ISLAMABAD: Finance Bill 2020 has not incorporated a single proposal of the Securities and Exchange Commission of Pakistan (SECP) for development of the capital market, attracting investment in stock exchange, encouraging enlistment of new companies, removing ambiguities or rationalization of capital gains tax on listed securities.
Sources told Business Recorder here on Sunday that the Finance Bill 2020 has only specified one amendment pertaining to the real estate investment trust (REIT).
Exemption for profits and gains on sale of immovable property to a Developmental REIT Scheme with the object of development and construction of residential buildings has been proposed to be extended to June 30, 2021. This one year extension upto June 30, 2021 is confusing and has no significant impact on the development of REIT projects.
Changes in the definition of securities for attracting new IPOs, private funds and amendments relating to the electronic warehousing were not incorporated in the Finance Bill 2020.
Following were the key budget proposals discussed between the FBR and the SECP relating to the corporate sector:
Addressing anomaly created in definition of security u/s 37A for computation of capital gains tax on listed securities. Required clarity has been requested for.
For unlocking potential of Private Funds, proposals to allow perpetual pass through status to all categories of private funds has been proposed. Further, considering revamping of regulatory regime and introduction Private Funds Regulations, 2015 consequential changes are requested in the Income Tax laws.
Proposal for promoting documented REIT structures is aimed at addressing short term and inadequate tax incentives for the real estate sector through REITs. These include allowing perpetual pass through status covering all categories of REITs, granting exemption from capital gains, taxation of dividends from REITs and advance tax on transfer of property.
Reduced cost of doing business in the insurance sector is essential for increasing growth and penetration. Insurance enables risk mitigation and addresses financial fragility issues, taxation at federal and provincial levels on insurance is proposed to be rationalized.
FBR's support is sought for proposals relating to provincial taxes and exercise duty with the committee, constituted to inter alia look into the harmonization of provincial taxes.
Proposal for development of regulated commodity market by addressing the issue of withholding tax u/s 153 on physical settlement. Applicability of withholding tax on sale of commodities in case of physical settlement of trades through Pakistan Mercantile Exchange platform is proposed to be exempted.
Inequality of taxation between incorporated and unincorporated businesses is discouraging corporatization and documentation. Different options are being considered for reducing this inequality over a period of time.
Considering the market condition, reducing CGT rates for 2 years on disposal of listed securities is proposed to be looked into. Also restoring distinction between short-term gains and long-term gains.
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