Fin623 GDB No. 2 solution
Monday, May 30, 2011 Posted In Fin Edit ThisSemester “Spring 2011”
“Taxation Management (FIN623)”
This is to inform you that Graded Discussion Board (GDB) # 02 Will be opened according to the following schedule
Schedule
Opening Date and Time
27th May , 2011 At 12:01 A.M. (Mid-Night)
Closing Date and Time
31st May , 2011 At 11:59 P.M. (Mid-Night)
Note: No extra or bonus/grace period is available for attempting GBD.
Samsung has a branch office in Pakistan. Mr. Kim, who is the employee of head office, is dedicated to perform services for the Pakistan branch office. What will be the tax treatment of salary received by Mr. Kim according to Income Tax Ordinance 2001?
SOLUTION:
Proper Answer:
Treatment of Salary through employment Exercised in Pakistan: Salary received by Mr. Kim will be Taxable under (Section 101) "Pakistan Source Income" of the Income Tax Ordinance 2001.
Additional Explanation:
As Sam-sung which is a foreign company but have a branch office in Pakistan its means that Sam-sung is working in Pakistan through Permanent Establishment in Pakistan so it will be a resident company here and any salary paid by a resident company is Pakistan Source income and also any salary which can be earn through employment exercised in Pakistan will be chargeable to tax under Pakistan Source Income.
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Samsung has a branch office in Pakistan. Mr. Kim, who is the employee of head office, is dedicated to perform services for the Pakistan branch office. What will be the tax treatment of salary received by Mr. Kim according to Income Tax Ordinance 2001?
Proper Answer:
Treatment of Salary through employment Excercised in Pakistan:
Salary received by Mr. Kim will be Taxable under (Section 101) "Pakistan Source Income" of the Income Tax Ordinance 2001.
Additional Explaination:
As Samsung which is a foreign company but have a branch office in Pakistan its means that Samsung is working in Pakistan through Permanent Establishment in Pakistan so it will be a resident company here and any salary paid by a resident company is Pakistan Source income and also any salary which can be earn through employment excercised in Pakistan will be chargeable to tax under Pakistan Source Income.
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Treatment of Salary through employment Exercised in Pakistan:
Salary received by Mr. Kim will be Taxable under (Section 101) "Pakistan Source Income" of the Income Tax Ordinance 2001.
Additional Explanation:
As Samsung which is a foreign company but have a branch office in Pakistan its means that Samsung is working in Pakistan through Permanent Establishment in Pakistan so it will be a resident company here and any salary paid by a resident company is Pakistan Source income and also any salary which can be earn through employment exercised in Pakistan will be chargeable to tax under Pakistan Source Income.
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According to income tax ordinance 2001;
Geographical Source of Income-Sec101 Pakistan-Source Income:
1) Salary shall be Pakistan-source income to the extent to which the salary-
• Is received from any employment exercised in Pakistan, wherever paid; or
• Is paid by, or on behalf of, the Federal Government, a Provincial Government, or a local authority
in Pakistan, wherever the employment is exercised
Permanent Establishment—Defined Sec. 2(41)
Permanent establishment in relation to a person, means a fixed place of business through which the
business of the person is wholly or partly carried on, and includes)
A place of management, branch office, factory or workshop, premises for soliciting orders, ware
house, permanent sales exhibitions or sales outlet, other than a liaison office except where the
office engages in the negotiation of contracts (other than contracts of purchase);
Tax treatment of Mr. Kim’s salary according to income tax ordinance 2001:
Salary of Mr. Kim is chargeable to tax since according to income tax ordinance 2001 sec(101), Salary shall be Pakistan-source income to the extent to which the salary-
• Is received from any employment exercised in Pakistan, wherever paid. And Samsung is permanent established in Pakistan so therefore it is also included in the tax payer category.
::::::::::::::::::::::::::
According to income tax ordinance 2001;
Geographical Source of Income-Sec101 Pakistan-Source Income:
1) Salary shall be Pakistan-source income to the extent to which the salary-
• Is received from any employment exercised in Pakistan, wherever paid; or
• Is paid by, or on behalf of, the Federal Government, a Provincial Government, or a local authority
in Pakistan, wherever the employment is exercised
Permanent Establishment—Defined Sec. 2(41)
Permanent establishment in relation to a person, means a fixed place of business through which the
business of the person is wholly or partly carried on, and includes)
A place of management, branch office, factory or workshop, premises for soliciting orders, ware
house, permanent sales exhibitions or sales outlet, other than a liaison office except where the
office engages in the negotiation of contracts (other than contracts of purchase);
Tax treatment of Mr. Kim’s salary according to income tax ordinance 2001:
Salary of Mr. Kim is chargeable to tax since according to income tax ordinance 2001 sec(101), Salary shall be Pakistan-source income to the extent to which the salary-
• Is received from any employment exercised in Pakistan, wherever paid. And Samsung is permanent established in Pakistan so therefore it is also included in the tax payer category.
