Pakistanis with foreign assets have been notified by the Federal Board of Revenue (FBR) to pay capital value tax (CVT) for the tax year 2022.
FBR sources said Thursday that letters were sent to all Pakistanis who live there and who listed offshore assets on their 2021 tax forms.
Section 8 of the Finance Act, 2022, charges a 1% capital-value tax on persons with more than Rs 100 million in international holdings, a Karachi LTO spokesman told Asian Trade.
LTO Karachi told taxpayers to discharge their debt by September 30, 2022. All taxpayers with more than Rs 100 million in overseas wealth were polled.
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The official said that the letters were sent to taxpayers as a wake-up call to make sure they paid their bills on time.
The Finance Act 2022 specifies how to calculate foreign assets in Pakistani rupees. All of the cost of foreign assets on the last day of the tax year must be shown in rupees using the exchange rate from the State Bank of Pakistan on that day.
When the cost of foreign assets can’t be accurately determined, the fair market value should be estimated on the last day of the tax year by converting the foreign currency into rupees at the State Bank of Pakistan’s exchange rate.
Experts say it’s difficult for taxpayers to determine their assets’ exchange rate.
The Finance Act, 2022, defines foreign assets as movable or immovable assets held outside Pakistan, directly or indirectly, including real estate, mortgaged assets, stocks and shares, bank accounts, bullion, cash, jewels, jewellery, paintings, accounts and loan receivables, assets held in dependents’ names, beneficial ownership or beneficial interests, or contributions in offshore entities or trusts.
4,000 Pakistanis must pay CVT in 2022, according to FBR. “They’ll be fined if they don’t pay,” said the official.
The 2022 Finance Act penalises non-CVT payers.
A person who fails to pay tax, collect tax, or pay the federal government after having collected tax must pay the tax plus a 12 percent per year default fee from the day the tax was due to the day it was paid.
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The Karachi LTO official said that the recovery process will follow the Income Tax Ordinance from 2001.
Since the assets are kept outside of Pakistan, the Pakistani government may contact the foreign government to start taking action against the owners.
The official said that Pakistan had already signed multilateral institution agreements with 142 countries. These agreements would help the local government collect the capital value tax from people who had not paid.
