The Federal Board of Revenue (FBR) has decided to determine income tax liability in advance for two foreign investors. The board will exercise the option for investors from Ireland and the US under the facility of advance ruling for non-residents.
Sources told Business Recorder here on Friday that two foreign investors have approached the FBR seeking advance ruling under the income tax law. The FBR will convene a meeting of Advance Ruling Committee on December 29 (Thursday) to issue rulings in tax matters of two foreign investors intended to make investment in Pakistan. The meeting of Advance Ruling Committee constituted under Rule 231A of the Income Tax Rules, 2002, has been fixed for cases of advance rulings of M/s Celestial Aviation Trading 34 Limited (CAT 34), Ireland, and LLP of United States of America.
With a view to remove any confusion and avoid disputes in respect of determination of the income tax liability of a non-resident person, a procedure of Advance Rulings was brought on statute by way of incorporating Section 206A into the Income Tax Ordinance, 2001, w.e.f. 1.7.2003. Through this facility, non-residents can obtain, in advance, a binding ruling on the issues that could arise in determining their tax liabilities at a later stage. Therefore, time consuming and expensive legal disputes can be avoided. The Board is empowered to determine any question of law or of fact as specified in the application made before it in respect of a transaction which has been undertaken or is proposed to be undertaken by a non-resident in Pakistan on its own or in combination with a resident concern.
The detailed procedures for obtaining an advance ruling are contained in Rule 231A and 231B of the Income Tax Rules, 2002. An application form for the purpose was prescribed in Rule 231B, stipulating the information required to be divulged and the documents to be attached.
Sources said that the advance ruling helps non-residents in planning their income tax affairs well in advance; gives clarity to the local partners of non-residents vis-à-vis their liabilities under the tax laws; brings certainty in determination of the tax liability and helps in avoiding long drawn and expensive litigation. It is inexpensive, expeditious and binding.