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FBR Takes Hard Action: Non-filers Banned with Exemptions & Penalties Revealed

The Pakistan government closes in on non-filers in an attempt to widen the exceedingly low tax base.

The National Assembly recently passed a mini-budget. In it, they reinstated prohibitions on non-filers for buying automobiles and property. This has been done to increase the country’s tax base.

A new section 227C was added by means of the Finance Act 2018. The government hopes to encourage return filers while curbing non-filers through this. According to this section, vehicle registering authorities have been barred from accepting or processing applications for booking, registration, or purchasing of new locally made motors or first time registration of imported vehicles if the person is not a filer as specified in Section 2(23A) of the Ordinance.

This ban was extended to authorities in charge of managing immovable properties worth above Rs. 5 million. For this as well, the person must be a filer as specified in the above mentioned section.

Exemptions:

Many people who suffered from loopholes in this ban were then taken into account to create exemptions. The Finance Supplementary (Amendment) Bill, 2018 details the exemptions of certain persons from the purview of section 227C of the Income Tax Ordinance, 2001.

Through this, non-filers can still purchase motorcycles in the engine capacity is below 200cc. Non-filers can also buy agricultural tractors, motorcycle-rickshaws, rickshaws and any other vehicle with and engine below 200cc.

Overseas Pakistanis owning an origin card or a NID for overseas Pakistanis will be to purchase vehicles in the country. However, that is only if they are able to get a bank to provide them with a receipt to verify the foreign exchange has been conducted through normal banking channels. The receipt must be provided within 60 days before the booking, registration or buying of the vehicle.

In the case of immovable properties of over Rs. 5 million, overseas Pakistanis will have to do the same. They will have to get a similar receipt from the bank for the verification for this as well.

Penalties:

To effectively implement this ban, penalties for non-compliance have been placed. The Finance Supplementary (Amendment) Act 2018 details this. They will be applicable upon local manufacturers, Excise and Taxation department and other concerned authorities.

The FBR has stated that any local manufacturers accepting any matters not complying with the ban will be fined. The fine will be 5% of the registered, booked or purchased vehicle under section 182 of Income Tax Ordinance 2001.

Any registering authority from the Excise and Taxation Department not complying will also be fined. They will be required to pay a penalty of 3% of the vehicle’s value.

In the case of immovable properties above Rs. 5 million, authorities will be penalized a 3% of the property.

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