According to the order, precisely, a large number of non-resident citizens of Pakistan origin were facing hardship in operating their foreign currency bank accounts maintained in Pakistan. They were required to file returns of income, at the time of opening of bank accounts, on an interpretation issued by the State Bank of Pakistan (SBP) vide Circular letter No. 5 dated 12th April 2018 read with Protection of Economic Reforms (PER) (Amendment) Ordinance 2018.
The treatment was prima facie in violation of the express provisions of Section 114 of the Income Tax Ordinance 2001 (the Ordinance) whereby the non-residents were not under an obligation to file returns of their foreign income. Thus on account of conflicting interpretations, the non-residents foreign currency account holders had to go through this hardship.
The matter was sent for comments to the secretary Revenue Division. In response thereto, the FBR submitted comments of the Member (IR-Policy) FBR. It was contended that it is the "resident individual who is required to file return of income under Section 114 as defined in terms of section 82 of the Ordinance." It was further contended that cumulative reading of section 114 of the Ordinance, PER (Amendment) Ordinance, 2018 and the SBP's Circular No. 05 dated 12th April 2018, clearly shows that a non-resident was not required to be a "filer". The bank authorities might have some internal administrative issue, which can 'only be resolved by the SBP.
The deputy director SBP also submitted comments vide letter dated April 19, 2019, contending that keeping in view the issue, a clarification had been issued by the Director Exchange Policy Department (EPD) SBP to all authorised dealers (banks). Evidently, the issue was related to the banks misinterpretation of law, which has duly been clarified by the SBP vide EPD Circular' Letter No. 7 dated 19th April 2019, contents whereof are reproduced below:
"Attention of authorised dealers is invited to the second provision of sub-section of the Section (5) of the PERA 1992 which Inter alia, states that: "Provided that no cash shall be deposited in an account of citizen of Pakistan resident in Pakistan, unless the account holder is filer as defined in the Income Tax Ordinance, 2001.
"It has come to our notice that some authorised dealers are not allowing non-residents to open and maintain foreign currency accounts on the pretext that they are not appearing as "filer" in the Active Taxpayer's List of FBR. "However, it is evident from the aforementioned Proviso that the instructions, contained therein, are not applicable to non-residents."
In view of the clarification issued by the SBP vide Director EPD's Circular letter No. 07 of 2019 dated 19th April 2019, the systemic issue under reference stands resolved. The investigation is, therefore, closed and the file be consigned to record, the FTO added.