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The
stalls are built at an average rate of 160 euros per
square feet and total cost of a small stall of 12×8 feet
comes to 15,360 euros. By 2006, the rate of value added
tax was 16 per cent which has now been increased to 19 per
cent. At current rate, the exporters on average pay 2,918
euros as VAT to Germany.
The
exporters said cumulative VAT was very high as thousands
of Pakistani exporters participated in fairs in different
German cities every year. The cities included Frankfurt,
Dusseldorf, Cologne and Hannover.
Though
most of the Pakistani exhibitors are denied VAT refund by
German authorities, the Engineering Development Board has
got the refund for its participation in the engineering
fair at Hannover. The EDB took part in the fair on its own
without facilitation or support from the Trade Development
Authority of Pakistan (TDAP).
According
to Nabeel Hashmi who managed participation in the fair,
millions of rupees worth of VAT refunds relating to taking
part in the fair in 2005-06 have been deposited in
government account. He hoped the refunds for 2006-07 would
soon be received as the entire process took around six
months.
It
was learnt that the Germans refused VAT refund to
Pakistani exporters on the plea that German exhibitors in
Pakistan should also be allowed similar refunds if they
participated in trade fairs here.
An
agreement exists between the two governments for avoidance
of double taxation. However, tax experts pointed out the
accord was related to income tax only and not value added
tax. For VAT, both the governments had to sign a separate
agreement, they added.
Some
exporters put the blame of delay in refund on the Trade
Development Authority of Pakistan which bought exhibition
space on behalf of the exhibitors who participated through
the authority. They argued the Engineering Development
Board which arranged participation in the engineering fair
at Hannover on its own succeeded in obtaining refunds
under the present rules.
Moreover,
they said, even the TDAP had in some cases been able to
obtain partial refunds through commercial counsellors.
“Probably the procedure adopted for refunds has some
flaws,” an exporter said.
The
exporters also complained that even if some rules had to
be changed from Pakistan’s side these should have been
done much earlier as the matter of VAT refund had been
pending for the last 30 months. The Federal Board of
Revenue had provided to the Ministry of Commerce
notifications and provisions of the sales tax act
(Pakistani equivalent of VAT) giving exemption to foreign
missions on services rendered in Pakistan.
The
Ministry of Commerce had to take up the matter with the
German authorities through Pakistan’s embassy there. But
it seems that due to bureaucratic red tape the matter has
either not yet been taken up with the German officials or
not pursued properly.
Source
:
Vat Refund
& Reclaim Info - http://www.thevatman.org, dated
08/12/2007
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