Tax Brief

SIGNIFICANT AMENDMENTS OF
FINANCE ACT, 2014
This Memorandum is correct to the best of our knowledge

and belief at the time of going to the press. It is intended
to provide only a general outline of the subjects covered.
It should neither be regarded as comprehensive nor
sufficient for making decisions, nor should it be used in
place of professional advice. The Firm and Ernst & Young
do not accept any responsibility for any loss arising from
any action taken or not taken by anyone using this
publication.
This Memorandum may be accessed on our website

http://www.ey.com
Ernst & Young Ford Rhodes Sidat Hyder
DISCLAIMER
This document has been prepared as a general guide for the benefit of our clients and is available to other
interested persons upon request. This should not be published in any manner without Firms consent. This is not
an exhaustive treatise as it provides general outline and overview of the applicable laws and practices in Pakistan
relating to tax and corporate regulatory matters.
Changes of consequential, administrative, procedural or editorial in nature have either been excluded from these
comments or otherwise dealt with briefly. It is suggested that the text of the document and relevant laws and
notifications, where applicable, be referred to in considering the interpretation of any provision
This document is not intended to be a substitute for detailed research or the exercise of professional judgment.
Accordingly, therefore, no decision on any issue be taken without further consideration and specific professional
advice should be sought before any action or decision is taken.
Table of Content
INCOME TAX
Page
1.1
Corporate tax rate ..............................................................................................................
1.2
Industrial undertaking setup through Foreign Direct Investment (FDI) .....................................
1.3
Concept of Filers and Non-Filers ..........................................................................................
1.4
Capital Gain on Sale of Securities ........................................................................................
1.5
Bonus shares treated as income of the shareholders .............................................................
1.6
Alternative Corporate Tax ...................................................................................................
1.7
Tax Rate of Dividend distributed by Collective Investment Scheme

or a Mutual Fund or a Stock Fund ........................................................................................
1.8
Non-Profit Organizations, Welfare and Charitable Institutions and Trusts .................................
1.9
Tax withholding from Directors fee ......................................................................................
1.10 Taxation of dividend and capital gains of Banking Companies .................................................
1.11 Minimum Tax
.................................................................................................................
1.12 Initial Allowance on Buildings ..............................................................................................
1.13 Advance Tax at Import Stage...............................................................................................
1.14 Increase in withholding tax rates for goods, services and execution
of contracts
.................................................................................................................
1.15 Advance Tax on Private Motor Vehicles ................................................................................
1.16 Withholding Tax from brokerage and commission ..................................................................
10
1.17 Advance Tax on Purchase/ Transfer of Immovable Property ...................................................
11
1.18 Wealth Statement ..............................................................................................................
11
Income Tax
1.1
Corporate tax rate
The Finance Act, 2014 (the Act) has reduced the tax rate for companies (other than companies engaged in the
business of banking, and small companies) to 33% for the tax year 2015. Banking companies will continue to be
taxed @ 35% while small companies @ 25%.
1.2
Industrial undertaking setup through Foreign Direct Investment (FDI)
A new Clause (18A) has been inserted in Part II, Second Schedule to the Ordinance which provides a reduced
corporate tax rate of 20% for a company setting up an industrial undertaking, between 1 July 2014 to 30 June
2017, through FDI of at least 50% of the cost of the project, including working capital, for a period of five years
beginning from the month in which the industrial undertaking is setup or commercial production is commenced,
whichever is later.
1.3
Concept of Filers and Non-Filers
The Act has introduced the concept of recognizing a person as a filer or a non-filer by inserting Clauses (23A) and
(35C) to section 2 of the Income Tax Ordinance, 2001 (Ordinance). A filer is defined as a taxpayer whose name
appears on the active taxpayers list issued by the Board from time to time or is holder of a taxpayers card; a nonfiler consequently is a person who is not a filer. The purpose of introducing the above concept is to levy certain
withholding taxes on a non-filer at higher rates as compared to a filer.
The following table contains the rates of tax withholding for filers and non-filers :
Sr.No.
1.
Section
150
Categories
Rate
Filer
Non-Filer
10%
15%
*provided that the for a non-filer if the yield of

profit paid is PKR 500,000 or less the rate
shall be 10*
10%
15%
PKR 1,000
PKR 12,000
PKR 1,000
PKR 24,000
PKR 10,000
PKR 120,000
PKR 10,000
PKR 240,000
0.5%
To be inserted
PKR 10,000
PKR 250,000
PKR 10,000
PKR 450,000
Advance Tax on dividend (other than the

power project companies)
Withholding tax on profit on debt
2.
151
3.
234
Rate of collection of Tax on private motor cars

depending on the engine capacity
4.
234
Rate of collection of Tax on other motor

vehicle depending on the engine capacity
5.
231A
Cash withdrawal from a Bank
6.
231B
Advance Tax on purchase on private motor

cars and jeeps depending on the engine
capacity.
Income Tax
Sr.No.
1.4
Section
Categories
Rate
Filer
Non-Filer
7.
236C
Advance Tax on sale and transfer of

immovable property
0.5%
1%
8.
236 G
Advance Tax to be collected on sales to

distributors, dealers and wholesalers of
Fertilisers
0.2%
0.4%
9.
236G
Advance Tax to be collected on sales to

distributors, dealers and wholesalers of other
than Fertilisers
0.1%
0.2%
10.
236K
Advance Tax on purchase of immovable

property where value of the immovable
property is more than 3 million
1%
2%
Capital Gain on Sale of Securities
The definition of securities in section 37A of the Ordinance has been broadened to include debt securities in
order to tax capital gain arising therefrom under the scheme of Capital Gain Tax (CGT) envisaged therein. The
term debt securities is defined to mean
(a)
Corporate Debt Securities such as Term Finance Certificates (TFCs), Sukuk Certificates (Sharia
Compliant Bonds), Registered Bonds, Commercial Papers, Participation Term Certificates (PTCs)
and all kinds of debt instruments issued by any Pakistani or foreign company or corporation
registered in Pakistan; and
(b)
Government Debt Securities such as Treasury Bills (T-bills), Federal Investment Bonds (FIBs),
Pakistan Investment Bonds (PIBs), Foreign Currency Bonds, Government Papers, Municipal
Bonds, Infrastructure Bonds and all kinds of debt instruments issued by Federal Government,
Provincial Governments, Local Authorities and other statutory bodies.
In accordance with the provisions of section 100B and the Eighth Schedule to the Ordinance, the responsibility
for computation of capital gains under section 37A and tax payable thereon in case of certain categories of
investors vests with the National Clearing Company of Pakistan Limited (NCCPL). By virtue of amendments in
section 100B, the Foreign Institutional Investors (FIIs) have also now been brought within the purview of the
Eighth Schedule. As a result NCCPL would now be responsible for computing the capital gains and tax thereon in
the case of FIIs as well with effect from 1 July 2014. The FIIs like other investors can however file an irrevocable
option to opt out of the scheme of taxation through NCCPL and compute the capital gains and tax thereon
themselves.
Income Tax
The CGT rates on gains arising from disposal of securities are dependent on the holding period of the securities,
which, before the Act, varied from 6 months to a year. The Act has extended the holding period from 1 year to 2
years which in effect means that securities held for a period of more than 2 years will not be taxed. The Act has
also enhanced the CGT rates effective from tax year 2015 to be as under :
S.No.
1.5
Period
Tax Year
Rate of tax
Rate before
amendment
Rate after
amendment
1.
Where holding period of a security is

less than six months
2015
17.5%
12.5%
2.

six months or more but less than
twelve months
2015
9.5%
12.5%
3.

twelve months or more but less than
twenty four months
2015
0%
10%
4.

two years or more
2015
0%
0%
Bonus shares treated as income of the shareholders
Bonus shares were previously not treated as part of income, as defined in section 2(29) of the Ordinance. The
reason for this is based on the principle that the shareholder does not derive any real income from these shares
until and unless they are disposed of and at that time the CGT will be levied on them.
The Act has amended the definition of income to bring bonus shares within the purview of income at the time
of their issuance. Consequently, section 39 of the Ordinance (income from other sources) has also been amended
to include income arising to the shareholder of a company from the issuance of bonus shares and hence made
them liable to be taxed @5%.
Following the above, new withholding provisions have been inserted in the Ordinance namely sections 236M and
236N which oblige every company to collect tax from the shareholders at the time of issuing bonus shares @ 5%
on the value of the bonus shares. This tax shall be a final tax on the income of the shareholder on the issuance of
bonus shares.
Income Tax
1.6
Alternative Corporate Tax
A new concept of Alternative Corporate Tax (ACT) has been introduced by the Act. For this purpose, section
113C has been inserted effective from the tax year 2014 which has an overriding effect on other provisions of
the Ordinance and provides that the tax payable by a company shall be the higher of corporate tax or
alternative corporate tax. This tax is levied at the rate of 17% of a sum equal to the accounting income which
has been defined to mean:
accounting profit before tax for the tax year, as disclosed in the financial statements or as adjusted
under sub-section (7) or sub-section (11) excluding share from the associate recognized under equity
method of accounting
It is further provided that for the purpose of determining accounting income, exempt income, income taxable
under FTR and income subject to 100% tax credit on account of equity investment shall be excluded. Moreover,
the following incomes are also immune from the levy of ACT:
Incomes of non-profit organizations, trusts or welfare institutions to which tax credit is available under
the newly introduced section 100C;
Income of a company (set up between 1 July 2014 to 30 June 2017, as an industrial undertaking with
FDI amounting to at least 50% of the cost of the project) to whom a reduced rate of tax is available
under the newly introduced Clause (18A), Part II of the Second Schedule
Apart from the above, insurance companies, companies engaged in exploration and production of petroleum and
extraction of mineral deposits, and banking companies are exempted from the levy of ACT.
For computing ACT, appropriate expenses shall be apportioned to the income to be excluded from the accounting
income as discussed above. The resultant accounting income after the aforesaid adjustments shall be treated as
taxable income for the purpose of ACT.
The excess of ACT paid over the corporate tax payable for the tax year shall be carried forward and adjusted
against the tax payable under Division II of Part I of the First Schedule to the Ordinance. The excess of ACT paid
over the corporate tax payable shall be carried forward for ten years immediately succeeding the tax year for
which the excess was first computed. It is further provided that if corporate tax or ACT is enhanced or reduced as
a result of any amendment, or as a result of any order under the Ordinance, the excess amount to be carried
forward shall be reduced or enhanced accordingly.
It is important to note that the Commissioner is empowered to make adjustments and proceed to compute
accounting income as per historical accounting pattern where he finds that the historical pattern has been
changed to avoid ACT.
Income Tax
1.7
Tax Rate of Dividend distributed by Collective Investment Scheme

or a Mutual Fund or a Stock Fund
A new concept of Stock Fund has been introduced in section 2 of the Ordinance, which means a Collective
Investment Scheme or a Mutual Fund where the investible funds are invested by way of equity shares in
companies, to the extent of more than 70% of the investment.
The rate of tax on dividend distributed by a Collective Investment Scheme or a Mutual Fund (including a Stock
Fund) for the tax year 2015 and onwards shall be as follows:
Unit Holder
Money Market Fund,

Income Fund or any
other Fund
Stock Fund
Where dividend receipts of Where dividend receipts
the Fund are more than the of the Fund are less than
capital gains
the capital gains
1.8
Individual
10%
12.5%
10%
AOP
10%
12.5%
10%
Company
10%
12.5%
25%
Non-Profit Organizations, Welfare and Charitable Institutions and Trusts
Before the Act, charitable organizations including welfare trusts and Non-Profit Organizations (NPOs) enjoyed
exemption from tax under Clauses (58), (58A), (59) and (60) of Part I of the Second Schedule to the Ordinance.
The Act, while omitting the aforesaid Clauses, has introduced section 100C in the Ordinance in order to allow tax
credit equal to 100% of the tax payable to such charitable organizations, welfare trusts and NPOs provided they
meet the following conditions:
the return of income for the tax year is filed;
the obligation of collection and deduction of tax and its deposit as specified under the Ordinance is
met; and
withholding tax statements for tax collected/ deducted as above, are filed.
The Commissioner Inland Revenue has also been empowered to issue exemption certificate under section 159 of
the Ordinance barring tax withholding under the Ordinance to such taxpayers who are subject to 100% tax credit
under section 100C discussed above.
Income Tax
It may be noted that public sector universities which are established solely for educational purposes and not for
the purpose of profit will continue to enjoy exemption from tax under the Second Schedule.
1.9
Tax withholding from Directors fee
Section 149 has been amended to cast the responsibility of withholding of tax on the payer from payment for
directorship fee or fee for attending board meetings or like payments @ 20% of the gross amount. The tax so
deducted is an advance tax for the recipient and is adjustable against his final tax liability.
1.10
Taxation of dividend and capital gains of Banking Companies
Seventh Schedule was added to the Ordinance to provide for rules for the computation of profits and gains and
tax payable by a banking company. Under Rule 6 of the Seventh Schedule dividend income of a bank was subject
to tax @ 10% of the gross amount. Capital gain on disposal of listed shares is also charged to tax @ 10% where the
holding period of the listed shares is more than a year.
The Act has amended Rule 6 and has also inserted Rules 6A and 6B to the Seventh Schedule. According to these
amendments, net income from dividend and capital gains would be taxable rather than the gross income. For this
purpose, allocation of expenses against dividend income and capital gains would be made based on the ratio the
dividend income/ capital gains bears to the total receipts of the bank irrespective whether the expenses have
actually been incurred or not to derive such income. The net income from dividend/ capital gain is now taxable @
12.5%.
1.11
Minimum Tax
The rate of minimum tax based on turnover is provided @ 1% in terms of section 113(2) of the Ordinance.
However, Part III of the Second Schedule contains various Clauses which provide reduced rates of minimum tax
for various classes of taxpayers.
The Act has omitted these Clauses and consolidated the rates of minimum tax under Division IX of Part I of the
First Schedule as under:
S.No.
Person(s)
Minimum Tax as
percentage of the persons
turnover for the year
(1)
(2)
(3)
(a)
1.
Oil marketing companies, Oil refineries, Sui Southern Gas

Company Limited and Sui Northern Gas Pipelines Limited
(for the cases where annual turnover exceeds rupees one
billion);
0.5%
Income Tax
S.No.
Person(s)
Minimum Tax as
percentage of the persons
turnover for the year
(1)
(2)
(3)
2.
1.12
(b)
Pakistan International Airlines Corporation; and
(c)
Poultry industry including poultry breeding, broiler

production, egg production and poultry feed production.
(a)
Distributors of pharmaceutical products, consumer goods

including fast moving consumer goods, fertilizers and
cigarettes;
(b)
Petroleum agents and distributors who are registered

under the Sales Tax Act, 1990;
(c)
Rice mills and dealers; and
(d)
Flour mills
3.
Motorcycle dealers registered under the Sales Tax Act, 1990
4.
In all other cases
0.2%
0.25%
1%
Initial Allowance on Buildings
The rate of initial allowance on Buildings was proposed in the Finance Bill, 2014 to be reduced from 25% to 10%.
The Act has however, reduced the rate to 15% instead of 10%.
1.13
Advance Tax at Import Stage
The general rate of collection of advance tax at import stage for industrial undertakings (other than specified) has
been increased from 5% to 5.5%.
1.14
Increase in withholding tax rates for goods, services and execution of contracts
The withholding tax rates prescribed for section 153 of the Ordinance in Division III of Part III of the First
Schedule have been increased in the following manner:
Income Tax
Sr.
No.
1.15
Nature of payments
Rate
Companies
Other
Taxpayers
1.
Sale of Goods
4%
4.5%
2.
Rendering of Services
8%
10%
3.
Execution of a contract
7%
7.5%
4.
Execution of a contract of a
sportsperson
10%
Advance Tax on Private Motor Vehicles
Under section 231B of the Ordinance, motor vehicle registration authority was required to collect advance tax at
the time of registering a new locally manufactured motor vehicle. The Act has substituted section 231B of the
Ordinance and the salient features of the newly incorporated section 231B are as under:
Previously the collection of tax was applicable at the time of registration of a new locally
manufactured vehicle, whereas now the obligation is on registration of both new locally
manufactured as well as imported vehicles
A manufacturer of motor car or jeep is also authorized to collect tax at the time of sale of such
vehicles
Motor vehicle registration authority has also been authorized to collect tax at the time of transfer
of motor vehicle registration or ownership of private motor vehicles
Tax is not to be collected on transfer of registration or ownership of private motor vehicles after 5
years from the date of first registration in Pakistan
Tax is not to be collected on registration of a new motor vehicle if tax has already been collected at
the time of purchase of the same vehicle
The rate of advance tax on transfer of registration or ownership of a private motor vehicle be
reduced by 10% each year from the date of first registration in Pakistan.
However, to avoid multiple withholding, it has been provided that no advance tax will be collected by the Excise
and Taxation Department at the time of registration of the vehicle, provided the person produces evidence that
10
Income Tax
tax was collected from the same person in respect of the same vehicle at the time of transfer of ownership, in the
case of locally manufactured vehicles or at the time of import in the case of imported vehicles.
The existing exemption from collection of tax from the Federal Government, Provincial Government, Local
Government, foreign diplomat, a diplomatic mission in Pakistan will continue. The rates of collection of advance
tax under this section are as under -
Engine capacity
1.16
Amount of tax
For filers
For non-filers
Up to 850 cc
Rs.10,000
Rs.10,000
851 cc 1000 cc
Rs.20,000
Rs.25,000
1001 cc 1300 cc
Rs.30,000
Rs.40,000
1301 cc 1600 cc
Rs.50,000
Rs.100,000
1601 cc 1800 cc
Rs.75,000
Rs.150,000
1801 cc 2000 cc
Rs.100,000
Rs.200,000
2001 cc 2500 cc
Rs.150,000
Rs.300,000
2501 cc 3000 cc
Rs.200,000
Rs.400,000
Above 3000 cc
Rs.250,000
Rs.450,000
Withholding Tax from brokerage and commission
The withholding tax rate from payments on account of brokerage and commission have been increased and the
new rates are as under :
Brokerage and Commission
Rate
Advertising Agents
7.5%
All other cases
12%
11
Income Tax
1.17
Advance Tax on Purchase/ Transfer of Immovable Property
Section 236C provides for collection of advance tax from seller or transferor of immovable property @ 0.5% of
the gross amount of the consideration received by the seller or transferor at the time of registering or attesting
the transfer.
Section 236K has been enacted for the collection of tax to be applicable on the purchaser or transferee as well.
This advance tax is to be collected in the same manner as prescribed in section 236C.
The rates of tax under section 236K are as under:
Rate
Value of Immovable Property
1.18
Filer
Non-filer
Up to Rs. 3 Million
0%
0%
More than Rs. 3 Million
1%
2%
Wealth Statement
The relaxation from filing of wealth statement for the tax year 2013 allowed to individuals and members of AOP
whose last declared or assessed income, or declared income for the year, was less than Rs.1 million has been
extended for the tax year 2014 as well.
12
Table of Contents
SALES TAX
Page
2.1 Definition Retail Price .........................................................................................
13
2.2 Scope of Tax
.....................................................................................................
13
2.3 Collection of Excess Tax ........................................................................................
13
2.4 Determination of Tax Liability ...............................................................................
14
2.5 Tax Credit Not Allowed ..........................................................................................
14
2.6 Posting of Inland Revenue Officer ..........................................................................
14
2.7 Electronic Scrutiny and Intimation .........................................................................
15
2.8 SROs to be Included in the SA 1990 Under Various Schedules ..................................
15
13
Sales Tax
2.1
Definition Retail Price
Sub-section (27) of section 2 of the Sales Tax Act, 1990 (Act) gives the definition of retail price.
A proviso has been added to this section whereby the Board is empowered through a General Order to specify
zones or areas for the purpose of determination of the highest retail price for any brand or variety of goods. It
empowers the Board to determine the retail price at which sales tax is to be charged.
2.2
Scope of Tax
The following amendments have been introduced to section 3 of the Act.

Sub-section 2(aa) is inserted to cover sales tax to be charged on goods specified in the newly introduced Eighth
Schedule to the Act at such rates and subject to such conditions and limitations as specified in the
aforementioned Schedule. The Eighth Schedule contains goods that are subject to sales tax at reduced rates.
Sub-section 3B is added whereby sales tax on import and supply of goods specified in the newly introduced Ninth
Schedule to the Act shall be charged, collected and paid at the rates stated therein in the manner, time,
procedure and conditions specified therein. The Ninth Schedule contains goods that are subject to sales tax at
fixed rates on various categories of cellular mobile phones and satellite phones. These are currently subject to
sales tax under SRO 460(1)/2013, the operation of which has been suspended by the Honble Islamabad High
Court.
Sub-section (8) which deals with charging of sales tax at the rate of 17% of the value of supply to CNG stations,
was amended by the Presidential Ordinance, 2014 (dated 23rd March 2014). It is now formally incorporated in
the Act.
A new sub-section (9) has been inserted in connection with the charging of sales tax on monthly electricity bills of
retailers at the following rates:
5% where the monthly bill does not exceed Rs.20,000; and
7.5% where the monthly bill exceeds Rs.20,000
2.3
Collection of Excess Tax
Sub-section (2) of section 3B of sales tax collection in excess, was substituted through the Presidential Ordinance,
2014 which has now been formally incorporated in the Act.
14
Sales Tax
2.4
Determination of Tax Liability
Section 7 of the Act deals with determination of tax liability and more particularly adjustment of input tax from
output tax.
The amount of further tax has been excluded from the scope of output tax while making adjustment for input tax.
Further tax at the rate of 1% is required to be charged under section 3(1A) to persons who are not registered for
sales tax purposes.
2.5
Tax Credit Not Allowed
Section 8 deals with the restrictions of claim of input tax. By and large this section incorporates into the main Act
the restrictions on claim of input tax.
Goods and services not related to taxable supplies made by registered persons have been added.
The four situations which have been inserted are:
Goods and services not related to taxable supplies made by the registered person;
Goods and services acquired for personal or non-business consumption;
Goods used in, or permanently attached to, immovable property, such as building and construction
material, paints, electrical and sanitary fittings, pipes, wires and cables, but excluding such goods
acquired for sale or re-sale or for direct use in the production or manufacture of taxable goods; and
Vehicles falling in Chapter 87 of the First Schedule to the Customs Act, 1969 (IV of 1969), parts of such vehicles,
electrical and gas appliances, furniture, furnishings, office equipment (excluding electronic cash registers), but
excluding such goods acquired for sale or re-sale.
2.6
Posting of Inland Revenue Officer
Pursuant to section 40B, an Inland Revenue Officer may be posted to the premises of the registered person or a
class of such persons for monitoring purposes.
An explanation has been added in this section to clarify that the powers under this section are independent of the
provisions of section 40 which deals with searches under a warrant issued by a Magistrate. It clarifies that a
15
Sales Tax
warrant from a magistrate is not necessary for the purposes of the monitoring exercise that may be done by an
Officer of Inland Revenue.
2.7
Electronic Scrutiny and Intimation
A new section (50B) has been enacted by the Act dealing with the implementation of a computerized system for
the purposes of automated scrutiny, analysis, and cross matching of returns and other available data relating to
the registered persons and to electronically send intimation to the same on any issue detected by the system.
2.8
SROs to be Included in the SA 1990 Under Various Schedules
Previously imports and supply of certain goods were subject to sales tax at zero rate through various notifications
including SRO 549/(1)/2008 and SRO 670(1)/2013. The Act has included zero rated goods within the body of
the Fifth Schedule.
The Sixth Schedule to the Act, lists goods that are exempt from sales tax. Certain goods were exempt from sales
tax through SRO 501(I)/2013, SRO 492(I)/2009, SRO 551(I)/2008 and SRO 575(I)/2006. Similar to above,
certain exemptions as available through the relevant SROs have been incorporated in the body of the Sixth
Schedule.
Formerly retailers whose annual turnover was less than Rs.5 million during the last twelve tax periods along with
cottage industry were exempt from the levy of sales tax. The Act has now restricted this exemption to cottage
industries only.
The Act introduces a new Eight Schedule whereby those items that were exempt from levy of sales tax under SRO
501(I)/2013 are listed and sales tax @ 5% is applicable subject to certain conditions.
The second table in the Eight Schedule lists certain imported goods that were exempt from sales tax under SRO
575(I)/2006. They will now be subject to reduced rate of sales tax @ 5% subject to certain conditions.
The Ninth Schedule has been implemented which provides the manner and collection of sales tax on the import
and local supply of cellular mobile phones and satellite phones in Pakistan.
16
Table of Content
FEDERAL EXCISE
Page
3.1 Determination of Value for the Purposes of Duty .....................................................
17
3.2 Rate of Duty on Cigarettes Modified .......................................................................
17
3.3 Rate of Duty on Cement Modified ...........................................................................
17
3.4 Restriction in Duty on Motor Vehicles .....................................................................
17
3.5 Travel by air
.....................................................................................................
18
3.6 Travel by air through chartered flights ...................................................................
18
3.7 Reduction in the Rate of Duty on Telecommunication Services...................................
18
Federal Excise
3.1
17
Determination of Value for the Purposes of Duty

Section 12 of the Federal Excise Act, 2005 (Act), deals with the mode and manner of valuation of goods
and services for the purposes of levy of duty. Sub-section (4) provides the manner in which duty is
chargeable on the basis of retail price of goods. The Act adds a new proviso whereby the Board by way of
general order may specify zones or areas for the purpose of determination of higher retail price for any
brand or variety of goods.
3.2
Rate of Duty on Cigarettes Modified

The rate of duty on cigarettes have been changed by substituting serial Nos.9 and 10 of Table I of the
First Schedule to the Act along with the description of goods. These are as follows:
Previous Provision
3.3
Current Provision
Table
No.
Relevant
entry in
Table
Locally produced
cigarettes if their onpack printed retail
price exceeds rupees
two thousand two
hundred and eighty
six per thousand
cigarettes
2,325 per
thousand
cigarettes
Locally produced
price exceeds rupees
two thousand seven
hundred and six per
thousand cigarettes
Rupees 2,632
per thousand
cigarettes
10
Locally produced
price does not
exceed rupees two
thousand two
hundred and eighty
six per thousand
cigarettes
Rupees 880
per
thousand
cigarettes
Locally produced
price does not exceed
rupees two thousand
seven hundred and six
per thousand
cigarettes
Rupees 1,085
per thousand
cigarettes
Description
Rate of
duty
Description
Rate of duty
Rate of Duty on Cement Modified

The rate of duty in respect of various types of cement has been substituted at 5% of the retail price in
Table I of the First Schedule of the Act.
3.4
Restriction in Duty on Motor Vehicles

The Act revised the duty structure on motor vehicles in the First Schedule Table I, and restricts the
applicability of the aforesaid duty to the extent of imported motor cars only.
Federal Excise
3.5
18
Travel by air
The Act has provided the following rates of duty in respect of services provided or rendered of travel by
air:
Domestic travelling within the territorial jurisdiction of Pakistan

Rate of duty
(Rupees)
Description
Long routes exceeding 500 KMs
2,500
Short routes within 500 KMs excluding Socio

economic routes
1,250
Socio economic routes (journeys along the

Baluchistan costal belt)
500
International travelling passengers embarking on international journey from Pakistan

Rate of duty
(Rupees)
Description
Travel in Economy and Economy Plus
5,000
Club, business and first class

3.6
10,000
Travel by air through chartered flights

The following service is brought under the purview of excisable services by including the same in Table II
of the First Schedule to the FEA
Entry No.
15
3.7
Nature of service
Chartered lights
Rate of duty
16% of the charges
Reduction in the Rate of Duty on Telecommunication Services

Formerly the rate of telecommunication services was 19.5%. It has now been implemented that this
federal excise duty should not be collected from provinces such as Sindh, Punjab and Khyber
Pakhtunkhwa where there is an imposition of Provincial sales tax which has already started to be
collected.
Further the rate of duty has been reduced from 19.5% to 18.5%.
19
Table of Content
Income Support Levy

Page
Income Support Levy ............................................................................................
20
20
Income Support Levy
Income Support Levy Act, 2013 was introduced by the Finance Act 2013 to impose a levy @ 0.5% on
the net moveable wealth exceeding Rs.1 million of individual taxpayers. The Act has repealed the
aforesaid Act.
21
Table of Content
Customs Regulatory Duty

Page
Customs Regulatory Duty....................................................................................
22
22
Customs Regulatory Duty
Apart from the changes in customs duty rates already notified through amendments in the First Schedule
to the Customs Act, 1969, a Regulatory Duty on import of goods at the rate of 5% has been imposed vide
SRO 568(I)/2014 dated 26 June 2014. This Regulatory Duty is applicable on goods falling under 282
tariff codes as listed out in the SRO and includes fruits, vegetables, beverages, electrical appliances,
kitchen appliance, furniture, toiletries, marble, granite, etc.
Notes
23
Notes
24

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SIGNIFICANT AMENDMENTS OF

FINANCE ACT, 2014

This Memorandum is correct to the best of our knowledge

This Memorandum may be accessed on our website

Ernst & Young Ford Rhodes Sidat Hyder

Ernst & Young Ford Rhodes Sidat Hyder

Corporate tax rate ..............................................................................................................

Industrial undertaking setup through Foreign Direct Investment (FDI) .....................................

Concept of Filers and Non-Filers ..........................................................................................

Capital Gain on Sale of Securities ........................................................................................

Bonus shares treated as income of the shareholders .............................................................

Alternative Corporate Tax ...................................................................................................

Tax Rate of Dividend distributed by Collective Investment Scheme

Non-Profit Organizations, Welfare and Charitable Institutions and Trusts .................................

Tax withholding from Directors fee ......................................................................................

1.10 Taxation of dividend and capital gains of Banking Companies .................................................

1.11 Minimum Tax

1.12 Initial Allowance on Buildings ..............................................................................................

1.13 Advance Tax at Import Stage...............................................................................................

1.15 Advance Tax on Private Motor Vehicles ................................................................................

1.16 Withholding Tax from brokerage and commission ..................................................................

1.17 Advance Tax on Purchase/ Transfer of Immovable Property ...................................................

1.18 Wealth Statement ..............................................................................................................

Ernst & Young Ford Rhodes Sidat Hyder

Corporate tax rate

Industrial undertaking setup through Foreign Direct Investment (FDI)

Concept of Filers and Non-Filers

*provided that the for a non-filer if the yield of

Advance Tax on dividend (other than the

Rate of collection of Tax on private motor cars

Rate of collection of Tax on other motor

Cash withdrawal from a Bank

Advance Tax on purchase on private motor

Ernst & Young Ford Rhodes Sidat Hyder

Advance Tax on sale and transfer of

Advance Tax to be collected on sales to

Advance Tax to be collected on sales to

Advance Tax on purchase of immovable

Capital Gain on Sale of Securities

Ernst & Young Ford Rhodes Sidat Hyder

Where holding period of a security is

Where holding period of a security is

Where holding period of a security is

Where holding period of a security is

Bonus shares treated as income of the shareholders

Ernst & Young Ford Rhodes Sidat Hyder

Alternative Corporate Tax

Ernst & Young Ford Rhodes Sidat Hyder

Tax Rate of Dividend distributed by Collective Investment Scheme

Money Market Fund,

Non-Profit Organizations, Welfare and Charitable Institutions and Trusts

Ernst & Young Ford Rhodes Sidat Hyder

Tax withholding from Directors fee

Taxation of dividend and capital gains of Banking Companies

Oil marketing companies, Oil refineries, Sui Southern Gas

Ernst & Young Ford Rhodes Sidat Hyder

Pakistan International Airlines Corporation; and

Poultry industry including poultry breeding, broiler

Distributors of pharmaceutical products, consumer goods

Petroleum agents and distributors who are registered

Rice mills and dealers; and

Motorcycle dealers registered under the Sales Tax Act, 1990

In all other cases

Initial Allowance on Buildings