Monitoring of Withholding Taxes (Sample Letter) - ITO 2001 Pakistan
Sub: MONITORING OF WITHHOLDING TAXES - TAX YEAR 2017
NTN:
Please refer to your letter No. Nil dated ___________.
We write to inform you that you required us to reconcile the difference between amount on which Tax is deducted and expenses claimed as provided in sub rule (4) of rule 44 of the Income Tax Rules 2002 under section 176 of the Income Tax Ordinance 2001.
In this regard we are submitting information / details for reconciliation as provided in Rule 44 (4) of the Income Tax Rule 2002 as mentioned below:
It should also be worth noting that all expenses claimed in the return are not actually paid of as of the year end but some of the expenses claimed because of accrual basis of accounting. Further, the statements of tax deducted /collected under section 165 of Income Tax Ordinance 2001 only shows those deductions relating to payments made during the year and does not take account of creditors and accruals at year end.
In view of the above, there should be clear understanding that there is always difference in expenses claimed and payments made in accrual basis of accounting and due to this reason payments not matched with expenses claimed.
Further, with regard to your notice, the amounts shown against which tax should be deducted are in essence expenses incurred under accrual accounting and actual payments might be different.
Moreover, we would like to inform you that your assumption that all payments that were made by the company during the year were liable to withholding tax is not correct, as some payments were below threshold limit of withholding tax, while some payments were made to suppliers / contractors who have exemption certificates and hence those payments were not subject to withholding tax.
Item wise description / explanation of different heads of accounts as mentioned in the above referred notice are given below;
1. Management Fees:
Total Management Fees payments made during the year amounting to Rs. 4,833,095/- on which tax amounting to Rs. 289,986/- was duly deducted and deposited.
2. Trustee Fee:
Trustee Fee claimed during the year amounting to Rs. 705,737/- on which deduction at source amounting to Rs. 42,344/- has been made.
3. Fees & Subscription:
Fees & Subscription expenses claimed during the year amounting to Rs. 214,852/- the whole of which was exempt being payment to Securities And Commission of Pakistan and Lahore Stock Exchange.
4. Audit Fee:
Audit Fee expenses claimed during the year amounting to Rs. 281,650/- on which deduction at source
amounting to Rs. 19,716/- has been made.
5. Printing and Stationery:
Printing and Stationery claimed during the year amounting to Rs. 34,320/- on which tax has been deducted and deposited amounting to Rs. 1,373/-.
6. Transaction Cost:
Transaction Cost claimed during the year amounting to Rs. 196,257/- the whole of which was exempt from deduction of tax at source.
7. Brokerage:
Brokerage expenses claimed during the year amounting to Rs. 4,196/- on which tax is deducted and deposited accordingly amounting to Rs. 420/-.
Please find enclosed detailed breakup of above payments showing opening and closing balances of the same.
In view of the above we trust that this discussion will clarifies the matter and it needs to be appreciated that company has made tax deduction from all payments which are subject to withholding tax the provisions and deposited the same within the specified time into the Government Treasury.
Furthermore, it should be noted that company has not made any default in collection or deduction of withholding tax under the relevant provision of the income tax Ordinance 2001. Also, all monthly and annual statement of tax deduction & collection were filed in timely manner and as per the provision of Income Tax Ordinance 2001, and rules as prescribed under Income Tax Rule 2002.
Hence company has not been in non compliance of any provisions of Income Tax Ordinance and Rules made thereunder and therefore no penalty proceedings shall be initiated accordingly.
We trust the above will meet with your requirements and oblige.
Thanking you,
Yours faithfully,
NTN:
Please refer to your letter No. Nil dated ___________.
We write to inform you that you required us to reconcile the difference between amount on which Tax is deducted and expenses claimed as provided in sub rule (4) of rule 44 of the Income Tax Rules 2002 under section 176 of the Income Tax Ordinance 2001.
In this regard we are submitting information / details for reconciliation as provided in Rule 44 (4) of the Income Tax Rule 2002 as mentioned below:
It should also be worth noting that all expenses claimed in the return are not actually paid of as of the year end but some of the expenses claimed because of accrual basis of accounting. Further, the statements of tax deducted /collected under section 165 of Income Tax Ordinance 2001 only shows those deductions relating to payments made during the year and does not take account of creditors and accruals at year end.
In view of the above, there should be clear understanding that there is always difference in expenses claimed and payments made in accrual basis of accounting and due to this reason payments not matched with expenses claimed.
Further, with regard to your notice, the amounts shown against which tax should be deducted are in essence expenses incurred under accrual accounting and actual payments might be different.
Moreover, we would like to inform you that your assumption that all payments that were made by the company during the year were liable to withholding tax is not correct, as some payments were below threshold limit of withholding tax, while some payments were made to suppliers / contractors who have exemption certificates and hence those payments were not subject to withholding tax.
Item wise description / explanation of different heads of accounts as mentioned in the above referred notice are given below;
1. Management Fees:
Total Management Fees payments made during the year amounting to Rs. 4,833,095/- on which tax amounting to Rs. 289,986/- was duly deducted and deposited.
2. Trustee Fee:
Trustee Fee claimed during the year amounting to Rs. 705,737/- on which deduction at source amounting to Rs. 42,344/- has been made.
3. Fees & Subscription:
Fees & Subscription expenses claimed during the year amounting to Rs. 214,852/- the whole of which was exempt being payment to Securities And Commission of Pakistan and Lahore Stock Exchange.
4. Audit Fee:
Audit Fee expenses claimed during the year amounting to Rs. 281,650/- on which deduction at source
amounting to Rs. 19,716/- has been made.
5. Printing and Stationery:
Printing and Stationery claimed during the year amounting to Rs. 34,320/- on which tax has been deducted and deposited amounting to Rs. 1,373/-.
6. Transaction Cost:
Transaction Cost claimed during the year amounting to Rs. 196,257/- the whole of which was exempt from deduction of tax at source.
7. Brokerage:
Brokerage expenses claimed during the year amounting to Rs. 4,196/- on which tax is deducted and deposited accordingly amounting to Rs. 420/-.
Please find enclosed detailed breakup of above payments showing opening and closing balances of the same.
In view of the above we trust that this discussion will clarifies the matter and it needs to be appreciated that company has made tax deduction from all payments which are subject to withholding tax the provisions and deposited the same within the specified time into the Government Treasury.
Furthermore, it should be noted that company has not made any default in collection or deduction of withholding tax under the relevant provision of the income tax Ordinance 2001. Also, all monthly and annual statement of tax deduction & collection were filed in timely manner and as per the provision of Income Tax Ordinance 2001, and rules as prescribed under Income Tax Rule 2002.
Hence company has not been in non compliance of any provisions of Income Tax Ordinance and Rules made thereunder and therefore no penalty proceedings shall be initiated accordingly.
We trust the above will meet with your requirements and oblige.
Thanking you,
Yours faithfully,
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