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EASE OF DOING BUSINESS REFORMS
DOING BUSINESS REFORMS 2020
PRESENTATION BY SABA IJAZSECRETARY (BDT-IT)
REFORMS UPDATES
CALENDAR YEAR 2018
MAJOR CHANGES TO TAX LAWS, REGULATIONS OR ADMINISTRATION
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• THE ELIGIBLE PERIOD FOR INVESTMENT IN PLANT &
MACHINERY FOR AVAILING TAX CREDITS UNDER SECTION
65B, 65D AND 65E EXTENDED TO JUNE 30, 2021
CHANGE IN TAX RATE
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Taxes Change in Tax Rate
Corporate Income Tax Rate of income tax for company will
be reduced from 30% to 29%
Rate of income tax for small
company will be reduced from 25%
to 24%
Sales Tax (VAT) No
CHANGE IN METHOD OF FILING OR PAYING TAXES AFFECTING TIME
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Taxes Changes in Method for Preparing, Filing or
Payment of Taxes affecting time
Corporate Income Tax • Preparation and filing of return for corporate income tax
already through electronic mode on Iris (FBR portal)
• Payment of taxes through ADC since March 2018
• Time significantly reduced
Sales Tax (VAT) • Preparation and filing of return for sales tax already
through electronic mode (e-FBR portal)
• Payment of taxes through ADC since March 2018
• Time significantly reduced
CHANGE IN METHOD OF FILING OR PAYING TAXES
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Taxes Changes in Method for Preparing, Filing or
Payment of Taxes
Corporate Income Tax • Preparation and filing of return for corporate income tax
already through electronic mode on Iris (FBR portal)
• Payment of taxes through ADC since March 2018
• Time significantly reduced
Sales Tax (VAT) • Preparation and filing of return for sales tax already
through electronic mode (e-FBR portal)
• Payment of taxes through ADC since March 2018
• Time significantly reduced
CHANGES IN AUDIT PROCEDURE/SECTIONS FOR DIRECT/INDIRECT TAXES
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• WITHDRAWAL OF SECTION 214D OF THE INCOME TAX ORDINANCE
2001 WHICH PERTAINED TO AUTOMATIC SELECTION OF CASES FOR
AUDIT WHERE RETURN FOR INCOME WAS NOT FILED WITHIN THE
DUE DATE
• CLOSURE OF AUDIT INITIATED UNDER SECTION 214D BY
INTRODUCTION OF SECTION 214E OF THE INCOME TAX
ORDINANCE 2001
CHANGES IN AUDIT PROCEDURE/SECTIONS FOR DIRECT/INDIRECT TAXES
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• THE PROVISIONS OF SECTION 177 (AUDIT BY
COMMISSIONER) AND 214C (AUDIT BY FBR) OF THE
INCOME TAX ORDINANCE, 2001 NOT TO BE APPLIED TO A
PERSON WHOSE INCOME TAX AFFAIRS HAVE BEEN AUDITED
IN ANY OF THE PRECEDING THREE TAX YEARS
LEGAL OR REGULATORY CHANGES AFFECTING PROCESS OF CLAIMING AND OBTAINING VAT REFUND
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• VAT REFUNDS SPECIFIC TO SAMPLE COMPANY IS NOT
APPLICABLE TO PAKISTAN
CHANGES TO TAX RATES BETWEEN JANUARY 1, 2019 TO MAY 1, 2019
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• RATE OF INCOME TAX FOR COMPANY REDUCED FROM
30% TO 29% FOR TAX YEAR 2019
• RATE OF INCOME TAX FOR SMALL COMPANY REDUCED
FROM 25% TO 24% FOR TAX YEAR 2019
CHANGE IN TAX RATE EXPECTED IN CALENDAR YEAR 2019
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Taxes Tax Rate
Corporate Income Tax Rate of income tax for company will be
reduced from 30% to 29%
Rate of income tax for small company will be
reduced from 25% to 24%
Sales Tax (VAT) No
DATA UPDATES
CALENDAR YEAR 2018
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DEDUCTIONS AND DEPRECIATIONS
CALENDAR YEAR 2018
DEDUCTION OF TAXES
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DEDUCTIBLE EXPENSES
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Nature of Expense Deductible in 2018 % Deductible
Start-up Expenses No
Advertising Expenses Yes 100%
Leasing Expenses Yes 100%
Medical Insurance Premium for
Employees
Yes 100%
Building Insurance Premium Yes 100%
Business Travel Expenses Yes 100%
Accountancy Fees Yes 100%
Legal Fees Yes 100%
Machinery Repair Expenses Yes 100%
Patent Royalties Yes 100%
Owner’s Expenses Yes 80%
Loss Carry Forward Yes 100%
DEDUCTIBLITY OF GENERAL PROVISIONS
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Nature of Provision Deductible in
2018
% Deductible
Bad Debts No Not Applicable
Provision for pension
contributions
No Not Applicable
Provision for future
machinery repairs
No Not Applicable
ANNUAL DEPRECIATION OF FIXED ASSETS
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Assets Tax
Depreciatio
n Rate
Land (not acquired in this calendar year) No
Building (for production and storage) 10%
Building Expansion 10%
Machinery 15%
Vehicle for Product Transportation 15%
Computers 30%
Office Equipment 30%
Business Development Expenses e.g. research and development
expenses (different from startup expenses)
20%
LABOUR TAXES AND MANDATORY CONTRIBUTIONS
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LABOUR TAXES AND MANDATORY CONTRIBUTIONS
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LABOUR TAXES AND MANDATORY CONTRIBUTIONS
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LABOUR TAXES AND MANDATORY CONTRIBUTIONS
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LABOUR TAXES AND MANDATORY CONTRIBUTIONS
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LABOUR TAXES AND MANDATORY CONTRIBUTIONS
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COMPLIANCE TIME
CALENDAR YEAR 2018
COMPLIANCE TIME
PROFIT TAXES (SAME AS CORPORATE INCOME TAX)
PREPARATION – PROFIT TAXES
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Time (Hours per Year)
Data gathering from internal sources
Additional analysis of accounting information to highlight
tax-sensitive items
Actual calculation of tax liability
Time spent maintaining/updating accounting systems for
changes in tax rates and rules
Preparation and maintenance of mandatory tax records
Other activities undertaken for preparation of corporate
income tax
Total preparation time
FILING – PROFIT TAXES
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Time (Hours per Year)
Completion of tax return forms
Time spent submitting forms to tax
authority
Other activities undertaken for filing of
corporate income tax
Total filing time
PAYMENT- PROFIT TAXES
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Time (Hours per Year)
Calculations of tax payments
Analysis of forecast data and associated
calculations if advance payments are required
Time to make necessary tax payments
Other activities undertaken for payment of
corporate income tax
Total payment time
TOTAL COMPLIANCE TIME (PREPARATION, FILING
AND PAYMENT)
COMPLIANCE TIMELABOUR TAXES AND MANDATORY
CONTRIBUTIONS
PREPARATION – LABOUR TAXES AND MANDATORY CONTRIBUTIONS
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Time (Hours per Year)
Data gathering from internal sources
Additional analysis of accounting information to highlight
tax-sensitive items
Actual calculation of tax liability
Time spent maintaining/updating accounting systems for
changes in tax rates and rules
Preparation and maintenance of mandatory tax records
Other activities undertaken for preparation of corporate
income tax
Total preparation time
FILING – LABOUR TAXES AND MANDATORY CONTRIBUTIONS
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Time (Hours per Year)
Completion of tax return forms
Time spent submitting forms to tax
authority
Other activities undertaken for filing of
corporate income tax
Total filing time
PAYMENT- LABOUR TAXES AND MANDATORY CONTRIBUTIONS
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Time (Hours per Year)
Calculations of tax payments
Analysis of forecast data and associated
calculations if advance payments are required
Time to make necessary tax payments
Other activities undertaken for payment of
corporate income tax
Total payment time
TOTAL COMPLIANCE TIME (PREPARATION, FILING
AND PAYMENT)
COMPLIANCE TIMECONSUMPTION TAXES
VAT/SALES TAX/GST
PREPARATION – VAT, SALES TAX OR GST
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Time (Hours per Year)
Data gathering from internal sources
Additional analysis of accounting information to highlight
tax-sensitive items
Actual calculation of tax liability
Time spent maintaining/updating accounting systems for
changes in tax rates and rules
Preparation and maintenance of mandatory tax records
Other activities undertaken for preparation of corporate
income tax
Total preparation time
FILING - VAT, SALES TAX OR GST
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Time (Hours per Year)
Completion of tax return forms
Time spent submitting forms to tax
authority
Other activities undertaken for filing of
corporate income tax
Total filing time
PAYMENT- VAT, SALES TAX OR GST
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Time (Hours per Year)
Calculations of tax payments
Analysis of forecast data and associated
calculations if advance payments are required
Time to make necessary tax payments
Other activities undertaken for payment of
corporate income tax
Total payment time
TOTAL COMPLIANCE TIME (PREPARATION, FILING
AND PAYMENT)
POST-FILING PROCEDURES
CALENDAR YEAR 2018
VAT CASH REFUND
CALENDAR YEAR 2018
ASSUMPTIONS FOR VAT REFUND
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• A SMALL COMPANY MAKES A LARGE CAPITAL MACHINERY
PURCHASE FOR MANUFACTURING PURPOSES
• THE VALUE OF MACHINE IS RS. 7.8 MILLION
• THE MACHINE IS MANUFACTURED DOMESTICALLY
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TIME TO COMPLY WITH A VAT REFUND
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How to request a VAT refund Registered person can claim carry forward, not VAT
Time on gathering VAT information from internal sources None as not applicable
Time on preparing VAT refund claim None as not applicable
List of documents to be submitted for a VAT refund claim None as not applicable
Time spent on preparing all additional documents None as not applicable
VAT return and claim for the VAT refund submitted at the same time
or separately
None as not applicable
Submission of all documents None as not applicable
Time to submit VAT refunds and all additional documents None as not applicable
Requirement of taxpayer to make representation to tax office
after claim
None as not applicable
Any other mandatory activity/task associated with VAT refund None as not applicable
Time spent on obtaining internal or external advice None as not applicable
TIME TO OBTAIN A VAT REFUND
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Percentage of companies selected for audit
in case of claiming VAT refund resulting
from large capital purchase
Not Applicable
Common type of audit triggered on the above
mentioned scenario
Not Applicable
Time between the date the claim for a VAT
refund is submitted and the date the VAT
refund is received
Not Applicable
Mode of VAT refunds received Not Applicable
TIME TO COMPLY WITH A CORPORATE INCOME TAX CORRECTION
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Option for the taxpayer to notify tax officer
voluntarily of an unintentional CIT error
Yes
Mode of notifying error Electronically
List of documents to provide to tax authority to
make correction in income tax return
Reason for revision of return duly
signed by taxpayer, copies of revised
audited accounts and revised tax
return
Time taken by taxpayer to gather information and
prepare documents to notify tax officer
Mode of submission of documents Electronically
Time taken by taxpayer to submit documents No time as it is done electronically
Payment of additional CIT liability and submission
of amended return separately or at the same time
At the same time
TIME TO COMPLY WITH A CORPORATE INCOME TAX CORRECTION
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Mode of processing tax payments Electronically
Taxpayer allowed to make additional payments Yes
Is this tax notice/reassessment dependent on an
audit taking place
Not necessarily
Percentage of cases selected for audit in case of
self-reporting a CIT error and underpayment of
CIT liability
Not Applicable
Common type of audit triggered on the above
mentioned scenario
Not Applicable
TIME TO COMPLETE A CORPORATE INCOME TAX CORRECTION
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Will a company like the one given in
questionnaire be selected for a tax audit?
Not necessarily
Percentage of cases selected for audit in case of
self-reporting a CIT error and underpayment of
CIT liability
Not Applicable
Would the correction to the CIT return increase the
likelihood of a tax audit taking place?
Not Applicable
Most common type of audit in case of correction to
the CIT return
Not Applicable
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• PRIVATE COMPANIES IN PAKISTAN HAVE TO CALCULATE THEIR OWN CORPORATE INCOME TAX
BILLS AND FILE RETURNS APPROPRIATELY (SELF-ASSESSMENT)
• MAJORITY OF COMPANIES SIMILAR TO QUESTIONNAIRE COMPANY USE COMPUTER
SOFTWARE TO PREPARE AND MAINTAIN THEIR FINANCIAL ACCOUNTS
• THEY USE SPREADSHEETS
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THANK YOU
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