CIRCULAR NO. 05/2013, Islamabad, the 28th June, 2013

Introducing New Online System of Issuance of Exemption Certificates u/s 152 (S) of the Income Tax Ordinance, 2001 - Guidelines Regarding F.No.3(61)(Int.Taxes)/2013 GOVERNMENT OF PAKISTAN REVENUE DIVISION FEDERAL BOARD OF REVENUE INLAND REVENUE Islamabad, the 28th June, 2013 CIRCULAR NO. 05/2013 (International Taxes) Subject: Introducing New Online System of Issuance of Exemption Certificates u/s 152 (S) of the Income Tax Ordinance, 2001 - Guidelines Regarding Section 152 of the Income Tax Ordinance, 2001 (hereinafter the Ordinance) commands every resident person and Permanent Establishment (PE) of a non-resident person obliged to remit outside Pakistan income earned under various heads by non-resident persons to (a) either withhold tax at the applicable rate from the amount of business due for remittance and deposit the same into the national exchequer; or (b) furnish to the Commissioner a notice in writing under subsection (5) thereof, if such person intends to make the payment to a non-resident person without deduction of tax. 2. Presently, the person intending to make payment to a non-resident recipient, MANUALLY issues a notice to the Commissioner divulging therein, most of the times, sketchy, half-backed, and incomplete information. There is credible evidence to suggest that the manual system of issuing notice/exemption certificates, regularly results in significant revenue hemorrhage in a variety of Ways and due to multiple reasons. This way the exemption certificates issued (since neither ever contested nor audited), are never put to an independent scrutiny, which factor stonewalls the entire transaction - whether right or wrong - for all time to come, which scenario, on the one hand, militates against the State interest, and, on the other, fails us on our commitments made to Pakistan's partners of Avoidance of Double Taxation Agreements (ADTAS), under which we are obliged to share with them all critical information regarding all incomes that get generated in Pakistan but not taxed for any reason or taxed at a reduced rate. 3. In order to arrest the situation, a new alternative ONLINE system of issuance of exemption certificates has been conceived,…