FBR sets new conditions for tax credit on system integration
The Federal Board of Revenue has imposed new conditions and restrictions on units claiming a tax credit for integration with its computerised systems, according to a notification issued on Wednesday. Under the notification, the credit allowed for a tax year in which an electronic resource is installed, integrated and configured with the board's system is ten per cent of the amount actually invested in that resource.
A person claiming the credit under Section 64D of the Income Tax Ordinance must, under the notification, be required by the ordinance, the Sales Tax Act or the Federal Excise Act 2005 to integrate with the board's computerised system for real-time production monitoring or for recording or reporting sales or receipts during the relevant tax year. The electronic resource must be purchased, acquired, installed or implemented and successfully integrated and configured with that system during the same year, and the equipment, hardware, software or other electronic component must be used directly and exclusively for the required integration.
Integration must be evidenced by an activation, commissioning or configuration record generated or confirmed by the board's system, identifying the taxpayer, the electronic resource and the date of activation. The claim must be supported by a tax invoice, bill, agreement, licence or other acquisition document, evidence of payment or liability, and any other documentary or electronic evidence that reasonably establishes the amount actually invested.
The amount actually invested includes the acquisition or purchase price and one-time costs directly attributable to installation, configuration, interface development, integration, testing and implementation needed to bring the resource into operation. It is reduced by any discount, rebate, refund, grant or subsidy received or receivable, and excludes refundable, adjustable or recoverable tax or duty; operation, routine and annual maintenance, repair, post-commissioning support and recurring service charges; internet, telecommunication and utility charges, salaries, training, consumables and financing costs; and any general-purpose system not exclusively used for integration, except a separately identifiable component dedicated to it.
The credit must be claimed in the return of income for the tax year in which the resource is installed, integrated and configured, and the same expenditure cannot be claimed more than once under Section 64D. Taxpayers must furnish, in the return or in a schedule made available on the IRIS portal, a description of the electronic resource, vendor or supplier particulars, invoice or agreement reference, date of acquisition or implementation, the amount actually invested, the integration or resource identification number and the date of activation or commissioning. The notification follows the board's earlier move to suspend sales tax registrations over integration failures.
