The Appellate Tribunal Inland Revenue (ATIR) in Lahore has ruled that foreign assets declared under the Foreign Assets (Declaration & Repatriation) Act (FADRA) 2018 are exempt from capital value tax (CVT) under the CVT Act of 2022, BR reported.
This decision came after a case was filed against the Commissioner Inland Revenue, AEOI Zone, challenging the imposition of CVT on foreign assets previously declared under the FADRA scheme.
The tribunal confirmed that FADRA, as a special law, takes precedence over the CVT Act of 2022, ensuring that any foreign assets declared under the amnesty scheme, and on which taxes were paid, would not be subject to further taxation. The ruling applies specifically to assets declared under FADRA, excluding assets that do not fall under this framework.
In the case at hand, the taxpayer—a resident individual—had filed an income tax return, including a Wealth Statement and Foreign Income and Assets Statement as required by the Income Tax Ordinance, 2001.
However, the taxpayer was issued a notice asking for clarification on why CVT was paid only partially on foreign assets. A demand of Rs37,381,018 was raised under the CVT Act of 2022 after the taxpayer’s reply was rejected.
The taxpayer then appealed the decision to the ATIR, which ruled in favor of the taxpayer. The tribunal pointed out that previous decisions by both the Lahore and Sindh High Courts did not address the specific issue of FADRA’s supremacy over the CVT Act. They clarified that the matter before the High Courts was related to the constitutional validity of the CVT Act and not its conflict with FADRA.
The ATIR’s ruling effectively annulled the CVT demand, citing that the judgments of the Lahore and Sindh High Courts did not cover the issue of FADRA’s precedence. The decision underscores that foreign assets declared under FADRA remain protected from subsequent tax impositions such as the CVT.