KARACHI: The Federal Board of Revenue (FBR) has issued notices to Pakistanis having foreign assets to pay capital value tax (CVT) for the tax year 2022.
Sources in the FBR said on Thursday that the notices had been sent to all resident Pakistanis having foreign assets as per declared through their returns of income for the tax year 2021.
An official at the Large Taxpayers Office (LTO) Karachi told BOL News that the capital value tax at one per cent had been imposed through Section 8 of the Finance Act, 2022 on the persons having foreign assets valuing above Rs100 million.
According to a notice issued by the LTO Karachi, the taxpayers have been advised to discharge their liabilities along with the income tax return, which is due on September 30, 2022. The tax office compiled data of all those taxpayers having gross value of over Rs100 million of the foreign assets.
The official said that the notices had been sent as wakeup calls for the taxpayers to discharge their liability before the deadline.
The Finance Act, 2022 has described the procedure for determination of foreign assets in Pakistani rupee. According to it, the total cost of the foreign assets on the last day of the tax year should be in relevant foreign currency converted into rupees as per the exchange rates notified by the State Bank of Pakistan for the said day.
It also added that where the cost of foreign assets cannot be determined with reasonable accuracy, the fair market value of the asset should be on the last day of the tax year, in relevant foreign currency converted into rupees as per exchange rates notified by State Bank of Pakistan for the said day.
Experts believe that the taxpayers would face complications, while calculating the exchange rate to determine the value of assets.
The Finance Act, 2022 defines the foreign assets as: any movable or immovable assets held outside Pakistan, whether directly or indirectly; and includes but not limited to real estate, mortgaged assets, stock and shares, bank accounts, bullion, cash, jewels, jewelry, paintings, accounts and loan receivables, assets held in dependents’ name, beneficial ownership or beneficial interests or contribution in offshore entities or trusts.
The FBR has detected around 4,000 such resident Pakistanis, who would be required to pay CVT for the tax year 2022. The official said that in case those taxpayers failed to pay the due amount, action would be taken against them under the relevant provisions.
Certain penalties have also been prescribed through the Finance Act, 2022 for a person failing to pay one per cent CVT.
According to the act, where a person fails to pay tax, or to collect tax or fails to pay to the credit of the federal government after having collected the tax the person would be personally liable to pay: the amount of tax; and the default surcharge at a rate equal to 12 per cent/annum on the tax unpaid computed for the period, commencing on the date on which the tax was due and ending on the date on which it was paid.
The official at the LTO Karachi said the recovery proceedings would be dealt with according to the Income Tax Ordinance, 2001.
Since the assets are held abroad, the Pakistani authorities may contact the authorities in relevant countries for initiating recovery proceedings against persons having assets.
The official said Pakistan had already signed multilateral institution agreements with 142 countries, which would help the local authorities make recovery against the persons who failed to pay the capital value tax.
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