Minimum Tax U/S 113, 113C & 153 by Mr.

Imran Shahzad

Minimum Tax under Section 113

Individual / AOP (TO ≥ 10 Other rates are

Million from 1 July 2017 0.5 % x TO- OMC,
onward SNGPL,SSGPL
Application
0.2 % x TO- Pharma,
of this
Rice, Flour, Petroleum
section
0.25 % x TO-
Resident Company Motor Cycle Registered

If tax payable / paid (other than FTR 1.25 % of Turn Over

Provision & Super Tax)

Minimum Tax
can be C/F for Reason of below tax may be: Turnover means: (other than FTR)
5 years and  Losses;  Gross Sales / Receipt
adjustable  Setting off losses; (Excluding sales tax; excise duty; trade
against tax  Exemptions; discount shown on invoices; and sales
liability.  Tax credits; / receipts taxable under FTR.)
 Tax expenses (including depreciation and  Gross fee for services, commission
amortization) and gross receipts from contracts
excluding covered under FTR.
Example (ZJL) Dec -2015
Acc. Sales – net as per Financial Statement 218,500
Add: Proportionate share of AOP Turn over 10,500
The company‘s share (TO of AOP) of the
(30,000 x 35%)
amounts stated above of any association
Adjusted turn over 229,000 of persons of which the company is a
Min. Tax u/s 113 (229,000 x 1.25%) 2,863 member

1
Minimum Tax is not applicable to the following persons (Clause 11A, Part IV, 2nd Sch.)
National Investment (Unit) Trust Venture capital company
Start up business u/s 2(62A) TY 2018 amendment
Petroleum dealers selling petrol through petrol pump Modaraba Companies
Companies selling electricity (exempt Clause 132) Modaraba Banks
SPV of PG for securitization of receivable LESCO, KESCO etc.
Persons export computer software & IT services WAPDA First Sukuk Company
Shipping companies taxed under FTR LNG Terminal Operators & owners
Corporate and Industrial Restructuring Corporation warehousing or cold for agri.
coal mining project companies Halal meat operators
Gwadar International Terminal Limited etc. PG, Local Govt.
Companies’ profits and gains derived from a transmission line project HUBCO

1
Share from AOP is taken as per rule i.e TO of AOP x share.
1|Page
 Minimum Tax U/S 113, 113C & 153 by Mr. Imran Shahzad

ACT - Alternate Corporate Tax under Section 113 C

Applicabl Companies ONLY Normal Tax @ 29%

e Corp.
Tax
Corporate shall
Provision
Tax be
(Excess tax over the higher
corporate tax can Tax of Minimum tax
be C/F to 10 shall be (under any provision)
succeeding years higher
and adjusted of
against tax payable)

ACT 17% x Accounting Income

Example (ZJL) Dec -20152

Acc. Profit as per un-adj. Financial Statement 46,500
Add: Share from AOP 1,250
Less: Sale of vehicle to employees (2,450) Accounting Income Means:
Less: Income from Associate (20,000)  Profit before tax (as per financial
Less: Capital gains – Separate block (6,000) statements)
Accounting Income 19,300 excluding:
o Share from Associate under equity
ACT @17% x 19,300 3,281
method
o Exempt income
Treatment of Common Expenditures (if income included o FTR and Separate block of income
different kinds of incomes) o Income subject to tax credit u/s
The common expenditures shall be apportioned and 65D,65E and 100C
taken accordingly (See question Standard Industries –
ATX)
Adm. & Fin. a/c income for
Example Revenues Gross profit
Expenses ACT
Local sales 80,000,000 32,000,000 26,320,706 5,679,294
Exports 15,000,000 6,000,000 4,935,132 -
95,000,000 38,000,000
Other income less foreign source income 1,350,000 444,162 905,838
Expenses 32m – 0.3m related to export 96,350,000 31,700,000
Foreign source income (assume exp. Incurred
1,000,000 1,000,000
outside Pakistan) Profit before tax.
97,350,000 7,585,132
ACT @ 17% x 7,585,132 1,289,472

2
Here we take share of accounting income of AOP whereas, U/S 113 we take share of sale, it was not included in profit now
included for the computation of ACT. Vehicles sold to employees should be a part of accounting profit but as per question,
vehicles are sold to employees at book value (point i). Technically no accounting profit. Company has wrongly added receipt
in the profit, now deducted to arrive at accounting profit for ACT.
2|Page
 Minimum Tax U/S 113, 113C & 153 by Mr. Imran Shahzad

(Please have a comparison between the above apportionment and apportionment of expenditures u/s 67)

Comparative Analysis of Turnover and Accounting profit u/s 113 and 113C respectively

Particular Minimum Tax (S 113) ACT (S 113C)

Min. Tax Calculated of Turnover Accounting Profit
Percentage 1.25% 17%
FTR Income Not Included Not Included
Exempt Income Included in TO Not included in Acc. Profit
Share from AOP Share of TO of AOP Share of profit from AOP
Carry forward of unadjusted tax 5 years 10 years
Separate Block of Income N/A Not included in Acc. Profit
Apportionment of Expenditures N/A Common expenditures should
be apportioned.
Profit loss account figure TOP BOTTOM
Applicable IND/AOP (If TO > 10M) Only for Companies
All Resident Companies
Reduced rates Pharma, Rice, SNGPL etc. N/A
Share from Associate under N/A Excluded from Acc. Profit
equity method

1.25% of Turnover
(excluding FTR if not
opted out of it)
Sales 1,100,000
Cost of Sales 792,000
Gross Profit 308,000
Administrative and selling expenses 135,000
Financial charges 110,000
Other charges 27,500 272,500
35,500
Other income 117,000
Profit before taxation 152,500

17% of Accounting Profit

before tax (excluding FTR,
separate block & exempt
income etc. if not opted
out of it)

3|Page
 Minimum Tax U/S 113, 113C & 153 by Mr. Imran Shahzad

Payment for good, services and Contract u/s 153

Prescribed person means:

a) the Federal Government;
b) a company;
Every prescribed c) an association of persons constituted by, or under law;
person making a d) a non-profit organization;
payment in full or part e) a foreign contractor or consultant;
(including advance) to f) a consortium or joint venture;
g) an exporter or an export house
a RESIDENT PERSON h) an Individual / AOP, having TO ≥ 50 million in any of the preceding year
shall deduct tax i) a person registered under the Sales Tax Act, 1990
j) a person deriving income from the business of construction and sale of
residential, commercial or other buildings (builder)
k) a person deriving income from the business of development and sale of
residential, commercial or other plots (developer).]

Provision of Services Contract

Sale of Goods (Accountants, doctors etc.) (civil, engg. Work)

Co. Advertisement in
Co. Individual / AOP 8% /14.5% Electronics & Print
4% /8% 4.5% /9 % (Min.) 1.5% F / NF 12% & 15%
(2.5 % fast moving
(2% fast moving
consumer goods)
(FTR)
consumer goods)

Listed Co. Individual / AOP

Individual / AOP
7% / 14% / Sportsman
10% / 17.5%
7.5% F/ 15 %NF,
Listed (Min.)
Un - Listed (Advance) 10% Sportsman
(Advance)
(FTR)

This provision is not applicable (from OPTIONAL: Non-resident has

Supply of
Manufactured Local Trading
Goods (Final)
(Advance)
Every exporter or an export house making a payment in
full or part including a payment by way of advance to a
resident person or permanent establishment in Pakistan
of a non-resident person for rendering of or providing
services of stitching, dying, printing, embroidery,
washing, sizing and weaving, shall at the time of making
the payment, deduct tax from the gross amount payable
at the rate 1% (FTR)
tax year 2016 & 2017) to a filer
company being a filer and engaged in
an option to opt for FTR
(request in writing before 3
freight forwarding services, air cargo
services, courier services, manpower months of commencement of
outsourcing services, hotel services, tax year and irrevocable for 3
security guard services, software
years)
development services, IT services and
IT enabled s
Carry Forward
Tax paid/payable should not
The excess amount of tax paid
be less than 2% x gross TO &
shall be C/F for adj. against accounts will be presented
tax liability for 5 years before commissioner.

4|Page
 Minimum Tax U/S 113, 113C & 153 by Mr. Imran Shahzad

Practice Questions

Minimum Tax U/S 113 and ACT 113C

Question113: for carry forward of minimum tax in excess of normal tax liability (ignore
Alternative Corporate Tax and withholding tax in this example):

Normal 1.25% of
Year tax liability turnover
1 10,000 60,000
2 90,000 63,000
3 120,000 75,000

Question113C - ACT Rs.

Corporate Tax excluding turnover tax u/s 113 300,000
Minimum tax u/s 113 510,000
Alternative Corporate Tax 700,000
Advance tax paid 820,000

Q.17.3 {Q.7 MAY 1998 ICAP CFAP} [ Minimum tax issue u/s 148 Imports]

Following is the P & L a/c of a listed company, for the year:

(Rs.000)
Local sales 13,000
Sale through exports 5,000
Sale of imported goods 2,000 20,000
Less: Cost of goods sold
Cost of goods (own manufactured) 10,000
Cost of imported goods 1,800 11,800
Gross profit 8,200
Selling and admn. expenses 1,000
Net profit before tax 7,200
All sales are subject to tax deduction / collection at source. Following taxes have been deducted /
collected:
153 on local supply of goods 520,000
153 on sale of commercial imports 80,000
148 on imports @ 5.5% 97,500
154 on exports @ 1% 50,000
Tax with electric and telephone bills 9,320
There were no opening and closing stocks. Compute its tax liability with return, if any.

5|Page
 Minimum Tax U/S 113, 113C & 153 by Mr. Imran Shahzad

Treatment of Foreign Losses (1)

Spring 2013
Q.3 (b) Imaginative Enterprises (IE) is an Association of Persons and was formed two years ago.
During the latest tax year, IE’s Pakistan source income amounted to Rs. 2,500,000 and tax payable
thereon amounted to Rs. 722,500.

Following are the details of its foreign source incomes, tax paid thereon and foreign losses brought
forward for the latest tax year:

Heads of income Foreign Foreign tax Foreign losses

income paid brought forward

--------------------Rupees--------------------

Speculation business 500,000 125,000 (250,000)

Non-speculation business (1,000,000) - -

Capital gains 750,000 75,000 (1,500,000)

Other sources 1,250,000 187,500 -

The foreign tax credit relating to income from other sources which remained unadjusted during
the last tax year amounted to Rs. 50,000.

Required:
Calculate total tax payable and foreign tax losses to be carried forward to next year (if any). (08)

Treatment of Foreign Losses (2)

March 2015
Q.6 Aslam is a resident taxpayer who operates his business from Lahore (LHR) and Paris (PAR).
In August 2014, he established a new branch in Berlin (BER). Following information is available
in respect of his business operations for tax year 2015:

LHR PAR BER

----- Rs. in million -----

Income / (loss) from business 29 40 (15)

Advance taxes paid in respective countries during the year 10 5 3

Income from capital gain (net of income tax of Rs. 3 million) - 27 -

Carried forward losses:

Loss from business - 55 -

Capital loss - 6 -

The following amounts paid by Aslam in respect of BER have been charged to LHR:
(i) salaries for the first three months amounting to Rs. 5 million.
(ii) rent expense for the year amounting to Rs. 7 million.

Required: Under the provisions of the Income Tax Ordinance, 2001 calculate the tax payable by
Aslam in the tax year 2015 and foreign tax losses to be carried forward to next year, if any. (09)

6|Page
 Minimum Tax U/S 113, 113C & 153 by Mr. Imran Shahzad

Example 6.5 [Company as a member of an AOP)]

(a) Gross revenue of AOP 25,000,000

(b) Allowable tax expenses of AOP 11,000,000
(c) Taxes paid at source by AOP 2,000,000
(d) The AOP has three members with the following share:
- A Ltd 30% share
- Mr. Y 35% share
- Mr. Z 35% share
(e) A Ltd’s taxable business income is Rs.3,000,000 other than share of profit from AOP.
Advance tax paid by A Ltd is Rs.1,300,000
(f) Mr. Y earned taxable income Rs.4,000,000 in his personal capacity.
(g) Mr. Z does not have any other income.

Required: Calculate tax liability of each member.

7|Page