Altertnative Corporate Tax - 113C

ALTERNATIVE CORPORATE TAX [113C] 

Starting from the tax year 2014 tax payable by a company (in respect of income which is subject to tax under NTR or minimum tax under any of the provisions of Income Tax Ordinance) shall be higher of the Corporate Tax (CT) or Alternative Corporate Tax (ACT). 

Before proceeding further it will be advisable to understand certain terms to be used in this context. 

"Corporate Tax" 

Corporate Tax means higher of tax payable by the company under NTR (under Division-II , of Part-I of the First Schedule) and minimum tax payable under any of the provisions of the Income Tax Ordinance, 2001. 

"Alternate Corporate Tax" (ACT)

ACT means the tax at the rate of seventeen per cent (17%) of a sum as computed as below: 

Accounting Income                                                                                                        XXXXX

Less:

       Exempt Income                                                                           XXXX

       Income other than NTR or Minimum Tax                                   XXXX

       Income subject to tax credit u/s 65D (new ind. undertaking)    XXXX

       Income subject to tax credit u/s 65E (old ind. undertaking)      XXXX

       Income subject to tax u/s 100C (NPOs, Trusts etc)                    XXXX                  XXXXX

Taxable Income for ACT                                                                                               XXXXX

"Accounting Income" 

Accounting Income means the accounting profit before tax for the tax year, as disclosed in the financial statements (after certain adjustment for common expenditure, etc.,) but excluding share from the associate recognised under equity method of accounting. 

Note: While determining 'accounting income' and sum for ACT, expenses shall be apportioned between the amounts to be excluded from accounting income. 

Provisions Relating to Alternative Corporate Tax 

Provisions relating to ACT are summarised below: 

• ACT shall be higher of the CT or ACT, which is computed @ 17% of the taxable income determined for ACT (as discussed above).
• The excess of ACT paid over the CT payable for the year shall be carried forward to the next tax year and adjusted against CT for that tax year. The unadjusted amount of excess tax paid may be carried forward for a maximum period of ten (10) years immediately succeeding the tax year for which the excess was first computed. 
• The mechanism for adjustment of excess of ACT over CT shall not prejudice or affect the entitlement of the taxpayer regarding carrying forward and adjustment of minimum tax u/s 113 of the Income Tax Ordinance, 2001. 
• Where CT or ACT is changed (i.e., enhanced or reduced) as a result of any amendment or duet to any other order under the Income Tax Ordinance, 2001, the excess amount to be carried forward shall be changed accordingly. 
• ACT shall not apply to persons carrying insurance business, business of exploration, and production of petroleum and banking companies. 
• Tax credit under section 64B (to companies making employment generation) and section 65B (to companies making investments for extension, expansion, BMR) shall be allowed against Alternative Corporate.
• The Commissioner may make adjustments and proceed to compute 'accounting income' as per historical accounting pattern. Before making such adjustment, the CIR  has to provide the company an opportunity of being heard 
• It is important to note that taxes paid or payable under NTR (Under Division-II of Part-I of the First Schedule) shall remain payable in accordance with the mode or manner prescribed under the respective provisions of the Income Tax Ordinance, 2001. 

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