ISLAMABAD: The Federal Government has exempted Trust Certificate Issuance Program (TCIP) from taxes and duties, to be issued under Sukuk MTN program, aimed at accessing international capital market, official sources told Business Recorder.
Sharing the details, sources said that the Federal Cabinet, in its meeting held on July 16, 2019, approved setting-up of Medium-Term Note (MTN) programs for Eurobonds and Sukuks. Under the Eurobond MTN program, Finance Division had raised $ 3.5 billion till date, with a $2.5 billion transaction in April 2021 and a $1.0 billion transaction in July 2021. The funds raised had provided necessary fiscal space to the Government and had strengthened the country’s foreign exchange reserves position.
The sources said Finance Division now intends to access the international capital markets through issuance of international Sukuk under a Sukuk MTN program, known as a “Trust Certificate Issuance Program (TCIP)”. Pursuant to Federal Cabinet decision of June 22, 2021, the inaugural issuance under TCIP was planned by utilizing the Islamabad-Chakwal section of M-2 Motorway as the underlying asset to structure the transaction.
Finance Division argues that international Sukuk issuance necessitated the following steps: (i) incorporation of a Special Purpose Company (SPC), with proposed name of “The Pakistan Global Sukuk Programme Company Limited”; and (ii) xemptions from provisions of the Income Tax Ordinance, 2001 as the transactions involve sale, purchase and transfer of assets which result in imposition of various takes. In case exemptions were not granted, the transactions were less appealing to international investors resulting in higher pricing for the offerings. All past international Sukuk issuances of the Government of Pakistan were granted similar exemptions.
Foregoing in view, on October 27, 2201, approval of the Cabinet was requested for the following proposals: (i) incorporating a SPC, “The Pakistan Global Sukuk Programme Company Limited”, with the Securities & Exchange Commission of Pakistan; (ii) granting tax exemption under Clause 75 of Part I of the Second Schedule to the Income Tax Ordinance, 2001 to the certificates and the certificate holders of TCIP; (iii) amending Table 1 of Clause 66 (1) of Part I of the Second Schedule to the Income Tax Ordinance, 2001 in respect of The Pakistan Global Sukuk Programme Company Limited; and (iv) amending Clauses 95, 96 and 97 of, and incorporating a new Clause 97A to, Part IV of the Second Schedule to the Income Tax Ordinance, 2001 for the purpose of exempting the certificates, The Pakistan Global Sukuk Programme Company Limited and the National Highway Authority from the application of relevant sections of the said Ordinance including Sections 37, 147, 151, 152, 153, 155, 236A, 236C and 236K.
The sources said, Cabinet was informed that the Federal Board of Revenue (FBR) has already given concurrence to the proposed exemptions.
After brief discussion, the Cabinet approved tax exemptions under the provisions of the Income Tax Ordinance, 2001 and other approvals in respect of International Sukuk issuances under the Government of Pakistan’s “Trust Certificate Issuance Program”.
Copyright Business Recorder, 2021
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