Pakistan Tax Bar Association (PTBA) has asked the Federal Board of Revenue (FBR) to upgrade its system to avoid the issuance of notices to deceased persons under the ongoing exercise against non-filers of income tax returns.
Recently, the FBR has issued a Standard Operating Procedure (SOP) for the deregistration of National Tax Numbers (NTNs) and sales tax registration numbers (STRNs) of deceased taxpayers.
The Federal Tax Ombudsman (FTO) has recommended that the FBR is required to revisit the entire scheme of deregistration of deceased persons and formulate a dedicated SOP in this regard specifically removing any system-based glitches that hamper the deletion of NTN /Registration despite legal orders having been made in IRIS by the concerned IR authority.
A communication of the PTBA to the FBR Chairman said that refer to Section 114 of the Income Tax Ordinance whereby the Commissioner is empowered to issue notice to a non-filer who has not filed his income tax return for the current tax year of any previous tax year.
After the implementation of “IRIS”, certain compliance requirements are purely system-based. Section 117 of the Ordinance clearly stipulates a person discontinuing his business will furnish a notice under this section to the Commissioner within 15 days from the discontinuation.
Therefore, after the implementation of “IRIS”, if the taxpayer submits such notice under section 117 of the Ordinance, and files their tax return for that tax year treating it as a separate tax year for this Ordinance, even in such cases the system has issued auto-generated notices for future tax years and the same is creating hardship to the taxpayer who one way or the other had complied with the provisions of the Ordinance.
In view of the above, we recommend that the system be upgraded and if notice under section 117 of the Ordinance along with the tax return has been submitted (in case of dissolution of AOP, winding up of company, and death of an individual), then no future notice should be issued for filing of tax return and if the department needs to inquire any information related to the disclosure under section 117 of the Ordinance, they may issue notice under Section 117 of the Ordinance, as the case may be.
This should be considered for the removal of hardship and will save the energy and time of the field officer from this futile exercise, PTBA added.
Based upon FTO’s recommendations FBR has issued the following Standard Operating Procedure:
- Verification of the death certificate and other relevant documents: Obtain an official death certificate from the concerned authorities (i.e. NADRA). Ensure that the death certificate contains accurate details of the deceased individual such as name, CNIC number, and date of death.
- Change of status in IRIS as “verified as Deceased” by the commissioner: Once the concerned commissioner verifies the necessary documents, he will modify the form of registration of the taxpayer by marking his status as “verified as deceased” and the subsequent steps for recovery of outstanding liabilities shall follow.
- Discharging any outstanding liabilities or obligations of the deceased taxpayer: The concerned CIR shall evaluate any outstanding tax liabilities, penalties, or obligations that the deceased taxpayer may have owed and proceed for the recovery of the same as stipulated in section 87 of the income tax ordinance 2001. The outstanding liabilities for sales tax may be determined in terms of Rule 11(4) of the Sales Tax Rules, 2006 of the deceased taxpayer and to be recovered.
- Order of cancellation of registrations of NTN/STRN: The concerned CIR shall issue an order for the cancellation of registration or NTN and STRN of a deceased person in IRIS, as per Rule 82 (5) of Income Tax Rules 2002 and under Rule 11 of the Sales Tax Rules 2006 after verifying the death certificate and other relevant documents.
- Updating the taxpayer’s status in IRIS and related databases: After issuance of the order of cancellation of NTN/STRN, the concerned CIR shall forward the same to the LRO (Local Registration Officer) to update the taxpayer’s status as “deceased” in the IRIS system and other related databases and to remove the taxpayer’s details from active taxpayer lists.
Communicating the deregistration to legal heirs or representatives of the deceased taxpayer: The concerned CIR shall formally notify the legal heirs or representatives of the deceased taxpayer about deregistration along with a copy of the “Order of cancellation of Registration” of NTN/STRN.
