Budget proposals: PSX for encouraging NRPs to bring new investment

ISLAMABAD: To attract foreign investment in the capital market, the Federal Board of Revenue (FBR) has received budget proposals of Pakistan Stock Exchange Limited for 2021-22 to encourage non-residents for bringing new investment in Pakistan.

According to the budget proposals of the PSX received at the FBR House for consideration in the next fiscal year, in order to attract foreign investment in the capital market it is essential to provide a level-playing field to such investors.

At present, the capital gains tax on equity securities is higher for non-residents than the capital gains tax in debt market for non-resident companies having no permanent establishment in Pakistan.

It is proposed to align the rates of capital gains tax on disposal of equity securities of non-residents with that of debt securities for non-resident companies having no permanent establishment in Pakistan.

The rationale behind the proposal is that revising the rates and mechanism of capital gains tax on disposal of equity securities in a similar manner to that of debt securities would enable a level playing field with the debt market resulting in greater investment in equity market and revenue collection.

As per proposed amendment, align the rates of capital gains tax on disposal of equity securities of non-residents with that of debt securities for non-resident companies having no permanent establishment in Pakistan where as per sub-section (1D) and (1E) to section 152 and Clause (3A) in Division II of Part Ill of First Schedule of the Income Tax Ordinance 2001 every banking company which maintains a SCRA of non-resident company having no permanent establishment in Pakistan is required to deduct tax @ 10 percent from capital gain earned on disposal of debt instrument and government securities purchased through the Special Convertible Rupee Accounts (SCRA).

The above tax collection by the bank is treated as final tax on capital gain earned by such non-resident company (Inserted through Tax taws (Second Amendment) Ordinance, 2019), the PSX added.

Copyright Business Recorder, 2021