06-13-2011, 11:10 PM
Subsection (2) of Section 49 of the Sales Tax Act 1990 states
âIn the case of sale or transfer of ownership of a taxable activity or part thereof to another registered person as an ongoing concern, sales tax chargeable on taxable goods or part thereof shall be accounted for and paid by the registered person to whom such sale is made or ownership is transferred.â
Now, your company is bound to account for and pay the sales tax chargeable on the goods acquired as a result of take-over. To settle the issue of already recorded output and input taxes, you can either recover the net amount from the seller of the business (as the benefit of such transactions has been passed on to them); or file an application with the Sales Tax authorities to
- either permit your company to use same Sales Tax Registration Number that was previously given to the sole-proprietorship as same business has been taken over.;
- Or, permit you to account for the output and input taxes outstanding on previous Registration Number, after which the previous number can be blocked or de-registered.
I hope Company's Memorandum of Association must be carrying a reference to the take-over agreement with the sole proprietorship. The MOA along with Take-Over agreement can be filed as a proof along with the application.
This process looks difficult but quite recently some companies (which took-over businesses from Sole-proprietorships or partnerships) have followed it and got the issue resolved.
Donât you have similar issues with bank balances, income tax, customs, utility connections, State Bank of Pakistan etc?
Regards,
âIn the case of sale or transfer of ownership of a taxable activity or part thereof to another registered person as an ongoing concern, sales tax chargeable on taxable goods or part thereof shall be accounted for and paid by the registered person to whom such sale is made or ownership is transferred.â
Now, your company is bound to account for and pay the sales tax chargeable on the goods acquired as a result of take-over. To settle the issue of already recorded output and input taxes, you can either recover the net amount from the seller of the business (as the benefit of such transactions has been passed on to them); or file an application with the Sales Tax authorities to
- either permit your company to use same Sales Tax Registration Number that was previously given to the sole-proprietorship as same business has been taken over.;
- Or, permit you to account for the output and input taxes outstanding on previous Registration Number, after which the previous number can be blocked or de-registered.
I hope Company's Memorandum of Association must be carrying a reference to the take-over agreement with the sole proprietorship. The MOA along with Take-Over agreement can be filed as a proof along with the application.
This process looks difficult but quite recently some companies (which took-over businesses from Sole-proprietorships or partnerships) have followed it and got the issue resolved.
Donât you have similar issues with bank balances, income tax, customs, utility connections, State Bank of Pakistan etc?
Regards,
