The Finance Act, 2022 has brought about certain amendments in the Income Tax Ordinance, 2001 (the Ordinance, hereafter). Some significant amendments on Imposition of Capital Value Tax 2022 are explained hereunder: –
Capital Value Tax 2022 has been imposed under Section 8 of the Finance Act, 2022 on below mentioned assets for tax year 2022 and onwards. In case of a motor vehicle held in Pakistan, CVT is to be charged and collected from the 1st day of July, 2022:
|Sr. #||Asset/ Description||Rate|
|1||Motor vehicle held in Pakistan
(i) the engine capacity exceeds 1300 cc; or
(ii) in case of electric vehicles, the battery power capacity exceeds 50kwh
|1% of the value|
|2||Foreign assets of a resident individual where the value of such assets on the last day of the tax year in aggregate exceeds Rupees one hundred million||1% of the value
|3||Such assets or class of assets as specified by by the Federal Government through a notification in the official Gazette Government||As specified Federal Government, not exceeding 5% of the value.|
The value of vehicle for the purpose of CVT is provided in the following manner:
(a) Imported vehicle: the import value assessed by the Customs authorities as increased by all duties and taxes leviable at import stage and Collector of Custom will collect CVT at import stage.
(b) Vehicle manufactured or assembled locally in Pakistan: the ex-factory price inclusive of all duties and taxes and local manufacturer or assembler will be responsible for collecting CVT.
(c) Auctioned Vehicle: the auction value inclusive of all duties and taxes and any person making sale by public auction or auction by tender will collect CVT.
Furthermore, the value of motor vehicle will be reduced by ten percent each year and no CVT will be collected after five years from the end of financial year in which motor vehicle has been imported, auctioned or locally purchased.
CVT on motor vehicle is to be collected at the time of import, purchase from local manufacturer or assembler and auction. Every motor vehicle registering authority of Excise and Taxation Department is required to collect CVT at the time of registration of motor vehicle with effect from Pt day of July, 2022 except where the CVT has already been collected from the same person applying for registration at the time of import, purchase from local manufacturer or at auction stage in respect of same motor vehicle.
CVT is to be collected by the Motor vehicle Registration Authority at the time of transfer of registration or ownership of motor vehicle. This means that CVT on every subsequent sale/transfer of motor vehicle whenever occurring within the prescribed five years period is to be collected.
An inclusive definition of the foreign assets has been provided which, inter alia, includes assets held abroad indirectly and under the beneficial ownership by the resident individual.
The value of foreign assets will be total cost of the foreign assets on the last day of the tax year in relevant foreign currency which is converted into rupees as per exchange rates notified by State Bank of Pakistan for the said day. In case the cost of foreign assets cannot be determined with reasonable accuracy, the fair market value on the last day of tax year will be taken for this purpose and rupee conversion is applied in the aforesaid manner. The resident person holding foreign assets will pay CVT at the time the income tax return for the tax year is due.
The officer of Inland Revenue has been empowered to pass an appealable order to recover CVT along with default surcharge from a person who fails to pay CVT or to collect CVT or fails to pay to the credit of the Federal Government after having collected CVT, by holding the person personally liable in this regard.
Provisions of Income Tax Ordinance, 2001 and Income Tax Rules, 2002 are applicable to collection, payment, recovery, or refund of CVT. Board is also empowered to prescribe rules• for any matter relating to the capital value tax.
For more information on FBR’s new regulations / circulars/ SROs/ amendments in taxation laws in Pakistan please visit https://www.fbr.gov.pk/