ISLAMABAD: The Federal Board of Revenue (FBR) is taking due actions on the issue of Pakistanis’ presence in Board of Directors of offshore companies on the basis of Panama Papers’ leaks.
As a result of proceedings, if any evasion of tax is detected, the relevant provisions of the law will be applied accordingly to retrieve the loss of state revenue.
According to Parliamentary Secretary for Finance and Revenue Rana Muhammad Afzal Khan, around 440 people, whose names have been associated with offshore companies in the Panama Papers’ leaks, are being strictly monitored in the light of their travelling as well as fund transactions.
At the same time a well placed source at FBR told Customs Today that as per FBR’s stance offshore companies may be legitimate and economically beneficial, or in certain cases harmful and even criminal. The basic principle of taxation around offshore companies is to ascertain whether these companies are formed for benign business purpose or for illegal and tax evasion purposes.
“However, if any Pakistani national, being resident for tax purpose, has shifted his after-tax money from Pakistan and formed an offshore company in foreign country, including tax haven such as Panama, for benign and legal business purpose, there is no illegality in that case” the source said.
Moreover, the source added that if any Pakistani national, being resident for tax purpose, had shifted his hidden or untaxed money from Pakistan through covert or illegal channels and formed an offshore company for the purposes of tax avoidance or money laundering, then it would certainly be treated as an illegal action.
It is pertinent to mention that a Pakistan individual is treated as resident for tax purpose, if he is present in Pakistan for a period of, or period amounting in aggregate to, one hundred and eighty-three days or more in the tax year.
In view of the above, the source maintained that FBR is in the process of taking a number of steps under the law about the offshore companies revealed in the Panama Papers. As a first step, FBR is obtaining information and documentary evidence about the investment or income of the offshore companies of Pakistani residents. The information once received shall be cross matched with the database of FBR and the taxpayers record.
Secondly, the source said that in case it is found that the person has filed the return and the information matches with the declared particulars of his income, no further action shall be taken. In case no record of the person is found available with FBR, the person shall be issued notice u/s 114 of the Income Tax Ordinance, 2011 to file his income tax returns.
Thirdly, the source observed that in response thereto, if the person provides complete documentary evidence that the person is nonresident for tax purposes, no further action is taken under the income tax laws. In case of resident persons, however, all the related provisions of the Income Tax Ordinance shall be applied.
Fourthly, the source noted that in case, the return has been filed but the offshore investment or income, as the case may be, has not been declared by the person, the tax payer will be issued a show cause notice to explain the sources of investment and income derived there-from, including any other details/ documentary evidence as are necessary.
