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Review Of Taxation And Economy

Review Of Taxation And Economy: Economic indicators picking up, macro balances likely to improve: SBP

Interview with Mr Ashfaq Yousuf Tola – President, TOLA ASSOCIATES


Professional Accomplishments


  • Fellow Member of Institute of Chartered Accountants of Pakistan
  • Fellow Member of the Institute of Cost & Management Accountants of Pakistan
  • Life Member of Karachi Press Club
  • Life Member of SAARC Chamber of Commerce and Industry
  • Member of Karachi Tax Bar Association

Key Achievements:

  • Presentation to IMF on Single Stage Sales Tax in December 2015.
  • Visited Turkey as an official of Government of Pakistan to study Turkish Tax System & authored a report on Turkish Taxation System.
  • Knowledge of more than 40 jurisdictions around the globe and co-authored report with Dr. Hafeez Pasha on Sindh Provincial Taxation System.
  • International Speaker on Pakistan Economy and Non-Resident Taxation in 2018 and 2019 at Dubai, Abu Dhabi and Jeddah.
  • Distinction of passing CA Examinations – Intermediate & Final (both groups together in 1st attempt) as trainee of PWC A. F. Ferguson & Co., Chartered Accountants.

Areas of Expertise:

  • Tax Planning and Advisory
  • Assurance and Business Advisory Services
  • International Mergers and Acquisitions
  • Corporate Finance and Investment Advisory
  • Due diligence and Forensic Audits
  • Financial Product Designing and Launching
  • Public Listings and Corporate Affairs

Key Positions:

  • Member Board – Privatization Commission, Government of Pakistan (present)
  • Chairman – Sub-Committee on Taxation for promotion of Islamic Banking Ministry of Finance, GoP (2017).

Federal Board of Revenue, Government of Pakistan:

  • Chairman Anomaly Committee (2019)
  • Member Tax Reforms Implementation Commission (2016 to date)
  • Member Tax Reforms Commission (2015)
  • Member Tax Advisory Council (2014-15)
  • Member Taxation Reforms Co-ordination Group (2011-13)
  • Member Revenue Advisory Council (2011)

Institute of Chartered Accountants of Pakistan:

  • Member Council, (present)
  • Chairman – Fiscal Laws Committee (Taxation), (present)
  • Chairman – Anti Money Laundering Committee, (present)
  • Chairman – CA Joint Committee, (present)
  • Member Investigation Committee, (present)
  • Member Examination Committee, (present)
  • Member Public Sector Committee, (present)
  • Member Overseas Coordination Committee, (2018)
  • Member Regional Committee – (Southern Region) (1993-1996)
  • Secretary of Regional Committee (Southern Region) (1996)
  • Member Education and Training Committee, (1994-95, 95-96, 96-97)
  • Member Technical Services Committee (1992-93, 93-94)
  • Chairman Chartered Accountant Students’ Association (1993)

South Asian Federation of Accountants:

  • Member Fiscal Law Committee (present)
  • Member Tariff Committee (present)

Federal Tax Ombudsman:

  • Member Advisory Committee (South) (present)

Pakistan Institute of Corporate Governance:

  • Member Board of Directors (present)
  • Member Audit Committee (present)

Pakistan Institute of Public Finance Accountant:

  • Member Board of Governors (present)
  • Chairman CPD Committee (present)

Institute of Cost & Management Accountants of Pakistan:

  • Secretary of Karachi Branch Council (KBC) (1995 and 1996)
  • Elected Member KBC and Convener Seminar and Publication Committees (1992-96)
  • Member Technical Committee
  • Member Research Committee

Karachi Club

  • President (2012 and 2013; 2016 and 2017)
  • Honorary Secretary (2008)
  • Member Managing Committee (2003, 2004)

Professional Experience

  • President Tola Associates (April 2017 to date).
  • Senior Partner Naveed Zafar Ashfaq Jaffery & Co, Chartered Accountants, a member firm of Prime Global International (2012 to March 2017).
  • Partner Nasir Javaid Maqsood Imran Ashfaq, Chartered Accountants (2011 to March 2012).
  • Principal Strategic Officer in Stallion Textiles (Private) Limited (2008 to 2010).
  • Chief Executive Officer in Fincon (2000 to 2007).

Pakistan & Gulf Economist had an exclusive conversation with Mr Ashfaq Yousuf Tola regarding taxation and economy. Excerpts of the conversation are as follows:

Through FA 2020, the definition of value of supply for used vehicle was inserted in Section 2(46) of Sales Tax Act 1990,whereby in case of registered person who is engaged in purchasing used vehicles from general public on which sales tax had already been paid at the time of import or manufacturing, and which are, later on, sold in the open market after making certain value addition, value of supply will be the difference between sale and purchase price of the said vehicle on the basis of the valuation method prescribed by the FBR. Now FBR vide SRO 931(1)/2020 dated 30th September 2020 has prescribed valuation method by inserting rule164A in Sales Tax Rule 2006. The value of supply shall be different between sale value – purchase value with no input tax adjustment allowed. The whole of sales and purchase amount is required to be received through banking channel under Section 73. Moreover, in case of purchase value is higher than sale value, the value of supply shall be considered as zero.

Section 50 of Sales Tax Act, 1990 empowers FBR to make Rules by notification for carrying out rules for the purposes of this Act including rules for charging fee for processing of returns, claims and other documents and for preparation of copies thereof. According to Section 3(2) taxable supplies or import of goods specified in Third Schedule shall be charged at the rate of seventeen percent of the retail price. Now FBR has issued Rules for video analytics for electronic monitoring of production of these goods vide SRO 889(I)/2020 dated 21st September 2020.

The Chapter XIV-B of Sales Tax Rules 2006 was introduced for prescribing rules for electronic monitoring, tracing of production, import and supply-chain of tobacco, beverages, sugar, fertilizer, cement, and petroleum products. A Licensing Committee was prescribed to issue license to the service providers of monitoring and tracking services. It was provided that the licensing committee shall comprise of at least three members of Inland Revenue Officers not below the rank of BPS-20 of FBR Headquarters, assisted by technical or IT expert and any other officer or authority designated by the board. Now through SRO 831(I)/2020 dated 9th September 2020, the composition of committee is changed and now it will comprise of at least 3 officers of Inland Revenue Services not below the rank of Commissioner, headed by an officer not below the rank of Chief Commissioner, assisted by technical or IT experts and any other Officer or authority designated by the FBR.

The BRA has issued notification No. BRA/BSTS/15/2020 dated 01 September 2020, whereby CPEC project Pak-China Technical & Vocational Institute of Gwadar Port is exempted from Sales Tax on services.

The FBR has issued circular No. 4 dated 30th September 2020 whereby it has extended date of filling of Income Tax Returns/statements as follows:

  • The individuals and Association of persons till 8th December 2020.
  • The companies with special tax year, till 8th December 2020.
  • It has also been clarified that no further extension will be granted.

The profits and gains of green filed industries are exempted for income tax as per Clause (126O) of Part I of Second Schedule. Now SOP for obtaining approval from FBR is prescribe in newly inserted Rules Chapter XVIIA in Income Tax Rules 2002, vide SRO 882(I)/2020 dated 18th September 2020, in which prescribe format of application for application of exemption and rules for processing by Commissioner, refusal and appeal against Commissioner’s decision is prescribed.

The SECP vide SRO 881 dated 9 September 2020 issued Red Flags/indicators whereby all the Regulated Persons registered in SECP has to comply with the above-mentioned Red Flags/indicators on the suspected prescribed/forbidden persons or entities under the Anti Money Laundering and Countering Financing of Terrorism Regulations, 2018.

The article “Business profits” as per DDT states that the right to tax business profits is only in the country of residence. The country of source has the right to tax only if the enterprise carries on business through a Permanent Enterprises [PE] situated in the country of source and to the extent of profits attributable to PE, discussed in our earlier version of monthly newsletter. In case where the enterprise of a country carries on business through PE in the other country, the country of source may have the right to tax the following profits:

1) Profits attributable directly to such PE situated in the country of source.

2) Profits attributable to sale of similar goods in the other country as sold by the PE even when it is not sold by such PE.

3) Profits attributable to any other activities carried on in the other country where such activities carried out are similar to that carried out by the PE. The scope of Business profits taxability is very wide in scope as per DTT, wherein it also provides right to the country of source to tax the profits attributable to activities which are similar to the activities carried on by the PE even though these are not carried on by the PE.

Profits which are chargeable to tax under the head “Income from Business” will be as follows:

  1. Profits and Gains of any business carried by a person at any time of a tax year.
  2. Profits derived by any trade, professional or similar association from the sale of goods or provision of services to its members.
  3. Profit derived from the hire or lease of tangible movable property i.e. leasing business.
  4. The fair market value of any benefit or perquisite, whether convertible into money or not, derived by a person in the course of, or by virtue of, a past, present, or prospective business relationship; and
  5. Any management fee derived by a management company (including a modaraba management company).

Fee for Technical Service arising in a Contracting State which are derived by a resident of the other Contracting State may be taxed in that other state. However, such technical fees may also be taxed in the Contracting State in which they arise, and according to the laws of that State, but where the beneficial owner of such technical fees is a resident of the other Contracting State, the tax charged should not exceed 12 percent of the gross amount of the technical fees.

State Bank of Pakistan’s Reserves have plunged by $341.9 million to $12.35 billion during the week as of 25th Sept 2020 vs $12.70 billion last week. On a week-on-week basis, State Bank’s reserves have deteriorated by 2.69% to $12.35 billion mainly due to external debt repayments during week. The private banking forex reserves declined by 0.37% from $7.20 billion to $7.17 billion. Overall, the total forex reserves dropped by 1.85% or $368.9 million from $19.90 billion as of 18th Sept 2020 to $19.53 billion as of 25th Sept 2020. SBP reserves dropped by $460 million since Sept 11th, 2020. However, this SBP reserves provide the import cover of 3.53 months. According to SBP, “COVID-19 curve has been flattened, economic activity indicators are picking up, and macro balances are expected to improve”.

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