Charities CBR

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Charities(Taxpayers Facilitation Guide)

Revenue Division

CENTRAL BOARD OF REVENUEGOVERNMENT OF PAKISTAN

Brochure - 007February 2004


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1Brochure 007 Charities

Revenue DivisionCentral Board of RevenueGovernment of Pakistan

Exposure Draft Brochure - 007February 2004

Introduction:

This brochure explains varioustypes of charities to help them tounderstand their eligibility tocertain income tax concessionsand their obligations under theIncome Tax Ordinance, 2001.

This brochure also covers therequirements, conditions andprocedures of getting approval toavail the applicable taxconcessions.

This brochure is to assist the taxpayers andreflects the legal position at the time of printing.In case of any conflict the legal provisions of thelaw shall always prevail over the contents of thisbrochure.

Comments and suggestionsWe welcome your comments about thisbrochure and your suggestions for futureeditions.You can e-mail us at [email protected] can write to us at the following address:Taxpayer Education and Facilitation,Central Board of Revenue,Constitution Avenue, Islamabad


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Brochure 007 Charities2

Contents Page

What is charity? 03To be a charity 03

Objects 03Non-profit 03Dissolution 03

Classification of charities under the IncomeTax Ordinance, 2001

04

Informal 04A trust or other legal obligation 04Approved by the Commissioner ofIncome Tax

04

Approved by the Central Board ofRevenue

04

General income tax concessions that alsoapply to charities

04

Educational institutions 04Special income tax concessions that apply tocharities

05

Exemption of income 05Exemption from levy of minimum tax 06

Tax credit (rebate) to the donors 06Charities and obligations as withholdingagent

07

Obligation of collecting or deducting taxat source

07

On salary paid to employees 07On payment to non-residents 07On payment for goods, services andexecution of contracts

07

On payment of rent of immovableproperty etc

07

On payment of or giving prizes andwinnings

07

On payment of brokerage andcommission

07

Obligation of depositing the tax collectedor deducted

07

Obligation of issuing certificate of taxcollected or deducted

07

Obligation of filing statements of taxcollected or deducted

08

Some words of caution 08Approval of the Commissioner of Income Tax 09

Charities that qualify for approval 09How to get approval? 09Documents to be accompaniedalongwith the application for approval

09

Processing of application for approval 09Validity of approval 10Circumstances under which approval isnot granted

10

How to renew the approval? 11When to apply for renewal ofapproval?

11

Documents to be accompaniedalongwith the application

11

Contents PageProcessing of application forrenewal of approval

11

Validity of renewal of approval 11Circumstances under which therenewal of approval is not granted

11

How long will it take to grant theapproval or renewal of approval

11

What to do once an approval or renewalof approval is granted

11

Circumstances in which approval orrenewal of approval given can bewithdrawn

12

If an approval or renewal of approval isnot granted or withdrawn

12

Does the approval earlier granted underthe Income Tax Ordinance, 1979 willhold good or a fresh approval under theIncome Tax Ordinance, 2001 isrequired?

12

Requirements or conditions for approval

or renewal of approval can be relaxed?

12

Approval of the Central Board of Revenue 13Charities that qualify for approval 13How to get approval 13Documents to be accompaniedalongwith the application for approval

13

Processing of application for approval 13Validity of approval 13Circumstances under which approval isnot granted

13

How to renew the approval? 14Validity of renewal of approval 14Circumstances under which therenewal of approval is not granted

14

Circumstances in which approval or

renewal of approval given can bewithdrawn

14

Does the approval earlier grantedunder the Income Tax Ordinance,1979 will hold good or a freshapproval under the Income TaxOrdinance, 2001 is required?

14

Requirements or conditions for approvalor renewal of approval can be relaxed?

14

Prescribed application form for approval fromthe Commissioner of Income Tax

15

Prescribed application for renewal ofapproval from the Commissioner of IncomeTax

17

Prescribed form of appeal before theRegional Commissioner of Income Tax

19

Prescribed application form for approval fromthe Central Board of Revenue

20

Prescribed application for renewal ofapproval from the Central Board of Revenue

22


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What is charity?

Charity is an organization:

Established and operated for humanitarianpurposes like:

o The advancement of education;

o The charity, i.e.,

Relief of the poor;

Education;

Medical relief;

Orphanage;

Homeless hostels;

Relief of special needs of peoplewith disabilities;

Promotion of fine arts, literature,

music etc.; Natural disaster relief;

Rehabilitation of victims;

Legal assistance; and

Advancement of any other objectof general public utility;

o The advancement of religion;

o The welfare of the community;

o The development of agriculture,aviation, fishing, horticulture andindustries etc.;

o The promotion of amateur sports; and

Whose activities carried on are not for thesake of earning profit or gain for the privatebenefit of its individual members directly orin-directly; and

Whose assets do not confer, or mayconfer, a private benefit to any otherperson.

Charity can still make a profit.However, the profits so made must beapplied for carrying out the objects ofthe organization only and must not bedistributed to the owners (members,trustees, or other private persons etc.)directly or indirectly under anycircumstances.

To be a charity

The constituent documents must contain thefollowing three fundamentals of a charity:

Objects

The purposes for which the organization isestablished spelled out in the object clauseof the constituent documents.

Non-profit

A clause restricting the distribution ofprofits and gains, e.g.,

The assets and income of theorganization shall be utilized solely inthe furtherance of its objects and noportion thereof shall be distributed, paid

or transferred, directly or indirectly, byway of dividend, bonus or otherwise byway of profit or by any other means tothe members or trustees or the relativeor relatives of a member or members orto any other private person except asbona-fide remuneration for servicesrendered or expenses incurred onbehalf of the organization.

Dissolution

Similarly, a clause for disposal of theassets on its dissolution, e.g.,

In the event of the dissolution of theorganization, its assets after thesatisfaction of all its debts andliabilities, if any, shall be transferred toany organization with similar objects.

The income tax law does not prescribe anyparticular form of words that an organizationmust incorporate in its constituent documentsto be a charity except:

In case of an organization approved by the

Commissioner of Income Tax under clause(36) of section 2 of the Income TaxOrdinance, 2001 [explained latter in thisbrochure], the clause relating to the disposalof assets on dissolution, in the constituentdocuments, must also restrict the transferof assets to a similarly approvedorganization.


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Classification of charitiesunder the Income TaxOrdinance, 2001

Charities can be broadly classified into fourtypes for the purposes of applicability ofincome tax concessions:

Informal

A trust orother legal obligation

Approved by the Commissioner ofIncome Tax

Approved by the Central Board ofRevenue

1. Informal charities are generally those,

which operate on a very low scale at locallevels mainly depending upon thevoluntary contributions.

2. A trust is an obligation annexed to theownership of property and arising out ofconfidence reposed in and accepted by theowner, or declared and accepted by himfor the benefit of another, or of another andthe owner.

Other legal obligation includes MuslimWaqf, Charitable endowments orinstitutions formed or registered under the

Societies Registration Act, 1860, theCharitable Endowments Act, 1890, theSocial Welfare Agencies (Registration andControl) Ordinance, 1961 or theCompanies Ordinance, 1984.

3. Approved by the Commissioner ofIncome Tax means approval accorded inaccordance with the clause (36) of section2 of the Income Tax Ordinance, 2001 andRules 211 to 220 of the Income Tax Rules,2002 [explained latter in this brochure].Such charity for the purposes of Income

Tax Ordinance, 2001 is referred to as non-profit organization.

4. Approved by the Central Board ofRevenue means approval accorded for thepurposes of clause (58) of Part I of SecondSchedule to the Income Tax Ordinance,2001 and Rule 220A of the Income TaxRules, 2002 [explained latter in thisbrochure].

General income taxconcessions that also apply tocharities

Educational institutions

Income of educational institutions includingvocational training institutions establishedsolely for educational purposes and not forthe purposes of profit is exempt from tax.

Such educational institutions of charitiesequally qualify under the general exemption.

The words established solely foreducational purposes and not for thepurposes of profit do not mean that thereshould not be any profit or surplus. All it meansthat the profit or surplus, if any, must beapplied for educational purposes and noportion thereof can be distributed, paid ortransferred, directly or indirectly, by way ofdividend, bonus or otherwise by way of profit orby any other means to the members ortrustees or the relative or relatives of a memberor members or to any other private personexcept as bona-fide remuneration for servicesrendered or expenses incurred on behalf of theeducational institution.


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Special income taxconcessions that apply tocharities

Exemption of income

Applicability of special income tax concessionsrelating to exemption of certain incomes of thecharities depends upon the type of the charity.These are enumerated below:

Nature ofincome

Exemption available to(Type of charity)

Applicable restrictions and conditions, if any,for availing exemption

Informal

Trust or other legal obligation

To the extent received solely for the religious andcharitable purposes of such organization

Voluntarycontributionsincludingdonations andsubscriptions Approved by the Central Board of Revenue None

Trust or other legal obligationGrants received

from Federal,Provincial orDistrictGovernments

Approved by the Central Board of Revenue

To the extent actually applied or set apart forapplication to the religious or charitable purposes

of such organization in Pakistan

Trust or other legal obligationForeign grants




Trust or other legal obligation To the extent actually applied or set apart forapplication to the religious or charitable purposes


Income fromproperty

Approved by the Central Board of Revenue None

Income frombusiness

Approved by the Central Board of Revenue To the extent expended in Pakistan for thepurposes of carrying out welfare activities of such

organization;and

In proportion to the ratio of income from businessto the aggregate incomes from all sources.

Example1. Income from voluntary contributions Rs. 50,0002. Income from property Rs. 15,0003. Income from business Rs. 35,0004. Total income from all sources Rs. 100,0005. Amount expended in Pakistan for

carrying out welfare activities Rs. 20,0006. Exempt income from business

[3 divided by 4 and multiplied by 5] Rs. 7,000

Trust or other legal obligation To the extent actually applied or set apart forapplication to the religious or charitable purposes


Profit oninvestments inthe securities ofthe FederalGovernment Approved by the Central Board of Revenue None

Trust or other legal obligationProfit on debtfrom scheduledbanks





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Exemption from levy of minimum tax

Charities approved by the Commissioner ofIncome Tax (non-profit organizations) enjoyexemption from levy of minimum tax of 0.50% oftheir turnover.

Tax credit (rebate) to the donors

Charitable donations, both in cash or kind, givento charities approved by the Commissioner ofIncome Tax (non-profit organizations), entitlethe donor (payee) to a tax credit (tax rebate)against its tax liability.

The pre-requisites to avail this tax concessionare:

Charitable donations, both in cash or kind,

are given to charities approved by theCommissioner of Income Tax (non-profitorganization);

Charitable donations (other than in kind)are given through crossed cheque drawnon a bank; and

The amount and/or value of charitabledonations eligible for tax credit (rebate) issubject to the following limits:

Where the donor (payer) is an individual or

association of persons:

Eligible amount is lower of the:

Amount of charitable donations and/orfair market value of the property given;or

30% of the taxable income

Example I Example II

1. Amount of charitabledonations Rs. 40,000 Rs. 20,000

2. 30% of taxableincome Rs. 30,000 Rs. 30,000

3. Eligible amount(lower of 1 or 2) Rs. 30,000 Rs. 20,000

Where the donor (payer) is a company:

Eligible amount is lower of the:

Amount of charitable donations and/or

fair market value of the property given;or

15% of the taxable income

Example I Example II

1. Amount of charitabledonations Rs. 40,000 Rs. 10,000

2. 15% of taxableincome Rs. 15,000 Rs. 15,000

3. Eligible amount(lower of 1 or 2) Rs. 15,000 Rs. 10,000


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Charities and obligations aswithholding agent

The obligation of collecting or deducting tax atsource, depositing the tax collected ordeducted, issuing certificate of collection or

deduction and filing of statements etc. relatingto collection or deduction of tax at source isexplained in detail in our brochure titled asCollection and deduction of tax at source.

An overview of such obligations relating to non-profit organizations is given below.

Obligation of collecting or deducting tax atsource

On salary paid to employees

All types of charities (informal, trust, otherlegal obligation, approved byCommissioner of Income Tax andapproved by the Central Board ofRevenue) have the same obligations todeduct tax at source from salary paid to anemployee(s) as any other employer.

On payment to non-residents

Again all types of charities have the sameobligations to deduct tax at source frompayment made to a non-resident, as any

other person, on account of:

royalty;

fees for technical services;

a turnkey contract;

a contract or sub-contract for thedesign, construction or supply of plantand equipment under a power project;

a contract or sub-contract under a

construction, assembly or installationproject in Pakistan, including a contractfor the supply of supervisory activitiesin relation to such project;

any other contract for construction orservices rendered;

any other payment.

On payment for goods, services andexecution of contracts

Charities that are:

an association of persons

constituted by or under any law; or

a company;

fall in the list of prescribed persons obligedto deduct tax at source from paymentmade on account of sale of goods,rendering of services and execution ofcontract.

On payment of rent of immovableproperty etc

Charities that are a company or approvedby the Commissioner of Income Tax orapproved by the Central Board of Revenueare obliged to deduct tax at source from thepayment of rent of immovable propertyincluding rent of furniture and fixtures, andpayment for services relating to suchproperty.

On payment of or giving prizes andwinnings

All types of charities have the sameobligations to deduct tax at source frompayment of or giving prizes and winnings(both in cash and kind).

On payment of brokerage andcommission

Charities that are a company or anassociation of persons are obliged todeduct tax at source from the payment ofbrokerage or commission.

Obligation of depositing the tax collected or

deducted

Deposit tax deducted within seven days of thededuction in Government Treasury or Statebank Of Pakistan or National bank of Pakistanusing the prescribed challan (deposit slip /memo) form for this purpose.


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Obligation of issuing certificate of taxcollected or deducted

Charities that collect or deduct tax at sourceare required to issue certificate of tax collectedor deducted to the respective person in theprescribed form.

Obligation of filing statements of taxcollected or deducted

Charities that collect or deduct tax atsource are required to file quarterly, sixmonthly and annual statements of taxwithheld and deposited on the prescribedforms.

association of personsincludes an artificialjuridical person.

companyincludes

a company formed and registered underthe Companies Ordinance, 1984;

a body corporate formed by or under anylaw in force in Pakistan;

a body incorporated by or under the law ofa country outside Pakistan relating toincorporation of companies;

a trust;

a co-operative society registered under theCo-operative Societies Registration Act,1925;

a co-operative society registered under anylaw for the time being in force in Pakistanfor the registration of co-operativesocieties;

any other society established orconstituted by or under any law for the timebeing in force; or

a foreign a foreign association whether

incorporated or not, which the Central Boardof Revenue has, by general or special order,declared to be a company for the purposesof Income Tax Ordinance, 2001.

For further details please refer to ourBrochure 005 - Collection and Deduction oftax at source (withholding agents

perspective).

Some words of caution

Incomes of charities from the followingsources are not exempt from tax:

Income from property except as indicated

earlier in this brochure.

Income from business (including incomessubject to collection or deduction of tax atsource as final tax) except as indicatedearlier in this brochure.

In order to avail exemption of incomes subjectto final taxation, the charities approved byCentral Board of Revenue for the purposes ofclause (58) of Part I of Second Schedule to theIncome Tax Ordinance, 2001 may obtainwithholding tax exemption certificate from theCommissioner of Income Tax. Once the tax iscollected or deducted at source neitherexemption can be availed nor refund of such taxcan be claimed.

Capital gains arising on disposal ofproperty of any kind whether or notconnected with business excluding stock-in-trade, property in respect of whichdeduction for depreciation or amortizationis admissible and any immoveableproperty.

Other sources i.e.

Dividend; Royalty; Profit on debt except as indicated

herein before. Ground rent; Rent from the sub-lease of land or a

building; Income from the lease of any building

together with plant or machinery; Income from provision of amenities,

utilities or any other service connectedwith renting of building;

Any prize on a bond, or winnings froma raffle, lottery, prize on winning a quiz,prize offered by companies forpromotion of sale or cross word puzzle;

Fair market value of any benefit oramount received as consideration forthe provision, use or exploitation ofproperty;

Amount received as consideration forvacating the possession of a buildingor part thereof;


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Approval of the Commissionerof Income Tax

Charities that qualify for approval

A charity established in Pakistan for:

religious;

educational;

charitable;

welfare or development purposes; or

for the promotion of an amateur sport; and

formed and registered underany law as a non-profit organization qualify for getting approval

of the Commissioner of Income Tax.

Any law includes Societies Registration Act,1860, the Charitable Endowments Act, 1890,the Social Welfare Agencies (Registration andControl) Ordinance, 1961 or the CompaniesOrdinance, 1984.

How to get approval?

A qualifying charity can get an approval bysubmitting an application to the Commissioner ofIncome Tax in the prescribed form alongwith the

schedule thereto (Annex I).

Documents to be accompanied alongwith theapplication for approval

Attested copy of the constitution,memorandum and articles of association,rules, regulations or bye-laws, as the casemay be, specifying the aims and objects.

Certified copy of the registered trust deed,where applicable.

Certified copy of certificate of registrationor incorporation etc., as the case may be,where applicable.

Attested copy of the audited financialstatements for the preceding year.(Balance sheet and revenue account /income statement / profit and lossaccount).

The qualification of the auditor for thispurpose is as under:

AnnualReceipts

Qualification of the Auditor

Upto Rs.0.50million

A retired audit, accounts,treasury or taxation officer ofthe Government not belowBasic pay Scale 17 or a bankmanager.

ExceedingRs. 0.50millionand uptoRs. 3.0million

A cost and ManagementAccountant.

ExceedingRs. 3.0

A Chartered Accountant

Names and addresses of the promoters,directors, trustees, president, secretary,treasurer, manager and other officebearers, as the case may be, indicatingclearly their family relationships, if any, witheach other.

An evaluated and certified report withregard to the performance of the qualifyingcharity in achieving the aims and objectsduring the three preceding financial years.

The Evaluation and certification is requiredto be done by an independent certificationagency approved by an authoritydesignated by the Government of Pakistanfor this purposes or, till that authority isestablished, under arrangements made bythe Central Board of Revenue.

Philanthropy Centre of Pakistan hasbeen approved as one of the evaluationand certification agency and till theapproval of another such agency a

charity has an option to get itselfevaluated and certified by the CentralBoard of Revenue.

Processing of application for approval

The Commissioner of Income Tax may makesuch inquiries or call for such further informationas deemed necessary and after completion ofthe formalities may grant the approval.


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An approval granted shall be:

Notified in the official gazette; and

Subject to such conditions as specified inthe approval.

Validity of approval

An approval granted is valid until the 30th

dayof June of the tax year next following the taxyear in which the approval is given.

Circumstances under which approval is notgranted

If the constitution, memorandum or articlesof association, rules, regulations or bye-laws, or trust deed, as the case may be,specifying the aim and objects does not

provide:

for the audit of its annual accounts;

for the quorum of a meeting of themembers in which the control of theaffairs of the charity vests,

in case of a charity other than atrust, of not less than four or one-third of the total number of themembers of such body, whicheveris greater; or

in case of a trust, of not less thanthree or one-third of the totalnumber of the members of suchbody, whichever is greater;

in the event of its dissolution for thetransfer of its assets after meeting allliabilities, if any, to another similarlyapproved charity, within three monthsof dissolution under intimation to theCommissioner of Income Tax;

for the utilisation of its money, propertyor income or any part thereof solely forpromoting its objects;

for prohibiting any portion of its money,property or income being paid ortransferred directly by way of dividendbonus or profit to any of its members orthe relative or relatives of a member ormembers;

for the maintenance of accounts withDirectorate of National Savings,National Bank of Pakistan, a scheduledbank, post office, or nationalisedcommercialised banks;

for prohibiting the making of anychanges in the constitution,memorandum and articles ofassociation, trust deed, rules andregulations or by-laws, as the casemay be, without the prior approval ofthe Commissioner of Income Tax;

for restricting the money validly setapart or not utilised to twenty five percent of the income including thesurplus out of the donations; and

In case, accounting period closes within

three months of the commencement ofactivities, the Commissioner of Income Taxcan relax this condition upto 50%.

If the money set apart or not utilized inexcess of the above mentioned limits is notinvested in Government securities,scheduled banks, NIT Units or mutualfunds registered with State Bank ofPakistan or Securities and ExchangeCommission of Pakistan is produced.

Subject to the condition that such deposit orinvestment in or through the scheduled banks

shall not exceed 1/3rd of the surplus at the endof the year.

If the Commissioner of Income Tax issatisfied that the applicant charity:

has been or is being used for personalgains of any particular person or agroup of persons;

has been propagating the views of aparticular political party or religioussect;

has been or is being managed in amanner calculated to personally benefitits members or their families; or

has not or will not be able to achieveits declared aims and objects in view ofits set up, administration or otherwiseas evaluated and certified by anindependent certification agency.


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The Commissioner of Income Tax will notify theapplicant, in writing, of his decision to refuse theapproval alongwith a statement of reasons forthe refusal.

How to renew the approval?

A charity approved by the Commissioner ofIncome Tax (non-profit organization) can renewits approval by submitting an application to theCommissioner of Income Tax in the prescribedform alongwith the schedule thereto (Annex II).

When to apply for renewal of approval?

An application for renewal of approval can befurnished within six months from the expiry ofthe validity of the approval or renewal lastgranted.

Documents to be accompanied alongwith theapplication for renewal of approval

Documents to be accompanied alongwith theapplication for renewal of approval is the sameas required for the initial approval (see page 09of this brochure), except that the requirementof performance evaluation and certificationfrom an approved agency will be applicablefrom July 01, 2004.

Processing of application for renewal ofapproval

The processing of application for renewal ofapproval is done in the same manner as theinitial approval (see page 09 of this brochure).

Validity of renewal of approval

The first renewal of approval is valid until the30

thday of June of the second tax year next

following the tax year in which the renewal ofapproval is given. All subsequent renewals ofapproval will be valid for a period extendingupto three years depending upon theindependent certification agencys report andaudit results.

Circumstances under which the renewal ofapproval is not granted

If the charity applying for renewal doesnot enjoy approval in the tax yearimmediately preceding the tax year inwhich the renewal application is made.

If the Commissioner of Income Tax issatisfied that:

the provisions for prohibiting themaking of any changes in theconstitution, memorandum and articlesof association, trust deed, rule andregulations or by-laws, as the casemay be, without the prior approval ofthe Commissioner of Income Tax hasnot been complied with;

the charity is being:

- used for personal gains of anyparticular person or a group ofpersons; or

- propagating the views of a particularpolitical party or religious sect; or

- managed in a manner calculated topersonally benefit its members ortheir families; or

- unable to achieve its declared aimsand objects in view of its set up,administration or otherwise asevaluated and certified by anindependent certification agency.

The non-profit organization has notcomplied with its obligations ofsubmitting its annual accounts etc.(explained latter in this brochure); and

otherwise the requirements forapproval in the preceding three yearshave not been complied with.

The Commissioner of Income Tax will notify theapplicant, in writing, of his decision to refuse anapplication to renew the approval alongwith astatement of reasons for the refusal.

How long will it take to grant the approvalor renewal of approval

The Commissioner of Income Tax will finaliseapplications for approval and renewal ofapproval within two months of receipt of theapplication.

What to do once an approval or renewal ofapproval is granted

A charity approved by the Commissioner ofIncome Tax (non-profit organisation) or whose


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approval has been renewed is required tosubmit by the 31

stJuly of each year to the

Commissioner of Income Tax and to theconcerned certification agency, in respect of thepreceding tax year:

a copy of the annual audited financialstatements, as explained earlier in thisbrochure;

a statement of income, donations receivedand moneys paid;

a list of donees and beneficiaries with fulladdresses; and

a statement showing the money set apartor kept un-utilised with reasons thereof.

Circumstances in which approval orrenewal of approval given can be withdrawn

Approval or renewal of approval granted earliercan be withdrawn:

if the charity fails to submit its annualaudited financial statements alongwithstatement of incomes, donations receivedand moneys paid, list of donees andbeneficiaries and statement of money setapart or kept un-utilised and the reasonsthereof; and

if the Commissioner of Income Tax issatisfied that:

the charity has failed to fully utilise itsincome and the donations received byit for achieving the purpose for which itwas established; or

the reason for setting apart, or for notutilising, the income and donationsreceived, is not valid.

Approval or renewal of approval once granted

cannot be withdrawn unless an opportunity toshow cause against the proposed action to betaken is given.

Where the Commissioner of Income Taxwithdraws an approval or renewal of approval,he will intimate his decision in writing alongwith astatement of reasons for such decision to thecharity and the certification agency.

If an approval or renewal of approval is notgranted or withdrawn

A charity dissatisfied with the decision:

refusing to grant approval or renewal of

approval; or

withdrawing an approval or renewal ofapproval,

may lodge an appeal with the RegionalCommissioner of Income Tax in the prescribedform (Annex III).

Does the approval earlier granted under theIncome Tax Ordinance, 1979 will hold goodor a fresh approval under the Income TaxOrdinance, 2001 is required?

The approval granted under the Income TaxOrdinance, 1979 and the corresponding IncomeTax Rules, 1982 is deemed to have beenwithdrawn unless an application for renewal issubmitted under the Income Tax Ordinance,2001 and Income Tax Rules, 2002 (explainedearlier in this brochure) before 30

thJune 2004.

Requirements or conditions for approval orrenewal of approval can be relaxed?

The Commissioner of Income Tax may relax ormodify any of the requirements or conditions of

approval or renewal of approval, on case-to-case basis, on being satisfied that the applicantcannot fulfil the requirements or conditions ofapproval or renewal of approval for reasonablecause.


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Approval of the Central Boardof Revenue

Charities that qualify for approval

A charity approved by the Commissioner of

Income Tax (non-profit organization), qualifiesfor getting a further approval from the CentralBoard of Revenue and resultantly further relatedtax concessions if:

Formed for the purpose of:

Establishing hospitals; or

Providing education; or

Community welfare or development;

Operated and functioned anywhere inPakistan, for a period of not less than three

years;

Complies with minimum acceptablestandards of internal governance,accountability, transparency and efficiencyprescribed by any law for the time-being inforce;

Area of its operation is wholly withinPakistan; and

Books of account are maintained regularlyin accordance with generally acceptedaccounting principles and satisfactory

arrangements exist for their inspection byinterested members of the public.

How to get approval

A qualifying charity can get this approval bysubmitting an application to the Central Board ofRevenue in the prescribed form alongwith theschedule thereto (Annex-IV).

Documents to be accompanied alongwith theapplication for approval

Documents to be accompanied alongwith theapplication for this approval are same asrequired for an approval of the Commissioner ofIncome Tax (see page ___ of this brochure)except that the:

audited financial statements are to besubmitted for the three preceding yearsinstead of one year; and

performance evaluation and certification isrequired to be done by an agencyapproved and appointed by the CentralBoard of Revenue instead of an agencyapproved by an authority designated by theGovernment of Pakistan.

Processing of application for approval

The Central Board of Revenue may make suchinquiries or call for such further information asdeemed necessary and after completion of theformalities may grant the approval.

An approval granted shall be notified in theofficial gazette.

Validity of approval

An approval granted is valid for the tax year in

which the approval is granted and for twofollowing tax years.

Circumstances under which approval is notgranted

Circumstances under which this approval is notgranted are almost same as in case of anapproval not granted by the Commissioner ofIncome Tax (see page 10 of this brochure).

In addition this approval is not granted if theconstituent document does not provide for

regular maintenance of books of account inaccordance with the generally acceptedaccounting principles and for their inspectionby the interested members of the public,without any hindrance, at all reasonable times.

On the other hand this approval cannot bedenied where the constituent documentsprovide that the assets on dissolution can betransferred either to a similarly approvedcharity or a charity approved by theCommissioner of Income Tax (non-profitorganization).

The Central Board of Revenue can relax thelimit on restricting the money validly set apartor not utilized in any case under anycircumstances.

The applicant charity will be given anopportunity to show cause before refusing togrant an approval.


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How to renew the approval?

Renewal of this approval can be obtained bysubmitting an application to the Central Board ofRevenue in the prescribed form alongwith theschedule thereto (Annex-V).

When to apply for renewal of approval?

An application for renewal of approval can befurnished within three months of the expiry of thevalidity of the approval or renewal last granted.

Documents to be accompanied alongwith theapplication for renewal of approval

In addition to the documents required for initialapproval, following further documents are to beaccompanied alongwith the application forrenewal of approval:

copies of Income Tax Returns and therelated assessment orders, if any;

statements of income, donations receivedand moneys paid;

statements showing the money set apart orkept unutilized with reasons thereof;

the names and addresses of thepromoters, directors, trustees, president,secretary, treasurer, manager and otheroffice bearers, as the case may be,

indicating clearly their family relationships,if any with each other;

copies of the annual report in respect ofthe activities and performance;

of the three tax years preceding the tax year inwhich application is made.

Processing of application for renewal ofapproval

The Central Board of Revenue may make suchinquiry or call for such further information asdeemed necessary and after satisfying that agenuine charity existed in the preceding yearthat complied with at all times, all the conditionsand requirements of renewal of approval and didnot suffer from any one or moredisqualifications.

The renewal of approval granted shall also benotified in the official gazette.

Validity of renewal of approval

Renewal of approval will be valid for the tax yearin which the application is made and twofollowing tax years.Circumstances under which the renewal ofapproval is not granted

If the charity applying for renewal does notenjoy approval in the tax year immediatelypreceding the tax year in which the renewalapplication is made.

The applicant charity will be given anopportunity to show cause before refusing togrant renewal of an approval.

Circumstances in which approval or renewalof approval given can be withdrawn

Approval or renewal of approval granted can bewithdrawn, at any time, if:

all the conditions and requirements ofapproval or renewal of approval are notcomplied with; or

on account of any one or moredisqualifications.

The applicant charity will be given anopportunity to show cause before withdrawingthe approval or renewal of approval.

Does the approval earlier granted under theIncome Tax Ordinance, 1979 will hold goodor a fresh approval under the Income TaxOrdinance, 2001 is required?

The approval granted under the Income TaxOrdinance, 1979 and the corresponding IncomeTax Rules, 1982 is deemed to have beenwithdrawn unless an application for renewal issubmitted under the Income Tax Ordinance,2001 and Income Tax Rules, 2002 (explainedearlier in this brochure) before 30

thJune 2004.

Requirements or conditions for approval orrenewal of approval can be relaxed?

The Central Board of Revenue may relax ormodify any of the requirements or conditions ofapproval or renewal of approval, on case-to-case basis, on being satisfied that the applicantcannot fulfill the requirements or conditions ofapproval or renewal of approval for a reasonablecause.


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Annex I

APPLICATION FOR APPROVAL FOR THE PURPOSES OFCLAUSE (36) OF SECTION 2 OF THE INCOME TAX ORDINANCE, 2001

To,The Commissioner of Income Tax,

_______________________Zone,

_______________________(City).

1. With reference to clause (36) of section 2 of the Income Tax Ordinance, 2001 (XLIX of 2001), Ithe undersigned, hereby apply, on behalf of __________________________________________(name of the organization) for its approval for the purposes of the said clause for the tax yearending on __________________.

2. Necessary particulars are set out below, and in the schedule to this application.

The following documents required under sub-rule (2) of rule 211 of the Income Tax Rules, 2002, areenclosed.

(i) _______________________________________________________________________

(ii) _______________________________________________________________________

(iii) _______________________________________________________________________

(iv) _______________________________________________________________________

(v) _______________________________________________________________________

(vi) _______________________________________________________________________

(vii) _______________________________________________________________________

(viii) _______________________________________________________________________

(ix) _______________________________________________________________________

(x) _______________________________________________________________________

Signature ________________________Name (in block letters) ________________________Designation ________________________

Application must be signed either by the President or the Secretary of the organization or by a Trustee, of the trust.


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SCHEDULEParticulars

1. Name of the organization (in block letters) ___________________________________

2. Full address of the organization (in block letters) ___________________________________

3. Date of registration of the organization ___________________________________

4. Its aims and objects. (a) ___________________________________

(b) ___________________________________

(c) ___________________________________

(d) ___________________________________

5. Whether the organisation has been registeredunder the Societies Registration Act, 1860 (XXI of1860), or the Voluntary Social Welfare Agencies(Registration and Control) Ordinance, 1961 (XLVIof 1961), or any other law in substitution thereof

relating to the registration of welfare organisation orestablished in pursuance of a Trust Deed. Pleasegive/state the law and the number and date ofregistration

6. Whether constitution, memorandum and articles ofassociation, trust deed, rules and regulations orbye-laws, as the case may be, conform(s) to theprovisions of sub-rule (1) of rule 213. If so, pleasegive the number of Article/ Clause/ Rule etc., foreach provision.

7. Whether the organization ensures for the benefit ofthe general public or a particular community orclass of persons only (give full details).

8. The number of members /trustees of theorganization on the date of application.

9. Accounting year of the organisation commenceson _______________________________and

ends on __________________________________

10. The following books of accounts are being regularlymaintained by the organization and are open forinspection without any hindrance to the generalpublic.

i) ____________________________________

ii) ____________________________________

iii) _____________________________________



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Annex II

APPLICATION FOR RENEWAL OF APPROVAL FOR THE PURPOSES OFCLAUSE (36) OF SECTION 2 OF THE INCOME TAX ORDINANCE, 2001

To,

The Commissioner of Income Tax,

_______________________ Zone,

_______________________(City).

1. I, the undersigned, hereby apply for the renewal of approval of ___________________________

_______________(name of the Organization) for the tax year ending on ___________________.

2. The ____________________________________________________ (name of the Organization)

was approved as a Non-Profit Organization by the Commissioner vide Notification No _________

dated ____________________.

3. It is hereby certified that:-

(a) constitution, memorandum and articles of association, trust deed, rules andregulations or bye-laws, as the case may be, previously filed with theCommissioner, have remained unchanged;

(b) the disqualification mentioned in sub-rule (1) of rule 213 do not apply to the

organization;

(c) the organization has fully complied with the provisions of Rule 213; and

(d) the information given above and in the attached Schedule is correct.


Application must be signed either by the President or the Secretary of the organization or by a Trustee, of the trust.


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SCHEDULEParticulars

1. Name of the organization (in block letters) ___________________________________________

2. Full address of the organization (in block letters) ___________________________________________

3. Date of registration of the organization ___________________________________________

4. Its aims and objects (a) ___________________________________________

(b) ___________________________________________

(c) ___________________________________________

(d) ___________________________________________

5. Date of approval granted under clause (36) ofsection 2 the Income Tax Ordinance, 2001.

6. Whether the constitution, memorandum and articlesof association, trust deed, rules and regulations or

bye-laws, as the case may be, conform(s) to theprovisions of sub-rule (1) of rule 213. If so, pleasegive the number.


8. The number of members/ trustees of theorganization on the date of application.

9. Accounting year of the organization commencesOn _______________________________________ and

ends on __________________________________________.

10. The following books of accounts are being regularlymaintained by the institution and are open forinspection without any hindrance to the generalpublic.

(i) ___________________________________________

(ii) ___________________________________________

(iii) ___________________________________________



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Annex IIIGROUNDS OF APPEAL

(i) ______________________________________________________________________

(ii) ______________________________________________________________________

(iii) ______________________________________________________________________

(iv) ______________________________________________________________________

(v) ______________________________________________________________________

We/I_________________________________________________________________________ theappellant(s) named in the above appeal do declare that what is stated therein is true to the best of our/myinformation and belief.

Signature ________________________Name (in block letters) ________________________

Dated: ________________, 20____ Address ________________________

PARTICULARS

1. Name of the organization (in block letters) ___________________________________________

2. Full address of the organization (in block letters) ___________________________________________

3. Date of establishment of the organization ___________________________________________

4. Its aims and objects (a) ___________________________________________

(b) ___________________________________________

(c) ___________________________________________

(d) ___________________________________________

5. Whether the organisation has been registered underthe Societies Registration Act, 1860 (XXI of 1860), or

the Voluntary Social Welfare Agencies (Registrationand Control) Ordinance, 1961 (XLVI of 1961), or anyother law in substitution thereof relating to theregistration of welfare organisation or established inpursuance of a Trust Deed. Please give/state the lawand the number and date of registration

6. Whether constitution, memorandum and articles ofassociation, trust deed, rules and regulations or bye-laws, as the case may be, conform(s) to theprovisions of sub-rule (1) of rule 213. If so, pleasegive the number of Article/ Clause/ Rule etc., for eachprovision.

7. Whether the organization ensures for the benefit ofthe general public or a particular community or class

of persons only (give full details).

8. The number of members/ trustees of the organizationon the date of application.



21/24


Annex IV

Application for Approval under clause (58) of Second Schedule tothe Income Tax Ordinance, 2001

To,

The Secretary,

Central Board of Revenue,

Islamabad.

With reference to clause (58) of the Second Schedule to the Income Tax Ordinance, 2001 (XLIXof 2001), I, the undersigned, hereby apply, on behalf of _______________________________

________________________________________________________(name of the organisation)

for its approval for the purposes of the said clause for the tax year ending on ________________.

2. Necessary particulars are set out below, and in the schedule to this application.

3. The following documents required under clause (b) of sub-rule 1 of Rule 220A are enclosed.

(i) ________________________________________________________________

(ii) ________________________________________________________________

(iii) ________________________________________________________________

(iv) ________________________________________________________________

(v) ________________________________________________________________


Application must be singed either by the President or the Secretary of the organisation or by a Trustee of the Trust.


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SCHEDULEParticulars

1. Name of the Organization (in block letters) _________________________________________

2. Full address of the organization (in block letters) _________________________________________

3. Date of registration of the organization _________________________________________

4. Its aims and objects (a) _________________________________________

(b) _________________________________________

(c) _________________________________________

(d) _________________________________________

5. Where the organization has been registered underthe Societies Registration Act, 1860 (XXI of 1860),or the Voluntary Social Welfare Agencies(Registration and Control) Ordinance, 1961 (XLVIof 1961), or any other law or established in

pursuance of a Trust Deed. Please give/ state thelaw, the number and date of Registration

6. Whether the constitution, memorandum and articlesof association, trust deed, rules and regulations orbye-laws, conforms to the provisions of sub-rules(2) and (3) of rule 220A. If so, please give thenumber of article/ clause/ rule for each provision.


8. The number of members/ trustees of theorganization on the date of application.

9. Accounting year of the organization commenceson _______________________________________ and

ends on __________________________________________.


(i) _________________________________________

(ii) __________________________________________

(iii) __________________________________________



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Annex V

Application for renewal of approval under clause 58 of theSecond Schedule to the Income Tax Ordinance, 2001.

To,

The Secretary,

Central Board of Revenue,

Islamabad.

I, the undersigned, hereby apply for the renewal of approval of __________________________________________(Name of organisation) for the tax year ending on _________________.

2. The ____________________________________________________ (name of the Organisation)was approved by the Board vide Notification No. _________ dated _______________.

3. It is hereby certified that

(a) constitution, memorandum and articles of association, trust deed, rules and regulations orbye-laws, previously filed with the Central Board of Revenue, have remained unchanged;

(b) the disqualification mentioned in the sub-rule (3) of rule 220A do not apply in the case of theorganisation;

(c) the organisation has fully complied with the provisions of sub-rule (4) of rule 220A; and

(d) the information given above and in the attached Schedule is correct.

4. The annual report of the organisations performance or activities in the immediately precedingyears is enclosed.


Application must be singed either by the President or the Secretary of the organisation or by a Trustee of the Trust.


24/24

23

SCHEDULEParticulars

1. Name of the organization (in block letters) __________________________________________

2. Full address of the organization (in block letters) __________________________________________

3. Date of registration of the organization __________________________________________

4. Its aims and objects (a) __________________________________________

(b) __________________________________________

(c) __________________________________________

(d) __________________________________________

5. Date of approval granted under clause (58) ofSecond Schedule to the Income Tax Ordinance,2001.

6. Whether the constitution, memorandum and articles

of association trust deed, rules and regulations orbye-laws conforms to the provisions of sub-rule (4)of rule 220A. If so, please attach documents andinstruments as are specified in clause (b) of sub-rule (1) of rule 220A.


8. The number of members/ trustees of the on thedate of application.

9. Accounting year of the organization commenceson ________________________________________and

ends on __________________________________________.


(i) ___________________________________________

(ii) ___________________________________________

(iii) ___________________________________________
