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Taxation Managment

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Taxation Management ­ FIN 623
VU
MODULE 5
LESSON 5.17
RESIDENTIAL STATUS & TAXATION
Geographical Source of Income Sec. 101 Pakistan Source Income:
8) A royalty shall be Pakistan-source income if it is:
 Paid by resident person, except where the royalty is payable in respect of any right, property, or
information used, or services utilized for the purposes of a business carried on by the resident
outside Pakistan through a permanent establishment; or
 Borne by a permanent establishment in Pakistan of a non-resident person
9) Rental income shall be Pakistan-source income if it is derived from the lease of immovable property in
Pakistan whether improved or not, or from any other interest in or over immovable property, including a
right to explore for, or exploit, natural resources in Pakistan.
10) Any gain from the alienation of any property or right referred to in sub-section (9) or from the
alienation of any share in a company the assets of which consist wholly or principally, directly or indirectly,
or property or rights referred to in sub-section (9) shall be Pakistan-source income.
11) A pension or annuity shall be Pakistan-source income if it is paid by a resident or borne by a permanent
establishment in Pakistan of a non-resident person.
12) A technical fee shall be Pakistan-source income if it is- Paid by a resident person, except where the fee
is payable in respect services utilized in a business carried on by the resident outside Pakistan through a
permanent establishment; or Borne by a permanent establishment in Pakistan of a non-resident person
13) Any gain arising on the disposal of shares in a resident company shall be Pakistan- source income.
14) Any amount not mentioned in the preceding sub-sections shall be Pakistan-source income if it is paid
by a resident person or borne by a permanent establishment in Pakistan of a non-resident person.
15) Where an amount may be dealt with under sub-section (3) and under another sub-section (other than
sub-section (14)), this section shall apply:
 By first determining whether the amount is Pakistan-source income under that other sub-section;
and
 If the amount is not Pakistan-source income under that sub-section, then determining whether it is
Pakistan-source income under sub-section (3).
16) An amount shall be foreign-source income to the extent to which it is not Pakistan-source income.
Permanent Establishment--Defined Sec. 2(41)
Permanent establishment in relation to a person, means a fixed place of business through which the
business of the person is wholly or partly carried on, and includes-
a) a place of management, branch office, factory or workshop, premises for soliciting orders, ware
house, permanent sales exhibitions or sales outlet, other than a liaison office except where the
office engages in the negotiation of contracts (other than contracts of purchase);
b) a mine, oil or gas well, quarry or any other place of extraction of natural resources;
c) A building site, a construction, assembly or installation project or supervisory activities connected
with such site or project but only where such sites, project and its concerned supervisory activates
continue for period or periods aggregating more than ninety days within any twelve-months period;
d) The furnishing of services, including consultancy services, by any person through employees or
other personal engaged by the person for such purpose;
e) a person acting in Pakistan on behalf of (hereinafter referred to as agent), other than an agent of
independent status acting in the ordinary course of business as such, if the agent:
i.  Has and habitually exercises an authority to conclude contracts on behalf of the other person.
ii.  Has no such authority, but habitually maintains a stock in trade or other merchandise from
which the agent regularly delivers good or merchandise on behalf of other person
f)  Any substantial equipment installed, or other asset and property capable of activity giving rise to
income.
Royalty Defined Sec. 2 (54)
Royalty means any amount paid or payable however described or computed, whether periodical or lump
sum, as a consideration for:
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Taxation Management ­ FIN 623
VU
a) The use of, or right to use any patent, invention, design or model, secret formula or process, trade mark
or other like property or right;
b) The use of, or right to use any copy right of a literary, artistic or scientific work, including films or video
tapes for use in connection with television or tapes in connection with radio broadcasting, but shall not
include consideration for the sale, distribution or exhibition of cinematograph films.
c) the receipt of, or right to receive, any visual images or sounds or both, transmitted by satellite, cable,
optic fiber or similar technology in connection with television, radio or internet broadcasting;
d) the supply of any technical, industrial, commercial or scientific knowledge, experience or skill;
e) the use of or right to use any industrial, commercial or scientific equipment;
f)  The supply of any assistance that is ancillary and subsidiary to, and is furnished as a means of enabling
the application or enjoyment of, any such property or right as mentioned in sub-clause (a) through (e)
g) The disposal of any property or right referred to in (sub-clause) (a) through (e).
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Table of Contents:
  1. AN OVERVIEW OF TAXATION
  2. What is Fiscal Policy, Canons of Taxation
  3. Type of Taxes, Taxation Management
  4. BASIC FEATURES OF INCOME TAX
  5. STATUTORY DEFINITIONS
  6. IMPORTANT DEFINITIONS
  7. DETERMINATION OF LEGAL STATUS OF A PERSON
  8. HEADS OF INCOME
  9. Rules to Prevent Double Derivation of Income and Double Deductions
  10. Agricultural Income
  11. Computation of Income, partly Agricultural,
  12. Foreign Government Officials
  13. Exemptions and Tax Concessions
  14. RESIDENTIAL STATUS & TAXATION 1
  15. RESIDENTIAL STATUS & TAXATION 2
  16. Important Points Regarding Income
  17. Geographical Source of Income
  18. Taxation of Foreign-Source Income of Residents
  19. Exercises on Determination of Income 1
  20. Exercises on Determination of Income 2
  21. SALARY AND ITS COMPUTATION
  22. Definition of Salary
  23. Significant points regarding Salary
  24. Tax credits on Charitable Donations
  25. Investment in Shares
  26. SALARY AND ITS COMPUTATION EXERCISES 1
  27. SALARY AND ITS COMPUTATION EXERCISES 2
  28. SALARY AND ITS COMPUTATION EXERCISES 3
  29. Tax treatment of Gratuity
  30. Gratuity Exercise
  31. PROVIDENT FUND
  32. Exemptions on Business income, Treatment of Speculation Business
  33. Deductions Allowed & Not Allowed
  34. Deductions: Special Provisions, Depreciation
  35. Methods of Accounting
  36. Taxation of Resident Company
  37. Taxation of Companies: Exercises
  38. Computation of Capital Gain
  39. Disposals Not Chargeable To Tax
  40. TAX RETURNS & ASSESSMENT OF INCOME UNIVERSAL SELF ASSESSMENT SCHEME
  41. Normal Assessment, USAS, Provisional Assessment, Best Judgment Assessment
  42. ADVANCE TAX COLLECTION & RECOVERY OF TAX PENALTIES & PROSECUTION
  43. What is Value Added Tax (VAT)?
  44. SALES TAX
  45. SALES TAX RETURNS