This is a detailed step-by-step guide to becoming a tax filer in Pakistan. The governing body FBR thrives to ensure that Pakistan citizens move forward and become tax payers. Laws and policies in place to drive people to submit taxes and become tax filers. How to become a Tax Filer is a common question. Due to the lack of information, people tend to become panic. This should not be the case. Here we provide details of tax filing and the step by step. Before we begin, let us introduce you to the current tax system in Pakistan and update regarding the difference between filer and non-filer.
Pakistan Taxation System – Filer Versus Non Filer
Pakistan has one of the lowest tax to GDP ratios. Hence, government tends to create processes and laws to assist and motivate non tax payers to become tax payers. In order to create a value position and incentive plan for the citizens, the government creates two groups.
One group is called the filer and the other is called the non filer. Filers get more incentives as compared to the non-filers. With more tax benefits, the government tends to migrate more and more people to the tax bracket of filers and enable them to submit their taxes.
Non- filers get worse taxes incorporated onto them. In addition, the government is now working with companies to further facilitate the tax filers. So you might even get better services at government and public areas.
2018 is the year when new polices are being made. For 2019 and beyond tax filers will be seeing more and more benefits coming to them. 2020 is challegening as well.
What is a Filer in FBR Terms
Before we file, let us first understand what is a “filer”. A file is an individual or company that is a part of the Active Taxpayers List (ATL). ATL is a detailed list that Federal Bureau of Revenue (FBR) maintains. List updates every Monday. Tax Lawyers work on updating their customers correctly and immediately. and wait a few days so that ATL can be updated.
Now the government has given certain benefits to filers. And hence the need to get filer status. Without being a filer, you are not given certain privileges. You get discounts on purchasing a car and there are no caps in terms of purchasing houses. For example, if you buy a plot valued at Rs.8.00 million, you will have to pay tax of Rs.320,000 if you have not filed your tax return, but if you are a filer, you have to pay just Rs.160,000. Similarly, on the purchase of a vehicle, the tax for a non-filer is double that paid by a filer.
This makes it more worth the while to become a filer and that too on an immediate basis. Additionally if you do not have become a filer, you will not be able to get tax returns.
How to become an Active Tax Payer and Filer
The only way to become an active tax payer and filer is to timely submit your last income tax returns. This is mandatory step. Typically, if you are not paying submitting your tax returns for any fiscal year, the system automatically takes you from filer status to non-filer status.
There are currently two ways of filing. One is the manual filing and the other is the online filing. We highly recommend using the online version. Online version is faster and more convenient. The government takes too much time in processing the data and uploading it from manual end.
There are many cases where people make their returns manually and they still do not see their tax forms and returns updated. This causes multiple visits to the office and a pain in the neck really. Always using a certified tax lawyer to get you set and online immediately is best practice.
Tax advisers are to provide immediate service. Prior to working on the online submission, these tax advisors provide correct and accurate data collection and then ensure that the laws are applicable. Income Tax Service is a requirement for people who are not well versed with the income tax laws.
Advantages of being a Tax Filer
If you are one of the lucky ones that are now on the list, below are the main benefits you reap:
- Non tax filers can a withholding tax of 0.3% on all bank transactions. You are excluded from this as a tax filer.
- When you paying for any vehicles you pay 50 % lesser than the regular non filers.
- When you paying for any immovable property, you pay 50% lesser than the regular non filers.
- Tax exemption on the token of cars and vehicles.
- If you have stocks then you are charged 10% instead of 15%.
- Taking 50,000 Rupees in one transaction is charged to customer. You are charged with 0.3% rate as compared to 0.4% for non-tax filers.
- If you have are lucky to get a prize bond awarded you pay lesser taxes as an active tax payer.
Basically the Government is trying to equip people to become tax payers. The tax brackets improve and you save a decent amount of money during this phase. Other than that there are heavy tax penalties if you do not pay any taxes.
Government announces timelines to submit the returns. Any late returns adds penalties. One needs to avoid penalties. It may be noted that in case of late filing the penalty is equal to 0.1% of the tax payable for each day of default subject to a maximum penalty of 50% of the tax payable, provided that if the penalty worked out as aforesaid is less than twenty thousand rupees, or no tax is payable for that tax year, such person shall pay a penalty of twenty thousand rupees. Rs. 20,000 maximum penalty is applicable.
This is one of the reasons why we recommend that there go to a certified lawyer to get the taxes files online.
Easy Step by Step Guide To become a Tax Filer
Here are the main steps required to be come a tax filer. These steps answer how to become a tax filer in Pakistan. These are the main steps that tax consultants will perform as well.
- Obtain an NTN Number. NTN stands for National Tax Number. Number mandatory.
- You can easily obtain an NTN number by simply visiting a center and applying or going to https://iris.fbr.gov.pk/infosys/public/txplogin.xhtml and making a request. Go to the site and then go to the Registration for Unregistered Person tab. It is a simple form. After filling it, NTN generates.
- NTN number takes approximately a few hours and you will have a unique NTN number at your disposal.
- IRIS Registration. Go to fbr website and go to the IRIS tab. From there register yourself for e-enrollment.
- Once registered you will get a confirmation on your email specified.
- Then log onto IRIS and electronically fill in the data. You need to have all the relevant tax content available.
- Once you submit all the data, IRIS will confirm that you have now submitted.
- After successful submission, you get an email confirmation. Later you are active on the ATL listing.
- You can validate that through logging on and entering your NTN or CNIC.
How to Check If you are now active in FBR and Filer in System?
The objective of FBR is to ensure people file their taxes and become filers.
Different banks and other agencies validate the FBR status to get you the special discounts as a “filer”.
If you have paid your taxes then you can simply go to FBR site and enter your CNIC or your NTN number. These two will provide you with the status of the individual or the company.
- Go to FBR website
- Download the easily available ATL List
- Open the list
- Another way is using SMS through any mobile service
- Send “ATL XXXXXXXX” and there is a space between the ATL and XXXXX denotes your number
- Visit the e.fbr.gov.pk and go to the tab “search taxpayers” and then go to the “Active Taxpayers” tab. Enter CNIC and the sumbit. THe results will show.
Recommendations on becoming a Filer
Here are the main recommendations on becoming a filer:
- Always get professional assistance. Though the tax system is online, calculations is still not that easy.
- Recommend going to a professional to get the taxes and documents sorted out.