ISLAMABAD: The Federal Board of Revenue (FBR) is considering a budget proposal of the Securities and Exchange Commission of Pakistan (SECP) to exempt foreign investors from applicability of 100 percent additional tax, in case their name is not appearing in the Active Taxpayers List (ATL).
The proposal, if incorporated in the Finance Bill 2021, would facilitate foreign investors representing five percent of overall capital market investors trading in Pakistan.
According to the proposal of the SECP under consideration of the budget makers, the SECP has proposed non-applicability of additional capital gains tax (CGT) on foreigners.
The proposal is to exempt foreign investors from applicability of 100 percent additional tax, in case, their name is not appearing in the ATL in the Tenth Schedule of the Income Tax Ordinance 2001.
Presently, 44 percent of total foreigners investing through the Pakistan Stock Exchange (PSX) are currently not appearing in the ATL list as a result of which they are subject to CGT @ 30 percent.
For such investors who do not have any other source of income in Pakistan except capital gains, should not be subject to additional 100 percent tax for not being in the ATL.
Align it simplified tax regime for Roshan Digital Account (RDA) holders, wherein tax rate applicable for persons appearing on ATL will be charged to RDA holders.
Foreigners may be subject to taxation in their home country being resident taxpayer therefore, a balanced taxation of their income in Pakistan is essential.
The rationale taxation of foreigner’s income from investment will result in inflow of foreign exchange, boosting foreign exchange reserves of the country.
it would broaden investor base of capital markets and more liquidity to capital markets by luring foreign investors.
Foreigners represents approximately five percent of overall capital market investors trading and removing additional tax will not materially impact tax revenue and fresh investments will result in further tax revenue, in case tax incentives are provided, the SECP added.
Copyright Business Recorder, 2021
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