KARACHI: Government warned individuals with foreign income of over $10,000 or assets worth $100,000 of penalties if they fail to annually file their returns under a new law.
The president on Sunday night promulgated four ordinances to make tax amnesty scheme, unveiled on April 5, into law. An ordinance, amending Section 114 and Section 116 of the Income Tax Ordinance 2001, made filing of income tax returns and wealth statement mandatory for resident taxpayers, having foreign income above $10,000 a year or foreign assets with a value of $100,000 or more. Individuals are required to submit details in wealth statement and returns, including total foreign assets and liabilities as on the last day of the tax year.
Individuals are also required to submit complete details of foreign income and expenditures during a tax year. The presidential ordinance prescribed a penalty for non-compliance with the law of filing of returns and statements by individuals with foreign income. “Where any person fails to furnish foreign assets and income statements within the due date then such person is required to pay a penalty of two percent of the foreign income or value of the foreign assets for each year of default,” it said.
Tax experts said the government slapped the new condition to get to know the income source. The experts said section 111(4)(a) of Income Tax Ordinance 2001 provided a blanket amnesty to inward remittances.
Government imposed restriction on depositing of money into foreign currency accounts to document the economy. The president signed another ordinance to amend the Protection of Economic Reforms Act (PERA) 1992. After the promulgation of the ordinance, transfers to foreign currency accounts could only be made if the account holders are on the active taxpayers list.
The presidential ordinance amended the Section 5 of PERA 1992 under which the accountholders of foreign currency accounts were enjoying complete exemption from declaring source before any authority.
Tax experts said foreign currency accountholders also need to file annual returns of income and wealth statement to keep their accounts intact after the amendment.
Under to ordinances issued by the president, the liquid foreign assets, not repatriated, have five percent tax, immovable assets outside Pakistan three percent tax, and liquid assets repatriated and invested in government securities up to five years in US dollar-denominated bonds with six month payment profit rate in rupees (rate of return three percent) will be whitened against two percent of tax. Confidentiality of disclosed assets will be ensured and the amnesty scheme will remain applicable up to June 30.
