KARACHI: The Federal Board of Revenue (FBR) will tighten noose around offshore illicit money and assets as Pakistanis having undeclared assets abroad are required to file statement by September 30, 2019.
“The FBR will launch proceedings against persons having offshore assets on the basis of available data,” an official at Large Taxpayers Unit (LTU) said on Thursday.
The official said that those persons having offshore assets should declare their return of income and assets by September 30, along with normal annual return for tax year 2019.
“Any person (who) concealed foreign assets in their returns, will be punishable under the tax laws,” the official added.
Through Finance Act 2018, Section 116A was added to Income Tax Ordinance, 2001 under which every Pakistani having foreign income above $10,000 or having foreign assets with a value of $100,000 had to furnish statement of foreign income and assets.
Previously, Pakistanis having foreign assets were not making declaration as law was silent on this and many tax evaders had taken advantage of this lacuna.
However, now all Pakistanis having foreign assets and income were required to file the statement from tax year 2019 as a result of amendment introduced through Finance Act 2018.
The FBR sources said that the implementation of Section 116A would help the authorities to get better results of exchange of information under Organisation for Economic Co-operation and Development (OECD).
Pakistan on September 14, 2016 entered into a multilateral treaty for the avoidance of double taxation; and for the exchange of information for the prevention of fiscal evasion or avoidance of taxes.
The treaty also included automatic exchange of information with respect to taxes on income imposed under the ordinance. The FBR sources said that there were many tax havens where illicit money had been parked.
There were many ways of offshore tax evasion and avoidance, which include: corporate re-structuring; merger; de-merger; split of contracts; paper subsidiary etc.
The tax havens were also being used for parking drug money and plundered money through corruption.
The FBR had started initiatives to net offshore tax evaders and was working on source of information, bilateral agreements, Dubai properties and information received from UK properties.
The sources said that in case persons failed to submit statement of offshore income and assets than domestic prevalent would be applied.
They also said that if a person fails to provide a foreign assets and income statement, such person would be liable to pay penalty of two percent of the foreign income or value of the foreign assets for each year of default.