The National Board of Revenue (NBR) has introduced a new income tax returns form for both local and foreign firms to use a new form from the current fiscal year while filing returns from the current fiscal year of 2019-2020. The new form will require companies to disclose more information in detail.
The new form invalidates all other forms for the purpose. Corporate taxpayers, particularly multinational companies, will have to make a declaration about their international transactions with their associate companies in the new returns form.
Income tax wing of the NBR issued an instruction on 10th July on submission of income tax returns in FY 2019-20 by corporate taxpayers in this regard. The tax administration amended the income tax rules three years ago to introduce the new return form, IT-11GHA 2016. In the new form, companies will have to state the areas of tax exempted incomes and the incomes that were granted reduced tax benefits.
Exporters will have to highlight the main items they sell abroad. The NBR has added provisions for multinationals and foreign companies to cite in the return form if they perform any international transactions with their associated or related enterprises abroad.
Multinationals and foreign companies will have to give statements about their international transactions with related entities abroad under the Transfer Pricing (TP) rules, which were framed in 2012 to check illicit profit shifting abroad by foreign companies.
Earlier, there were no options for providing many of required information including tax benefits and international transactions with associate companies. NBR addressed the issues and incorporated provisions for providing the information. Corporate taxpayers will have to provide basic information from audit reports in the new form. The companies will also have to provide it with detailed information related to balance sheet, income, expenditure, intangible assets and loan to affiliated companies.
According to the NBR, the number of companies having electronic taxpayers’ identification number is around 80,000 in the country. The official also said that MNCs, both foreign and local, would have to make a declaration whether it was liable to give the statement of international transactions (SITs) and whether the SITs were attached with the returns.
According to the existing income tax law, submission of SITs is mandatory for MNCs but many of the MNCs do not comply with the provision. Field-level tax officials can not detect the avoidance as they don’t have any information whether the company has international transactions or not. From now on, they would easily be able to detect the non-compliant companies if they did not submit SITs tracking the information provided in the returns.
According to the NBR, nearly 1,000 MNCs in the form of legal entities, liaison and representation offices operate in the country. Of them, only 120-130 companies regularly submit their statements of international transactions (SIT) to the NBR.
The latest data on the returns filed by companies are yet to be published by the NBR. Its annual report 2016-17 published earlier this year showed that 29,215 companies filed returns in 2016-17, up 34 percent year-on-year.
The NBR asked all its income tax commissioners in 31 tax zones across the country to take necessary steps in this regard.