Tax Overview and Recommendations

7 Tax Authority Tax Authorities Federal Board of Revenue (FBR) Tax audit activity www.fbr.gov.pk The provinces have their own revenue authorities to administer sales tax on services and other provincial levies. Returns may be selected for tax audit by FBR on the basis of random or parametric selection through computer balloting. In addition to above, the Commissioner Inland Revenue having jurisdiction over the case also has independent powers to select a case for tax audit. The tax authority's approach to tax audits is largely a manual approach including detailed consideration of key documents. A typical tax audit commences with a letter requesting provision of supplementary analysis or information. Taxpayers are advised to contact their tax advisor immediately when a tax audit commences or any correspondence is received from the tax authority. Audits into any given return generally last one year. Key focus areas for the tax authority in tax audits conducted in recent years have included: " " " " Allocation of expenses between income under normal tax regime and final tax regime and under various heads of income. Bad Debts / Provision for bad debts Provision for obsolete / slow moving stocks Inadmissible expenses like donation, penalty etc. Re-characterization Documentation requirements KPMG " Interest free loans / advances " Exchange Losses " Payments from which tax was not withheld at source Transfer pricing 13 © 2016 KPMG International Cooperative ("KPMG International"). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. All rights reserved.

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