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Amnesty scheme announced Hidden wealth regularisation at 10pc tax

Sohail Sarfraz

ISLAMABAD: The government has announced a new amnesty scheme for hidden income and assets which can be regularised by paying 10 percent tax.

The last date for utilising the scheme is April 30.

The amnesty has been offered in pursuance of Economic Reforms Package given by Chief Executive of Pakistan.

According to Income Tax circular No. 4/2000 issued on Wednesday, undisclosed and untaxed income as well as any assets created out of such income can be declared under the scheme and regularised by paying tax at the rate of 10 percent.

The declaration can be made of undisclosed income earned in any income year ending on or before June 30, 1999.

The scheme will cover all tax payers whether existing or new, except persons against whom proceedings are pending under the National Accountability Bureau Ordinance, 1999.

The assets declared under the scheme will not be liable to wealth tax for preceeding years and will also be exempt for the next five years.

Income Tax circular no. 4/2000 reads:

In exercise of the powers vested in the CBR under section 59D of the Income Tax Ordinance, 1979, the following scheme for the payment of tax in respect of undisclosed income is made. This scheme shall be called Tax Amnesty Scheme, 2000. The Scheme shall apply to all assesses whether existing or new except the cases where proceedings are pending under the National Accountability Bureau Ordinance, 1999 (XVIII of 1999). The Scheme shall apply to undisclosed income of any income year or year ended on or before June 30, 1999.

Meaning of undisclosed income: For the purposes of this Scheme, 'undisclosed income' means any income (including any investment to be include an income under section 13 or any other deemed income) which was chargeable to tax but could not be so charged under the Income Tax Ordinance, 1979, for any income year or years ended on or before June 30, 1999.

Charge of Tax on undisclosed Income: The tax on undisclosed income shall be charged at the rate of 10 percent.

Declaration of undisclosed income: The declaration of undisclosed income shall be in the form given in the annex to the Scheme and shall be submitted by April 30, 2000.

Payment of Tax on undisclosed income: The tax payable on the undisclosed income shall be paid by the declarant on or before furnishing the declaration and it shall be accompanied by proof thereof.

Procedure for filing of declaration: The declaration of undisclosed income shall be delivered to the concerned Deputy Commissioner of Income Tax who, on receipt of such declaration, shall give an acknowledgement receipt. Undisclosed income may be declared either in consolidated form for all years for which declaration is made or separately for each year on a single declaration form.

Incorporation of undisclosed income in books of accounts: Where the declarant has paid tax on his undisclosed income in accordance with the Scheme, he shall be entitled to incorporate in his books of accounts such undisclosed income in tangible form.

Immunity: Where a person has paid tax on his undisclosed income in accordance with the Scheme, he shall not be liable to any further tax, charge, levy, penalty or prosecution in respect such income under the Income Tax Ordinance 1979. The undisclosed assets declared in accordance with the scheme and on which tax has been paid would be exempt from wealth tax under the Wealth Tax Act, 1963, for any assessment year commencing on or before the July 1, 1999 and for five assessment years following that.

Pending proceedings: The filing of declaration for any year or years shall not affect the pending assessments as well as re-assessments for that or those years. All such assessments or re-assessments shall be finalised as provided in the Income Tax Ordinance, 1979, or Wealth Tax Act, 1963. No set off or credit for the 'undisclosed income' declared under the Scheme shall be given against the income assessed on such assessment or re-assessment. However, no addition in 13 shall be made in respect of such undisclosed asset as is declared under the Scheme for the relevant year for which assessment or re-assessment is made, provided that the value of such asset is according to the provisions of this Scheme and the tax thereon has been paid. The pending appeals and revision petitions will be heard and decided in the normal course.

Finality of proceedings under the scheme: All declarations filed under the Scheme shall be subjected to preliminary examination. Where a declaration in respect of undisclosed income has been properly made and the tax due on such income has been fully paid, such declaration shall be accepted by Deputy Commissioner of Income Tax concerned without any further proceedings and the declarant shall be informed accordingly.

Where any deficiency or any mistake in calculation of tax or any other deficiency or mistake is noticed, a show cause notice with the prior approval of Commissioner of Income Tax, shall be issued and served upon the declarant requiring him to meet the deficiency and explain the mistake or omission within 30 days of the service of the said notice. If the said deficiency or mistake is rectified within the due date the declaration shall be accepted and the declarant should be treated accordingly.

In case the declarant does not respond to the notice issued under para 10(3) of the Scheme or does not make the declaration, such declaration should be rejected with the approval of the Commissioner of income tax and the provisions of para 7 and 8 of the Scheme shall not apply.

Where it is subsequently discovered that the declaration so made was not true and correct or the particulars of income or assets were inaccurate, the acceptance of such declaration shall be cancelled with prior approval of Commissioner of Income Tax or Wealth Tax concerned provided that no such order or cancellation shall be made without giving an opportunity of being heard to the declarant. However no order or cancellation shall be made after June 30, 2000.

Where the declarant claims depreciation allowance in respect of Plant and Machinery for any assessment year prior to the assessment year commencing of before the July 1, 2000, his declaration for the relevant assessment year shall be cancelled by the DCIT with the prior approval of the CIT and all provisions of the Income Tax Ordinance, 1979 or Wealth Tax Act, 1963 shall apply accordingly.

Consequences of filing of untrue or incorrect declaration: Where a declaration is rejected or its acceptance is cancelled in accordance with the provisions of para 10 of the Scheme, the immunity granted under para 8 of the Scheme shall cease to exist and all the provisions of Income Tax Ordinance, 1979 and Wealth Tax Act 1963, shall apply accordingly.

Valuation of Assets: For the purpose of this Scheme the valuation of undisclosed assets created out of undisclosed income shall be made in the following manner:

Residential properties: Plots and open lands; Actual cost of acquisition or value specified for the purposes of stamp duty applicable on 30th June of the relevant income year, whichever is higher.

Super structure: Actual cost of construction or at the rate of Rs. 300 per Sq.ft. whichever is higher.

Apartments and flats: Actual cost of acquisition or value specified for the purposes of stamp duty applicable on 30th June of the relevant income year, whichever is higher.

Commercial Properties: Plots and open lands; Actual cost of acquisition or value specified for the purposes of stamp duty applicable on 30th June of the relevant income year, whichever is higher.

Super structure: Actual cost of construction or at the rate of Rs. 300 per Sq.ft. whichever is higher.

Shares and stocks of listed Companies: As per Wealth Tax Rules applicable on June 30 of the relevant year.

Shares and stocks of Companies not quoted on stock exchange: As per Wealth Tax Rules applicable on June 30 of the relevant year.

Investment in Securities and Capital Instruments (i.e. National Saving Schemes, Postal Certificates, Bonds and other Securities etc.): As per Wealth Tax Rules applicable to the relevant year.

Cash and Prize Bonds: The face value.

Motor Vehicles: Imported motor vehicles; CIF value plus the amount of all charges, customs-duty, sales tax, levies, octroi, fees and other duties and taxes leviable thereon and the costs incurred till their registration.

Motor vehicles purchased from a manufacturer or assembler or dealer in Pakistan: The price paid by the purchaser, including the amount of all charges, customs duty, sales tax and other taxes, levies, octroi, fees and all other duties and taxes leviable thereon and the costs incurred till their registration.

Motor vehicles specified above on the valuation date following the valuation dates in which the vehicle was first assessable in the hands of the assessee: The value compared in the manner specified above as the case may be, as reduced by a sum equal to 10 percent of the said value for each successive year, up to a maximum of five years.

Used motor vehicles purchased by an assessee locally: The original cost of the vehicle determined in the manner specified as the case may be, as reduced by an amount equal to 10 percent for every year following the year in which it was imported or purchased from a manufacturer. Provided that in no case shall the value be determined at an amount less than 50 percent of the value determined in aforesaid manner.

Bullion: Rs. 5,000 per 10 grams.

Jewellery (Gold): Rs. 4,000 per 10 grams.

Jewellery (Other than gold): Market rate on June 30, 1999

Stock and Trade: Actual cost of acquisition.

Accounts receivable: Actual on June 30 of the relevant income year.

Plant and machinery: Actual cost of acquisition on 30th day of June of the relevant income year with proof of purchase.

Other assets: As provided in the Wealth Tax Act, 1963.

Depreciation allowance: In respect of Plant and Machinery declared under this Scheme, no depreciation allowance shall be allowed in respect of any assessment year commencing on or before the July 1, 1999. The WDV of such plant and machinery as on June 30, 2000 shall be worked out as if the depreciation allowance had been allowed up to the assessment year commencing on the July 1 1999, under the provisions of the Third Schedule to the Income Tax Ordinance, 1979.

Form of declaration of undisclosed income: The declaration of undisclosed income required to be furnished under section 59D shall be in the form as per annexure and shall be verified in the manner and accompanied by the documents as specified in the Scheme.