Pakistan Cracks Down on Late Tax Filers and Non-Compliance

The government has introduced significant changes to its income tax system through the Finance Act 2024, aiming to improve compliance and revenue collection. Here's a breakdown of the key measures:

New "Late Filer" Category:

• Previously, taxpayers were categorized as Filers or Non-Filers. The new "Late Filer" category will attract a higher tax rate for individuals and associations of persons (AOPs) who fail to file their income tax returns by the deadline. This aims to encourage timely filing.
• The tax rates of Late Filers are applicable from July 01, 2024. So those persons who filed their returns for last three preceding tax years after the respective due dates is a Late Filer Now
• The concept of immediate Active Tax Filer is no more.

Understanding Filers and Non-Filers:

• Filers: These are individuals and AOPs who register with the Federal Board of Revenue (FBR) and file their income tax returns regularly.
• Non-Filers: Individuals and AOPs who haven't registered with the FBR or haven't filed their tax returns are considered Non-Filers.

How to Become a Filer:

The FBR offers online registration for becoming a Filer. It's a relatively straightforward process that can be completed electronically.

Changes to Withholding Tax on Property Transactions:

• Withholding tax slabs are now based on property value. The highest rate for Filers is 4% for properties exceeding Rs. 100 million, while Late Filers face a higher rate of 8%.

Flat Rate Capital Gains Tax on Immovable Property:

• A flat 15% tax will be levied on capital gains from immovable property acquired on or after July 1, 2024, regardless of the holding period. This aims to simplify the tax system and potentially discourage investment solely for tax benefits.

Travel Ban for Non-Compliant Taxpayers:

• The government intends to restrict foreign travel for Non-Filers and Late Filers, with exceptions for Hajj/Umrah pilgrims, minors, students, and overseas Pakistanis. This is a new, stringent measure aimed at encouraging tax compliance.

Important Note:

Tax laws can be complex. Seeking guidance from a qualified tax advisor is recommended for a complete understanding of your specific tax obligations and potential impacts of the new regulations.

This article was published at Pakistan Tightens Tax Regime: New “Late Filer” Category, Property Withholding Tax Slabs, and Exporter Tax Changes