The Foreign Investment (Promotion and Protection) Act, 2022: Investors and shareholders granted income tax exemption

ISLAMABAD: The government has given full protection to the income tax exemption granted to the investors and shareholders of qualified investments made under the Foreign Investment (Promotion and Protection) Act 2022.

Under the amended Finance Bill 2023, the government has introduced a new section 44A of the Income Tax Ordinance 2001 i.e. Exemption under Foreign Investment (Promotion and Protection) Act 2022.

As per new section, taxes on income (including capital gains), advance tax, withholding taxes, minimum and final taxes under the Income Tax Ordinance shall, for the period and to the extent provided in the Second and Third Schedules to the Foreign Investment (Promotion and Protection) Act, 2022 in respect of qualified investment or investors, be exempt or subject to tax at the rate and in the manner specified.

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All investors and shareholders of the qualified investment, their associates and companies specified in the Second and Third Schedules to the said Act including third party lenders on account of any loan shall also be exempt from taxes and other provisions of the ordinance, it added.

Under section 99D (additional tax on certain income, profits and gains) added in the Income Tax Ordinance 2001 through the amended Finance Bill 2023, the federal government may specify sector or sectors for which this section would apply to determine windfall income, profits or gains and economic factors.

“Notwithstanding anything contained in this Ordinance or any other law for the time being in force, for any of the last three tax years preceding the tax year 2023 and onwards, in addition to any tax charged or chargeable, paid or payable under any of the provisions of this Ordinance, an additional tax shall be imposed on every person, being a company, who has any income, profit or gains that have arisen due to any economic factor or factors that resulted in windfall profits or gains”, it added.

The Federal Government may by notification in the official Gazette. -(a) specify sector or sectors, for which this section applies; (b) determine windfall income, profits or gains and economic factor or factors including but not limited to international price fluctuation having bearing on any commodity price in Pakistan or any sector of the economy or difference in income, profit or gains on account of foreign currency fluctuation; (e) provide the rate not exceeding fifty percent of such income, profits or gains; (d) provide for the scope, time and payment of tax payable under this section in such manner and with such conditions as may be specified in the notification; and (c) exempt any person or classes of persons, any income or classes of income from the application of this section, subject to any conditions as may be specified in the notification, section 99D added.

Copyright Business Recorder, 2023