Are you a Pakistani resident holding foreign assets? If so, you need to understand the Capital Value Tax (CVT) and its implications for your tax obligations. In this article, we’ll explain what the CVT is, how it is calculated, and what it means for you as a taxpayer.
What is Capital Value Tax?
Capital Value Tax (CVT) is a tax on the total value of an individual’s foreign assets at the end of a tax year. It was introduced in Pakistan under the Finance Act, 2019, and is applicable to all resident individuals who hold foreign assets. The CVT is an additional tax on top of the income tax that individuals are already paying on their income from all sources.
How is Capital Value Tax Calculated?
The value of foreign assets subject to CVT is calculated as the total cost of the foreign assets on the last day of the tax year in relevant foreign currency. This value is then converted into Pakistani rupees as per the exchange rates notified by the State Bank of Pakistan for that day. If the cost of foreign assets cannot be determined with reasonable accuracy, the fair market value on the last day of the tax year will be taken for this purpose, and the rupee conversion will be applied in the same manner.
Who is Liable to Pay Capital Value Tax?
All resident individuals who hold foreign assets are liable to pay CVT. This includes assets held abroad indirectly and under the beneficial ownership by the resident individual. The CVT is payable at the time the income tax return for the tax year is due.
What Happens if CVT is not Paid?
If a person fails to pay CVT, or to collect CVT or fails to pay to the credit of the Federal Government after having collected CVT, they will be held personally liable for the amount due, along with a default surcharge. The officer of Inland Revenue has been empowered to pass an appealable order to recover CVT from the person in question.
What are the Applicable Rules?
The provisions of the Income Tax Ordinance, 2001, and Income Tax Rules, 2002, are applicable to the collection, payment, recovery, or refund of CVT. The Board is also empowered to prescribe rules for any matter relating to the capital value tax.
In conclusion, the Capital Value Tax is an additional tax levied on the total value of foreign assets held by resident individuals in Pakistan. All resident individuals who hold foreign assets are liable to pay CVT, and failure to do so may result in legal action. It is important to understand the rules and regulations governing the CVT in Pakistan to avoid any legal or financial complications. Keep yourself informed and stay compliant to ensure a smooth tax filing process.