In case of companies that are based in Pakistan, filing a NIL tax return is equally important when the company has not had any business activity or revenues of any kind in the financial year. This blog walks you through step by step process to filing a NIL tax return for the companies in Pakistan using IRIS system.

Meaning of a NIL tax return

Nil tax return does not mean not filing a tax return as often inferred. It implies that submitting a return with zero or small amounts that can be reported due to:

• No revenue generated
• No taxable exists
• No operations made
• Withholdings/tax paid are zero, or you don’t have anything to claim

Under IRIS, you still fill out the pertinent declaration/return screens and remit them in a proper manner therefore the system will record that the company has been compliant in that tax year.

Who should file a Nil tax return?

You should file a nil tax return in the following cases

• Newly incorporated and not into operations yet.
• No payment record (no invoices, no receipts)
• Out of business, but registered with NTN.
• No transactions SPV/holding company
• At early setup stage (banking, licensing, hiring not begun)

Also note that the FBR provides due dates of income tax returns and states that companies usually have a later deadlines as compared to individuals/AOPs 

Items to keep ready before filing

• Company NTN and IRIS credential.
• Fundamental information about the company profile (directors, address, business activity classification)
• Financial summary of the year
• Bank statement confirmation
• Evidence of any withheld tax (where applicable)

Noticeable Observations to Companies of Nil Returns in Pakistan:

• Financial Statements are Crucial (FBR Requirement): Although the Companies Act 2017 may bot obligate financial statements of companies with authorized capital below PKR 3 million, the FBR would still need such statements to prepare a tax return, including a nil one. Leaving out financial statements will amount to a notice being issues by the FBR, and your return will be considered incomplete.
• Annual Compliance is Compulsory: Submission of NIL tax return is a mandatory annual compliance obligation, although your company might have not undertaken any business transactions in the financial year. This will be beneficial in terms of not incurring penalties and being in good terms with the FBR.
• Incomplete return notices: Be ready to get a notice from FBR, in case you do not enclose the necessary financial statements to indicate that your return was incomplete. Act immediately on such notices in order to prevent aggravation.

Other suggestion to Companies:

• Maintain a file: it is always important to keep a copy of the filed nil tax return as well as the confirmation receipt in the files of your company.
• Keep the profile up to date: you company NTN and business profile information has to be updated regularly in the FBR database to prevent cases of discrepancies.

Myth to be overcome: no income, no need to file?

The common misconception is that when you did not make any income, then you are not required to be filing taxes. This is generally incorrect. Most of the registered entities, as well as the majority of residents, whether the income of high or not, are often obliged to present formal declarations to the tax authorities. The filing of nil return is not only about paying taxes, it is also about doing the right thing and keeping a transparent record of finances with the tax department. Even without income, proactive filing is an indicator of proper tax management and assists in avoiding possible problems in the future.

Allow Sidekick to assist you in your Income Tax Filing Journey

As an accounting company, Sidekick has the potential to simplify the procedure of submitting and filing nil income tax returns for the companies. As all the companies registered with FBR are legally required to submit a return, Sidekick makes sure that they do so by ensuring that the whole process is well handled. Experts at Sidekick take care of the procedures like, obtaining or verifying National Tax Number (NTN) of the company and accessing the IRIS portal of the FBR. Sidekick then carefully prepares and files the return, with corresponding documents required by the FBR. Such professional control prevents numerous mistakes and helps companies comply with the due dates of filling documents and thus avoid the hefty penalties and the unpleasant FBR notices.

Conclusion

The submission of an empty income tax form as an individual or on behalf of a company is a simple but essential procedure of making sure that the tax laws are not violated. Knowing what to do, and following the rules, once can easily file their nil return, keep proper tax records, evade possible fines, and develop a good rapport with taxation agencies. It is worth remembering, however, that despite the lack of revenue, paying your taxes is a pillar of responsible financial citizenship and doing business.