Recent tax developments in Pakistan include extension of income tax to the semi-autonomous region of Gilgit-Baltistan; postponement of income tax filing deadlines due to problems with the country’s electronic filing system; and the opening of talks to renegotiate the exchange of information provisions of the Pakistan-Switzerland tax treaty.
The semi-autonomous northern area of Gilgit-Baltistan (GB), bordering the Himalayas, has long enjoyed special status through the Constitution of Pakistan. These areas were tax-exempt until March 2012, when the Gilgit-Baltistan Council, headed by the Prime Minister of Pakistan, extended the application of income tax law to GB.
However, the extension could not be enforced due to the absence of a revenue collecting authority and resistance from the Gilgit-Baltistan Legislative Assembly, which comprises elected representatives of the GB people. The GB Council has now decided to enforce the law in the region with technical and administrative support from the Federal Board of Revenue (FBR).
The law applies to all persons working and earning income in GB. However, persons domiciled in GB and deriving income from GB sources would be entitled to 50 percent tax rebate.
The FBR launched its new web-based portal for tax filings for the Tax Year 2014, but due to technical issues, the filing of returns for that year appears to be behind schedule. As a result, the FBR has extended the due date for tax returns of salaried individuals to 31 October 2014 (from 31 August 2014).
Similarly, companies with years ending from 1 July to 31 December 2013 and associations of persons (i.e., partnership, firms) and non-salaried individuals must now file their returns by 31 October 2014 (instead of 30 September 2014). Companies still need to make their tax payments by the original 30 September 2014 due date.
To gain access to information about Swiss bank accounts of ‘super-rich’ Pakistanis, the FBR has entered negotiations with the Swiss Federal Tax Administration (FTA) toward amending Article 25 of the Pak–Swiss tax treaty on the exchange of information between the two tax authorities.
The current provision’s scope is considered to be quite narrow. The Swiss parliament has allowed the FTA to sign Article 26 of the OECD model convention in its treaties and to satisfy international requests for exchange of bank account information. Following this, the FBR and FTA started negotiations to broaden the scope of the existing Article 25 of their treaty to include bank account information.