The Federal Board of Revenue (FBR) Wednesday announced that the acknowledgement of the returns filed under Voluntary Tax Compliance Scheme (VTCS) would automatically place new taxpayers/traders on Active Taxpayer List (ATL) within seven days after filing of return. According to an income tax circular issued by the FBR here on Wednesday, new taxpayer trader for tax year 2015 shall pay one percent tax only on the declared working capital, which shall not exceed Rs 50 million, and furnish a simplified one page income tax return supported by proof of tax payment and copy of CNIC at the facilitation desk of concerned Regional Tax Office.
It said that the government has introduced Voluntary Tax Compliance Scheme (VTCS) through the Income Tax Amendment Act, 2016 in the light or negotiations with different trade bodies in the wake of withholding tax under section 236P on banking transactions. VTCS not only provides an opportunity to traders who were non existing taxpayers but the benefits of this scheme also extends to traders who are existing taxpayers.
The salient features of VTCS for new traders are as under: It said that there are 2.8 million commercial electricity consumers in the country out of which filers are merely 0.6 million and thus majority of traders are out of tax-net. Trade bodies attributed this gap mainly to complexity of income tax return and intricacies of tax laws. VTCS has attempted to resolve these irritants by facilitating new taxpayer trader to file single page income tax return under the simplified special provision of section 99A or Income Tax Ordinance, 2001. Part I of the Ninth Schedule deals with income tax affairs of a new taxpayer trader who has never furnished income tax return in last ten tax years 'ie, from tax year 2005. In order to boost confidence of new taxpayer trader, a long term scheme is devised so that trader remains aware of his tax affairs in clear terms for four years and may carry out business without any fear of tax uncertainty.
New taxpayer trader in VTCS may be an individual proprietorship or an Association of persons engaged in the business or buying and selling of goods without further processing. In certain trading activities a trader may also be performing after sales services by doing repair jobs etc who may also qualify for VTCS. However, any person engaged in business of service rendering or providing or services ill the light of section 153(7)(ii) of Income Tax Ordinance, 2001 does not qualify for VTCS. Similarly any person whose Sales Tax affairs are covered under Rule 5 of Chapter 11 of Sales Tax Special Procedure, 2007 is also not eligible for VTCS.
It said that the new taxpayer trader for tax year 2015 shall pay one percent tax only on the declared working capital, which shall not exceed Rs 50 million, and furnish a simplified one page income tax return supported by proof of tax payment and copy of CNIC at the facilitation desk of concerned Regional Tax Office. Acknowledgement of the return would automatically place new taxpayer trader on ATL within seven days after filing of return.
For tax year 2016, the trader shall declare at least three times of turnover on working capital declared in tax year 20 I5 and pay turnover tax as per rule 4 of Part I of the Ninth Schedule. Trader shall furnish on or before due date, a simplified one page return supported by proof of lax payment and copy of CNIC at the facilitation desk of concerned Regional Tax Office. Acknowledgement of the return would automatically place new taxpayer trader on ATL within seven days after filing of return.
For the tax year 201 7 the new taxpayer trader shall pay 25% tax over and above the tax paid in tax year 2016. Trader shall furnish on or before due date a simplified one page return supported by proof of tax payment and copy of CNIC at the facilitation desk of concerned Regional Tax Office Acknowledgement of the return would automatically place new taxpayer trader on ATL within seven days after filing of return, it said.
For the tax year 2018 the new taxpayer trader shall pay 25% tax over and above the tax paid in tax year 2017. Trader shall furnish on or before due date a simplified one page return supported by proof of tax payment and copy of CNIC at the facilitation desk of concerned Regional Tax Office. Acknowledgement of the return would automatically place new taxpayer trader on ATL within seven days after filing of return.
The VTCS provides a facility to a new taxpayer trader that he shall not be declared as a prescribed person for the purpose of withholding tax under section 153 of Income Tax Ordinance while making payments on purchases of goods, it said.
VTCS also provides a facility to take benefit of imputable income in wealth or accounts on the basis of tax paid during tax years 2016, 2017 and 2018 so as to explain the source of funds for any investment or expenditure with particular reference to section III of Income Tax Ordinance, 2001.
It said that the new taxpayer trader under VTCS shall be immune from audit either by the Commissioner under section 177 or by the Board under section 214C of the Income Tax Ordinance.
The Commissioner Inland Revenue shall seek prior approval from the Board where any action under section 122 of the Ordinance, is warranted for tax year 2015, 2016, 2017 and 2018 or where any action under section 114 of the Ordinance for filing of return of any prior year to tax year 2015 is warranted in the case covered under the VTCS.
New taxpayer trader under VTCS shall not be required to get himself registered for sales tax if he qualifies under Rule 6 of Chapter II of Sales Tax Special Procedure, 2007 whereby sales tax is collected on electricity bills of an amount below Rs 600,000 annually which is sufficient to discharge his sales tax liability.
It stated wholesaler or dealer who is not registered before availing the benefit of VTCS shall not be required to get himself registered for sales tax if he is complying with the conditions under Rule 6 of the Part II of Sales Tax Special Procedure.2007.
New taxpayer trader is not required to file wealth statement for tax years 2015.2016, 2017 and 2018 along with simplified return under the VTCS.
New taxpayer trader under the VTCS shall not claim withholding tax adjustment or tax credits against tax payable for tax years 2015 to 2018.
New taxpayer trader shall be required 10 file returns for all four years from tax year 2015 to 2018. Any default in filing of return for any tax year shall disqualify him from VTCS or after furnishing of the return if found that he was not eligible under VTCS and new taxpayer trader shall be dealt with the existing provision of law from tax year 2015 and onwards.
The salient features of VTCS for existing traders are as under: It said that the VTCS provides facility to existing taxpayer trader whereby he may furnish prescribed income tax return under the simplified special provision of section 99A of Income Tax Ordinance. 2001. Part II of the Ninth Schedule deals with income tax affairs of an existing taxpayer trader who has either filed tax return up to tax year 2014 or who has furnished income tax return for any tax year during last ten tax years, ie, from tax year 2005. In order to boost confidence to an existing trader, a long term scheme has been devised so that trader remains aware of his tax affairs in clear terms for four years and may carry out business without any fear of tax uncertainty.
Existing taxpayer trader shall furnish prescribed return for the tax year 2015 supported by evidence of tax paid at the facilitation desk of concerned Regional Tax Office. Acknowledgement of the return would automatically place existing taxpayer trader on ATL within seven days after filing of return.
Existing taxpayer trader shall pay tax for tax year 2015 more than 25 percent of tax paid in tax year 2014 or for the latest tax year for which return was furnished or tax on turnover as per rule 4 of Part I of the Ninth schedule or Rs 30,000 whichever is higher.
Existing taxpayer trader who has already furnished return for tax year 2015 may avail the facility under VTCS by way of furnishing of revised return for which no approval from the Commissioner is required. Revised return shall be accompanied with payment of tax which shall be 10 percent more than the tax paid on the basis of original return or tax as per rule 2 of Part II of the Ninth Schedule whichever is higher, it said.
For tax year 2016, trader shall pay 25 percent higher tax on the basis of taxable income of tax year 2015 or tax on turnover as per rule 4 of Part I of the Ninth Schedule whichever is higher. Trader shall furnish return on or before due date supported by proof of tax payment at the facilitation desk of concerned Regional Tax Office. Acknowledgement of the return would automatically place existing taxpayer trader on ATL within seven days after filing of return.
For tax year 2017, trader shall pay 25 percent higher tax on the basis of taxable income of tax year 2016 or tax on turnover as per rule 4 of Part I of the Ninth Schedule whichever is higher. Trader shall furnish return on or before due date supported by proof of tax payment at the facilitation desk of concerned Regional Tax Office. Acknowledgement of the return would automatically place existing taxpayer trader on ATL within seven days after filing of return.
For tax year 2018, trader shall pay 25% higher tax on the basis of taxable income of tax year 2017 or tax on turnover as per rule 4 of Part I of the Ninth Schedule whichever is higher. Trader shall furnish return on or before due date supported by proof of tax payment at the facilitation desk of concerned Regional Tax Office. Acknowledgement of the return would automatically place existing taxpayer trader on ATL within seven days alter filing of return.
Existing trader shall not be obliged to furnish wealth statement if his taxable income is less than Rs one million. Existing taxpayer trader shall not be a prescribed person to deduct tax under section 153 of Income Tax Ordinance while making payments for purchases of goods.
The VTCS provides a facility to trader to take benefit of imputable income in his wealth statement or accounts on the basis of tax paid during tax year, 2015-2018 provided that existing trader shall pay tax @l percent on the difference between the said imputable income and taxable income. In this way he is allowed to explain source of funds for any investment or expenditure in the light of section III of the Income Tax Ordinance, 2001.
Existing taxpayer trader under VTCS is immune from audit either by the Commissioner under section 177 or by the Board under section 214C of the Income Tax Ordinance. Commissioner Inland Revenue shall seek prior approval from the Board where any action under section 122 of the Ordinance, is warranted for tax year 2015, 2016, 2017 and 2018 or where any action under section 114 of the Ordinance for filing of return of any prior year to tax year 2015 is warranted in the case covered under the VTCS.
Existing taxpayer trader under VTCS shall not be required to get registration for sales tax if he qualifies under Rule 6 of Chapter II of Sales Tax Special Procedure, 2007 whereby sales tax is collected on electricity bills of an amount below of Rs 600,000 annually which is sufficient to discharge his sales tax liability. Wholesaler or dealer who is not registered before availing the benefit of the VTCS shall not be required to get himself registered for sales lax if he is complying with the conditions under Rule 6 of the Part II of Sales Tax Special Procedure, 2007. Existing taxpayer trader under the VTCS cannot claim withholding lax and refunds adjustment, and lax credits against tax payable. Refunds if any for any prior year to tax year 2015 would separately be considered on its merits, it added.