By SAMIULLAH RANDHAWA
LAHORE: The federal government is likely to introduce the Foreign Asset Tax Act to take overseas Pakistani’s in the tax net.
In this regard, the initial draft of the scheme has been prepared for the legalisation of undisclosed foreign assets, income and expenditures of Pakistanis living abroad.
According to the draft, the contents of a declaration made under the scheme shall remain confidential and shall not be disclosed. It stated that the provisions of section 216 of Income Tax Ordinance 2001 shall be fully applicable to declarations made under Income Tax Ordinance 2017.
This has been proposed in the draft that tax slabs for foreign Pakistanis revealed that the rate of Foreign Asset Tax would be two per cent on an asset located outside Pakistan held for more than five years up to June 30, 2016. “Foreign Asset Tax would be 5 per cent on income and assets located outside Pakistan to be repatriated through official banking channels into Pakistan and receipt attached with the declaration,” draft stated.
The rates of Foreign Asset Tax has been proposed to be 7.5 per cent for assets located outside Pakistan for which the only declaration is made and foreign currency and bearer assets may be legalised on payment of 15 per cent Foreign Asset Tax. This has been proposed that tax payable on undisclosed income shall be paid through banking channels in foreign currency converted into Pakistani rupees which would be accompanied by evidence thereof.
Under the draft of Foreign Assets Tax Act 2017, the said law would effectively deal with the problems of undisclosed foreign assets, income and expenditure, the procedures for dealing with such assets, income and expenditure and to provide for imposition of tax on any undisclosed foreign asset, income and expenditure, held, earned and incurred outside Pakistan.
The initial draft of the Foreign Assets Tax Act 2017 also revealed that tax shall be charged on every declarant in respect of his total undisclosed foreign asset, income and expenditure as per the rates specified under the First Schedule of this Act.
Sources said that in case a person has paid tax on his undisclosed income, assets, expenditure in accordance with this Act, should not be liable to any further tax, charge, levy, penalty or prosecution in respect of such income, asset, expenditure under the Income Tax Ordinance, 2001 or any other law for time being in force.
They further informed that the voluntary disclosure initiative was also under consideration of the Federal Board of Revenue (FBR) and Tax Reform Commission Implementation Committee (TRIC).
An official in FBR told Pakistan Today that under this act where a declaration in respect of undisclosed income and assets had been made and the tax due on such income had been fully paid, then such declaration shall be accepted by the commissioner of Inland Revenue. He said that the value of an undisclosed asset, including financial interest in the entity, means the cost of an asset acquired or created outside Pakistan converted in Pakistan rupees at the rate specified by the State Bank of Pakistan reduced by the amount of borrowing incurred by that person for the acquisition of the undisclosed asset.