The experts said that if the Ordinance was amended to state that, "15 percent surcharge on income tax payable during the period of March 15 to June 30, 2011 is applicable to all persons irrespective of their tax year," then all the persons will be obliged to pay this 15 percent surcharge.
Sources said that the Income Tax (Amendment) Ordinance, 2011 says, "this surcharge shall not be payable for the tax year 2010 and prior tax years and shall be applicable, subject to the provisions of sub-section (1), for the tax year 2011 only." The language of the Ordinance is very clear that it would be applicable for the Tax Year 2011 only. Now, the government has two options to collect the surcharge from persons, whose income year was closed on December 31, 2010 by amending the Income Tax (Amendment) Ordinance. The second option is to continue with the existing provisions of the Income Tax (Amendment) Ordinance and not collect surcharge from those, which are not legally covered under the said Ordinance. In case the existing arrangement continues, surcharge would be payable on the payment transactions made between March 15, 2011 and June 30, 2011. If the status quo has been maintained, the surcharge would be applicable on tax payable under the provisions of the Income Tax Ordinance 2001.