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Home Breaking News

FBR cannot impose tax on remittances: FTO

byM Hayat
19/08/2022
in Breaking News, Lahore, Latest News, Slider News
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LAHORE: The Federal Tax Ombudsman (FTO) was taken aback as to how the Federal Board of Revenue (FBR) can impose a tax on a Pakistani seafarer who is a master mariner sailing officer on board of foreign vessels.

According to an order issued by the FTO, the FBR cannot impose a tax on foreign remittances received through a banking channel against a monthly salary earned as a master mariner on a foreign vessel and remitted through a banking channel.

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While disposing of a complaint, the FTO has directed the FBR to revisit the tax order, in case of a Pakistani seafarer who is a master mariner sailing on board of foreign vessels. The FTO has observed that the salary income of such persons is exempted from the income tax in terms of clause 4 (b), part-1 of Second Schedule to the Income Tax Ordinance,2001.

Briefly, the complainant; a salaried individual and a Master Mariner sailing on board of foreign vessels, earning US$ 8,000/per month; filed an income tax return for tax year 2016. The salary income of a Pakistani seafarer working on a foreign vessel provided that such income is remitted to Pakistan, not later than two months of the relevant tax year through normal banking channels; is exempt from income tax in terms of clause 4(b), Part-1 of Second Schedule to the Ordinance.

The department issued show cause notice against foreign remittance amounting to Rs9,818,819 declared in the wealth reconciliation statement for Tax Year 2016.

Service charges/ commission/ fees: Payments to non-residents brought into the tax net

The complainant submitted a bank statement and requested to close the amendment proceeding as the foreign remittances were received through banking channel against a monthly salary earned as Master on foreign vessel and remitted through banking channel but the department made an addition on account of unexplained assets creating tax liability of Rs2.598 million on the excuse of not providing an encashment certificate. Therefore, the complainant took the matter with the FTO, the Chief Commissioner–IR contended that the complainant did not declare any such income in his return but declared the same in the wealth statement. As no encashment certificate was produced along with the bank statement; therefore, the addition as unexplained assets under Section 111(1 )(b)/39 of the Ordinance was made.

On the contrary, the complainant submitted his seaman identity card issued by the Shipping Master and “Seaman engagement and discharge record” showing date of joining and date of discharge from a foreign vessel, monthly pay slips issued by foreign vessel “MV Miami Pride” depicting monthly salary income of US$8,000/per month for tax year 2016 and bank statement showing money trails.

Whereas, the order of the FTO stated that the nature and source of foreign remittance had been explained in the shape of monthly salary income working on foreign vessels and remitted through banking channel, any addition made under Section 111(1)(b) in the case of complainant; is contrary to law and procedure.

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