GOVERNMENT OF PAKISTAN
REVENUE DIVISION
CENTRAL BOARD OF REVENUE

C.No.4(21)TP-I/92                                                Islamabad, the 1st July, 1992.

CIRCULAR NO.20 OF 1992 (INCOME TAX)

SUBJECT:PRESUMPTIVE TAX ON EXPORTERS - CLARIFICATION
             REGARDING:

The Finance Act, 1992, has introduced a regime of presumptive tax for exporters through the insertion of section 80CC in the Income Tax Ordinance, 1979. The salient features of this regime are as under:-

  1. Authorized dealers in foreign exchange are required to deduct income tax at source from all foreign exchange proceeds realized on or after July 1, 1992, on account of goods exported at any time by an exporter.

  2. Tax is to be deducted under sub-section (5A) of section 50 from all proceeds realized without any monetary threshold.

  3. The foreign exchange proceeds will comprise invoice value of goods exported customs duty, freight and insurance and other charges collected from the foreign buyer to the credit of the exporter’s bank account. The whole of such amount received by the exporter shall be deemed to be his income chargeable to presumptive tax with effect from assessment year 1993-94.

  4. The standard rate of withholding tax as well as presumptive tax has been specified at one per cent of the total foreign exchange proceeds converted into Pakistani rupees according to the exchange rate prevalent at the time of realization of such proceeds. However, the standard rate of tax has been reduced in the case of exporters who prove that reduction in tax on account of the goods exported was available to them previously as under:-

  Goods Exported Reduced rax rate.

i

 Where the exporter was entitled to 50% reduction in tax on export of manufactured goods including refined/treated  salt, barrettes, granite blocks, heat insulating bricks, and  magnetite refractories. 0.75%
  Where the exporter was entitled to 75% reductionin tax on export of value-  added goods like leather & textile garments, engineering and electrical goods, cutlery, ceramic tiles, sports goods surgical goods and   pharmaceuticals etc. 0.50%

The list of various items of export eligible for rebate or reduction in tax at different rates under the normal law is annexed.

  1. The provisions of withholding tax as well as the presumptive tax will not apply in respect of exports made by those manufacturers whose total income is already exempt from tax. For this purpose formal notification of exemption will be issue separately.

  2. The tax deducted at source by the authorized dealers in foreign exchange shall be deemed to be full and final discharge of tax liability in respect of all exporters, including companies and registered firms, who have no other receipts and source of income.

  3. Such persons shall not file the prescribed returns of income. They will, however, be required to furnish simplified statement of their deemed income and presumptive tax for the assessment year 1993-94 onward.

  4. Since a person having no other receipts or income shall not be required to file his return of income nor any assessment in his case shall be made, an order under section 59A shall be deemed to have been made in respect of such deemed income without making a formal assessment.

  5. All the provisions contained in sub-sections (5) & (6) of section 80CC shall be equally applicable to cases covered under section 80CC.

 

2. Since the provisions of section 80CC will become applicable from assessment year 1993-94, exporters maintaining books of account may be given special treatment as under:-

  1. Local sales of goods (manufactured for export) as well as waste material, not constituting more than 20% of such production, may also be treated as export sales if the assessee opts to pay tax on such sales at the rate applicable to export sales under section 80CC.

  2. Credit for the tax collected on the amount of electricity bills under section 50(7E) may be given in computing the tax payable by the exporter in respect of all receipts and sources of income including the deemed income u/s 80CC. However no other allowance or deduction against such deemed income will be admissible.

  1. The share of a partner in the deemed income of the registered firm liable to be assessed on presumptive basis under section 80CC may not be subjected to further tax in his hands by virtue of exemption granted under clause (IIIA) of the second Schedule. However, income not covered by section 80CC will be assessable in the normal manner

  2. Where income from exports is inseparable from commission, brokerage and other receipts and the assessee cannot prove the extent of overhead expenses relating to non-export receipts, allocation of expenses may be made on a pro-rata basis in the same ratio as the receipts not covered by section 80CC bear to the gross profit on the export sales.

  3. Where deductions under sub-section (5A) of section 50 are made in respect of exports already accounted for an subjected to tax in the normal manner prior to the assessment year 1983-84, credit for such deductions will be given and refund, if any, claimed by the exporter will be allowed accordingly.