KARACHI: The Federal Board of Revenue (FBR) on Wednesday started recovery of the capital value tax (CVT) from the super-rich persons having ownership of assets abroad.
“In this regard the first recovery notice has been issued to a business tycoon of the country,” an officer of Inland Revenue (IR) confirmed.
The instant notice has been sent to the business tycoon, who declared foreign assets worth $70 million, or equivalent to over Rs14 billion, as of June 30, 2022. Therefore, the revenue board calculated over Rs140 million as CVT payable by the taxpayer.
The CVT was imposed through the Finance Act, 2022 at one per cent of the value on the foreign assets of a resident individual where the value of such assets on the last day of the tax year in aggregate exceeds Rs100 million.
According to the FBR, an inclusive definition of the foreign assets has been provided which, inter alia, includes assets held abroad indirectly and under the beneficial ownership by the resident individual.
“The value of foreign assets will be the total cost of the foreign assets on the last day of the tax year in relevant foreign currency, which is converted into rupees as per the exchange rate notified by the State Bank of Pakistan for the said day.
“In case the cost of foreign assets cannot be determined with reasonable accuracy, the fair market value on the last day of the tax year will be taken for this purpose and the rupee conversion is applied in the aforesaid manner. The resident person holding foreign assets will pay CVT at the time the income tax return for the tax year is due,” the FBR said.
It also said that the Inland Revenue officer has been empowered to pass an appealable order to recover CVT along with the default surcharge from a person who fails to pay CVT or to collect CVT or fails to pay to the credit of the federal government after having collected CVT, by holding the person personally liable in this regard.
It is decided that all those names of the super-rich persons will be made public, who were served recovery notices. “Therefore, the name of the person, who has been served instant notice of recovery, maybe made public by the FBR,” the IR officer added.
The CVT implementation was challenged before the Sindh High Court and the Lahore High Court.
The taxpayers had objected to three fundamental issues in the CVT applications, which included the federal government cannot impose CVT; the immovable properties were already taxed; and the tax cannot be imposed on immovable properties, which were declared under the amnesty schemes.
Both the higher courts gave verdicts in favour of the FBR. According to the sources, the vires or the tax was challenged before the Supreme Court. However, the FBR issued the notice after consultation with the legal team.
The IR officer said in case the taxpayer failed to comply with the recovery notice, then harsh action would be taken as per the Income Tax Ordinance, 2001, which would also include attachment of the bank account or auction of properties or through arrest of the taxpayer.
