Basic Questions About the Taxation OF NGO, TRUST OR NPO in Pakistan| Non Profit Organization Tax
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2 سال پیش
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Organizations are classified into two
Organizations are classified into two broader categories;
For Profit organizations
Not for profit organizations (NPO)
For profit organizations are profit oriented and their aim is to maximize the profits. The aim of not for profit organizations is not profit earning but to work for social welfare, socio-economic development, public health, education and poverty alleviation. Some common examples of Not for profit organizations include non-governmental organizations (NGOs), trusts, charitable institutions and Companies licensed under Section.42 of Companies Act, 2017 by SECP. The revenues and surplus generated by NPO is used for welfare activities meant for public at large and does not provide for personal benefit of any person as also reflected in Section 2(36) clause (c) of Income tax ordinance, 2001.
According to Section.2 sub-section (36) of Income Tax ordinance, 2001
a non-profit organization means any person other than an individual, which is –
established for religious, educational, charitable, welfare or development purposes, or for the promotion of an amateur sport;
formed and registered under any law as a non-profit organization;
approved by the Commissioner for specified period, on an application made by such person in the prescribed form and manner, accompanied by the prescribed documents and, on requisition, such other documents as may be required by the Commissioner and none of the assets of such person confers, or may confer, a private benefit to any other person;]
Unquote – emphasis supplied
From the above mentioned provision of law it is quite evident that in order to get status of NPO the organization must be registered by or under any law as non-profit organization for said purposes and approved by Commissioner Inland Revenue. An organization claiming itself as non-profit organization is required to get approval from Commissioner Inland Revenue (valid for 3 years) under section.2 sub-section 36 of ITO, 2001 by filing an application as prescribed in rule 211 of Income Tax Rules, 2002.This condition for approval was not mandatory before insertion of sub-sub clause (e) of clause (d) to sub-section (1) of section.100C of ITO, 2001 inserted vide Finance Act, 2019 taking effect from July 01, 2020 and a large number NPOs were enjoying the benefit of tax credit before its insertion. Relevant portion of section.100C of ITO, 2001 is reproduced here;
Section 100 C Tax credit for certain persons:
(1) The income of Non-profit organizations, trusts or welfare institutions, as mentioned in sub-section (2) shall be allowed a tax credit equal to one hundred per cent of the tax payable, including minimum tax and final taxes payable under any of the provisions of this Ordinance, subject to the following conditions, namely:
(a) return has been filed;
(b) tax required to be deducted or collected has been deducted or collected and paid;
(c) withholding tax statements for the immediately preceding tax year have been filed1;
(d) the administrative and management expenditure does not exceed 15% of the total receipts:
Provided that clause (d) shall not apply to a non-profit organization, if—
(a) charitable and welfare activities of the non-profit organization have commenced for the first time within last three years; and
(b) total receipts of the non-profit organization during the tax year are less than one hundred million Rupees
(c) approval of Commissioner has been obtained as per the requirement of clause (36) of section 2:
Provided that this clause shall take effect from the first day of July, 2020; After getting approval the NPO is entitled to claim tax credit equal to one hundred per cent of the tax payable under section 100C of ITO, 2001. The Commissioner has a power under Rule 217 of Income tax rules, 2002 to withdraw the approval granted if he identifies any condition mentioned in said rule after providing an opportunity to show cause and intimating the organization with decision in writing mentioning the reasons thereof. An organization dissatisfied with the decision of Commissioner may file an appeal with “Chief Commissioner” within sixty days of receipt of refusal order from Commissioner.
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#do_nonprofits_need_to_pay_sales_tax
#non_profit_organization_tax_classification
#non_profit_company_tax_exemption #Taxationist #TaxationistCorporateConsultants #TaxLawayerInRawalpindi #TaxLawyerInIslamabad #Tax #law #FederalBoardOfRevenue #FBR #SECP #SecurityExchangeCommissionOfPakistan #CorporateLawyer #BestTaxConsultantInRawalpindi #KhurramShahzadAslam #KhuramShahzad #KhurramShahzadDawar
For Profit organizations
Not for profit organizations (NPO)
For profit organizations are profit oriented and their aim is to maximize the profits. The aim of not for profit organizations is not profit earning but to work for social welfare, socio-economic development, public health, education and poverty alleviation. Some common examples of Not for profit organizations include non-governmental organizations (NGOs), trusts, charitable institutions and Companies licensed under Section.42 of Companies Act, 2017 by SECP. The revenues and surplus generated by NPO is used for welfare activities meant for public at large and does not provide for personal benefit of any person as also reflected in Section 2(36) clause (c) of Income tax ordinance, 2001.
According to Section.2 sub-section (36) of Income Tax ordinance, 2001
a non-profit organization means any person other than an individual, which is –
established for religious, educational, charitable, welfare or development purposes, or for the promotion of an amateur sport;
formed and registered under any law as a non-profit organization;
approved by the Commissioner for specified period, on an application made by such person in the prescribed form and manner, accompanied by the prescribed documents and, on requisition, such other documents as may be required by the Commissioner and none of the assets of such person confers, or may confer, a private benefit to any other person;]
Unquote – emphasis supplied
From the above mentioned provision of law it is quite evident that in order to get status of NPO the organization must be registered by or under any law as non-profit organization for said purposes and approved by Commissioner Inland Revenue. An organization claiming itself as non-profit organization is required to get approval from Commissioner Inland Revenue (valid for 3 years) under section.2 sub-section 36 of ITO, 2001 by filing an application as prescribed in rule 211 of Income Tax Rules, 2002.This condition for approval was not mandatory before insertion of sub-sub clause (e) of clause (d) to sub-section (1) of section.100C of ITO, 2001 inserted vide Finance Act, 2019 taking effect from July 01, 2020 and a large number NPOs were enjoying the benefit of tax credit before its insertion. Relevant portion of section.100C of ITO, 2001 is reproduced here;
Section 100 C Tax credit for certain persons:
(1) The income of Non-profit organizations, trusts or welfare institutions, as mentioned in sub-section (2) shall be allowed a tax credit equal to one hundred per cent of the tax payable, including minimum tax and final taxes payable under any of the provisions of this Ordinance, subject to the following conditions, namely:
(a) return has been filed;
(b) tax required to be deducted or collected has been deducted or collected and paid;
(c) withholding tax statements for the immediately preceding tax year have been filed1;
(d) the administrative and management expenditure does not exceed 15% of the total receipts:
Provided that clause (d) shall not apply to a non-profit organization, if—
(a) charitable and welfare activities of the non-profit organization have commenced for the first time within last three years; and
(b) total receipts of the non-profit organization during the tax year are less than one hundred million Rupees
(c) approval of Commissioner has been obtained as per the requirement of clause (36) of section 2:
Provided that this clause shall take effect from the first day of July, 2020; After getting approval the NPO is entitled to claim tax credit equal to one hundred per cent of the tax payable under section 100C of ITO, 2001. The Commissioner has a power under Rule 217 of Income tax rules, 2002 to withdraw the approval granted if he identifies any condition mentioned in said rule after providing an opportunity to show cause and intimating the organization with decision in writing mentioning the reasons thereof. An organization dissatisfied with the decision of Commissioner may file an appeal with “Chief Commissioner” within sixty days of receipt of refusal order from Commissioner.
#ngo_taxation_in_pakistan
#ngo_taxes
#ngo_tax_exemption_in_pakistan
#ngo_tax_filing
#pakistan_ngo_registration
#ngo_taxation
#taxation_of_trust_and_ngo
#does_an_ngo_pay_tax
#ngo_tax_benefits
#ngo_tax_audit
#ngo_tax_filing
#ngo_tax_consulting
#ngo_tax_deduction
#taxation_for_ngo
#ngo_income_tax
#ngo_income_tax_exemption
#ngo_is_tax_free
#is_a_non_profit_organization_exempt_from_tax
#non_profit_organisations_tax_benefits
#do_nonprofits_need_to_pay_sales_tax
#non_profit_organization_tax_classification
#non_profit_company_tax_exemption #Taxationist #TaxationistCorporateConsultants #TaxLawayerInRawalpindi #TaxLawyerInIslamabad #Tax #law #FederalBoardOfRevenue #FBR #SECP #SecurityExchangeCommissionOfPakistan #CorporateLawyer #BestTaxConsultantInRawalpindi #KhurramShahzadAslam #KhuramShahzad #KhurramShahzadDawar
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