ISLAMABAD: Leading tax experts have apprehended that litigation will start between the Federal Board of Revenue (FBR) and the sectors making windfall profits after enforcing section 99D of the Income Tax Ordinance 2001.
Habib Fakhruddin, FCA Senior Partner Amir Alam Khan & Co., Chartered Accountants told Business Recorder that additional tax on certain income, profits and gains has been introduced through Finance Act 2023. The dealing sections included section 99D, Rule (6DB) of 4thSchedule, Rule (4AC) of 5th Schedule and Rule 7(CA) of 7th Schedule of the Income Tax Ordinance 2001.
Unexpected income, profits and gains derived by a Company of specified sectors, as a result of any “economic factor or factors” during the year or any of the preceding three years will be subject to “additional tax” retrospectively from tax year 2023.
The Federal Government has been empowered to specify the sector or sectors, for this purposes; determine windfall income, profits or gains and economic factor or factors including but not limited to international price fluctuation having bearing on any commodity price in Pakistan or any sector of the economy or difference in income, profit or gains on account of foreign currency fluctuation.
The FBR will prescribe the rate of such additional tax, not exceeding fifty percent of such income, profits or gains.
The government will prescribe the scope, manner, conditions and time for payment of such additional tax and specify any person or classes of persons, any income or classes of income exempt from the application of this section, subject to any condition.
It has also been provided that the Federal Government shall place before the National Assembly the notification issued under this section within 90 days of the issuance of such notification or by the 30th day of June of the financial year, whichever is earlier.
The retrospective application of this section not only for the tax year 2023 but also three preceding tax years will be the moot point for litigation, he maintained.
By corresponding amendments to the 4th, 5th and 7th Schedules, the provisions of this newly-inserted section have also been made applicable to companies engaged in the business of Insurance, exploration and production of petroleum and banking, he added.
Copyright Business Recorder, 2023