New businesses are frequently told they need to register with the FBR without being told what for. There are distinct registrations serving different purposes, and which apply depends on what the business does.
National Tax Number
The NTN identifies a taxpayer for income tax purposes. For individuals the CNIC generally serves this function; companies and associations of persons are registered separately.
It is required for opening business bank accounts, tendering, importing and most dealings with government departments.
Sales tax registration
Sales tax registration is separate and applies where the business makes taxable supplies, subject to the applicable thresholds and rules. Provincial authorities administer sales tax on services, so a business may require both federal and provincial registration depending on what it supplies.
Thresholds and requirements change, so confirm the current position rather than relying on older guidance.
The Active Taxpayer List
Appearing on the Active Taxpayer List depends on filing returns on time. Absence from it results in higher withholding rates on a range of transactions, which is a direct and recurring cost of non-compliance.
Consequences of staying outside
- Higher withholding on banking, property and vehicle transactions
- Inability to tender for government or corporate contracts
- Difficulty opening or operating business banking facilities
- Exposure to assessment and penalty when the business becomes visible
Businesses generally become visible eventually. Registering later rarely costs less than registering at the outset.
What to do next
Establish what your business actually supplies, and to whom, before deciding which registrations apply. That question determines the answer more than the size of the business does.