USD-denominated NPCs: Pakistanis having declared assets abroad can invest: expert

ISLAMABAD: International tax expert Dr Ikramul Haq has said that the resident Pakistanis who have declared assets abroad with the Federal Board of Revenue (FBR) can also invest in US$-denominated government securities.

He was addressing a virtual seminar organised by Consulate General of Pakistan Los Angeles on income tax laws in Pakistan and impact on overseas Pakistanis and foreign investors on Wednesday.

To a question, he responded that the overseas Pakistani can avail tax credit in USA under the tax treaty already inked between the Pakistan and the USA.

Dr Haq stated that first time in Pakistan’s history non-resident Pakistanis (NRPs) were being provided an opportunity to remotely open an account in Pakistan through an entirely digital and online process without any need to visit a bank branch.

The opening of the account will require only a basic set of information and documents. Banks have been asked to complete all necessary customer due diligence within 48 hours.

He said that the government had enabled investment by NRPs in Naya Pakistan Certificates (NPCs) issued by the Government of Pakistan, in both USD and PKR, at very attractive risk free rates.

On NPC, only a 10 percent withholding tax on profits is applicable that is full and final. No filling of tax return is required.

He informed that the Sharia-compliant version of the NPC was also available, which was in full conformity with Sharia principles and certified by reputed Sharia scholars.

Resident Pakistanis who have declared assets abroad with the FBR can also invest in USD-denominated NPCs.

To do so, they can open a Roshan Digital Account in foreign currency by visiting a bank branch in Pakistan, the international tax expert said.

To a query, he said that the NRPs willing to undertake banking, payment and investment activities can do so through digital channels.

There are two types of accounts offered under Roshan Digital Accounts.

These are Foreign Currency Value Account (FCVA) and NRP Rupee Value Account (NRVA).

These accounts are to be fed with remittances received from abroad through banking channels.

The funds in an NRVA can also be transferred from the customer’s own FCVA or other NRVA with the same bank.

Moreover, returns on investments and disinvestment proceeds on account of investments made from these accounts can also be credited in these accounts.

As per the SBP’s instructions, “Feeding from local sources is not allowed”.

It further provides that “all banking services allowed through digital channels will be available with the account e.g. internet/mobile banking, ATM/debit cards. The bank may also issue a check book to the account holder, if required”, he referred to the SBP’s instructions.

He explained these accounts, as per the SBP, can be used to “invest in foreign currency-denominated debt securities of the government of Pakistan, notably the US$ ‘Naya Pakistan Certificates’, as well as foreign currency deposit schemes of the banks and profit from these investments and disinvestment proceeds can also be credited in the account”.

The SBP further provides that the transfer and payment to any person within or outside Pakistan is allowed and cash withdrawal is available in either foreign currency or in equivalent Pak rupees.

Moreover, the funds in the accounts can be repatriated abroad anytime without any prior approval from the SBP or the bank.

Under the Special Technology Zones Authority Ordinance, 2020, he highlighted the incentives for zone enterprises.

The incentives for zone enterprises included exemption from all income taxes (withholding tax, presumptive tax) for a period of 10 years from the date of issuance of license by the authority, and exemption from all custom duties and taxes for a period of 10 years from the date of issuance of license by the authority on capital goods including but not limited to materials, plant, machinery, hardware, equipment and software imported into Pakistan for consumption within zones by the authority and zone enterprises.

Other exemptions included exemption from property tax for 10 years from the date of issuance of license by the authority; exemption from the GST on goods and services on import of plant, machinery, equipment and raw-materials for consumption of these items within zones by the authority as well as zone enterprises and tax exemption on dividend-income and long-term capital gains from investments in a venture capital (VC) undertaking for a period of 10 years from the date of issuance of license by the authority.

The special zone shall include any defined geographical area notified by the authority with any such name including, but not limited to special technology zones, information technology parks, high-tech industrial area, software technology park, hardware technology park, technology export zones; free technology zones, science and technology park, information technology zones, science and technology zone, Dr Ikramul Haq added.

Copyright Business Recorder, 2020