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Workers Welfare Fund

Significant Amendments
Chargeability of WWF
Mode of payment and recovery of WWF from industrial establishment Section 2(i) and 4
Section 4(1) of the Workers Welfare Fund Ordinance, 1971 [the WWF Ordinance] provides that every industrial establishment, total income of which in any year is not less than Rs. 100,000 shall pay to the Fund a sum equal to two percent of so much of its total income as assessable under the income tax laws. The term total income, defined in section 2(i) of the WWF Ordinance, has same meaning as in the income tax laws. Section 4(8) of the WWF Ordinance also provides that where any industrial establishment fails to pay the amount due from it as required, it shall be liable to pay an additional amount equal to eight percent per annum of the amount due from the date it was originally payable to the date on which it is paid. There have been disputes with regard to scope of total income for levy of WWF and the courts held that WWF is not chargeable on income covered under presumptive tax regime as well as that WWF should be charged after adjustment of brought forward losses. The Finance Bill now seeks to enhance the limit of total income from Rs. 100,000 to Rs. 500,000. The Finance Bill also seeks to substitute the definition of total income provided in the WWF Ordinance as follows: Where return of income is required to be filed under the 2001 Ordinance, the profit (before taxation or provision for taxation) as per accounts or the declared income as per the return of income, whichever is higher; and Where the return of income is not required to be filed, the profit (before taxation or provision for taxation) as per accounts or four percent of the receipts as per the statement filed under section 115 of the 2001 Ordinance, whichever is higher.

Due to this proposed change in the definition of total income in the WWF Ordinance, wherever an industrial establishment has profits as per accounts, it will be required to pay WWF irrespective of its taxability under the 2001 Ordinance. Further, the proposed changes in the WWF Ordinance would also nullify the courts judgments on the matter with reference to levy of WWF on presumptive income and after adjustment of brought forward losses. The Finance Bill also seeks to modify the provisions of section 4(8) of the WWF Ordinance to provide that if any industrial establishment fails to pay the amount of WWF shall be liable to pay an additional amount as per provisions of the 2001 Ordinance relating to the mode and recovery of the income tax. Consequently, non-payment / delayed payment of WWF may attract additional tax at 12 percent as provided in section 205 of the 2001 Ordinance besides any other repercussions contained in the 2001 Ordinance.

Budgetbrief2006
2006 KPMG Taseer Hadi & Co, the Pakistan member firm of KPMG International, a Swiss cooperative. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative.

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