Taxation of Shipping and Air Transport Income. Understanding the Regulations of Section 7 of the Income Tax Ordinance 2001.

Key Point 1:
Taxation of Shipping and Air Transport Income (Section 7):

• Non-resident persons involved in operating ships or aircraft as owners or charterers are subject to taxation.
• The tax calculation involves applying the relevant tax rate to the gross income from the carriage of passengers, livestock, mail, or goods both embarked in Pakistan and outside Pakistan.
• Exemptions apply, and the section outlines specific scenarios where this tax does not apply.

Key Point 2:
Presumptive Income Tax for Resident Shipping Businesses (Section 7A):

• Resident persons engaged in the shipping business are subject to presumptive income tax.
• The tax is calculated based on tonnage or area, depending on specific criteria.
• This section provides details on the tax rates applicable to different types of ships and crafts.
• The section outlines the exchange rate for calculating the equivalent amount in US dollars.

Key Point 3:
Tax on Profit on Debt (Section 7B):

• This section imposes a tax on the profit on debt received by individuals (other than companies) from certain sources mentioned in section 151.
• The tax rate is specified in Division IIIA of Part I of the First Schedule.
• Exemptions and thresholds are outlined in this section.

Key Point 4:
Tax on Builders (Section 7C):

• Taxation of profits and gains derived from the construction and sale of buildings is covered in this section.
• The tax rate depends on the area of the building being constructed for sale.
• The section also allows for the prescription of specific rules and authorities for tax payment and compliance.

Key Point 5:
Tax on Developers (Section 7D):

• This section focuses on the taxation of profits and gains from the development and sale of plots.
• Tax rates are determined based on the area of residential, commercial, or other plots for sale.
• The section outlines the mode and manner of tax payment and compliance.

Conclusion:
Understanding Pakistan’s tax regulations on shipping and air transport income is vital for businesses involved in international trade and non-resident entities. 

References:

Income Tax Ordinance, 2001 (Section 7)

Income Tax Ordinance, 2001 (Section 7A)

Income Tax Ordinance, 2001 (Section 7B)

Income Tax Ordinance, 2001 (Section 7C)

Income Tax Ordinance, 2001 (Section 7D)