Non-Governmental Organizations (NGOs) and trusts play a significant role in Pakistan’s social development, education, and health sectors. To support these organizations, the government offers various tax benefits to ensure that they operate efficiently and effectively. This article will discuss the tax benefits that are available to NGOs and trusts in Pakistan, and the process of obtaining Non-Profit Organization (NPO) status to qualify for these benefits.
Tax Benefits for NGOs and Trusts
NGOs and trusts are tax-exempt entities in Pakistan. These organizations are exempt from income tax, sales tax, and withholding tax on the donations received. The tax exemption is only applicable if the NGO or trust is registered as an NPO with the Federal Board of Revenue (FBR) under section 236 of the Income Tax Ordinance, 2001.
The NPO status is granted to organizations that operate solely for non-profit purposes, with the main source of income being donations, grants, and assistance. The approval under section 236 is valid for three years or at the discretion of the Commissioner Inland Revenue.
To qualify for the tax exemption, NGOs and trusts must be compliant with all the requirements of income tax and sales tax laws. They are required to file their annual income tax returns and comply with withholding tax obligations as a withholding agent.
Process of Obtaining NPO Status
To obtain NPO status, NGOs and trusts must follow the procedure outlined by the FBR. The process involves the following steps:
Step 1: Registration of the NGO or Trust
The first step is to register the NGO or trust under the relevant laws of Pakistan, such as the Trusts Act, 1882, or the Societies Registration Act, 1860. After registration, the organization must obtain a National Tax Number (NTN) and a Sales Tax Registration Number (STRN) from the FBR.
Step 2: Application for NPO Status
Once the organization is registered, it can apply for NPO status by submitting an application to the FBR. The application must include the following documents:
- A copy of the certificate of registration
- A copy of the memorandum and articles of association
- A copy of the trust deed, if applicable
- A list of office-bearers and members of the organization
- A copy of the latest audited financial statements
- A detailed description of the activities of the organization
Step 3: Verification and Approval
After receiving the application, the FBR verifies the information provided by the organization. The Commissioner Inland Revenue may request additional documents or information before granting NPO status. Once the organization is approved as an NPO, it can enjoy the tax benefits available to non-profit organizations in Pakistan.
NGOs and trusts play a crucial role in Pakistan’s social development, education, and health sectors. To support these organizations, the government offers various tax benefits that are available to non-profit organizations. The tax exemption is only applicable if the NGO or trust is registered as an NPO with the FBR under section 236 of the Income Tax Ordinance, 2001. NGOs and trusts must comply with all the requirements of income tax and sales tax laws to qualify for the tax exemption. The process of obtaining NPO status involves registration, application, verification, and approval by the FBR. By obtaining NPO status, NGOs and trusts can operate efficiently and effectively, contributing to the country’s development while enjoying tax benefits.