ISLAMABAD (February 04 2003) : The private security agencies engaged in provision of security staff to different organisations would be assessed under the 'presumptive tax regime' for the determination of income tax, official sources told Business Recorder on Monday.
The Central Board of Revenue (CBR) has issued instructions to Regional Commissioners of Income Tax (RCITs) to cancel all income tax assessments of such agencies which are not made under the 'presumptive tax regime'.
Sources said that the security companies providing security staff act as labour contractors and should be taxed under the 'presumptive tax regime'.
However, security companies were not ready to accept that they were actually facilitating provision of labour to different organisations.
The issue ascertaining the status of security agencies was under review and the Board, after much deliberations, has resolved it through issuance of a clarification vide circular 11/1991.
The said circular clarifies that companies providing security staff can, at the best, be termed as labour contractors and be taxed under the 'presumptive tax regime'.
In the presence of circular 11/1991, the assessment in the cases of security agencies deriving income from execution of security contracts are not out of the purview of 'presumptive tax regime'.
Sources pointed out that the CBR was approached by a security agency for refund of tax deducted at source under section 50(4) of the repealed Income Tax Ordinance 1979.
After examining the case, it came to light that the companies providing security services under labour contracts are being subjected to different tax treatments.
For this reason, the RCITs would identify and cancel all such assessments of these agencies where assessments were not made in the 'presumptive tax regime'.