ISLAMABAD: The Federal Board of Revenue (FBR) Friday tried to give an impression that the investment opportunity offered to the foreign and local investors under the industrial package is not an amnesty scheme, but a conditional tax concession.
The FBR Friday issued an Income Tax Circular Number 13 of 2022 to explain the industrial package introduced through the Income Tax (Amendment) Ordinance, 2022, (the Amendment Ordinance).
The FBR’s circular said, “It is emphasized that the investment opportunity offered to investors under this section is not an amnesty scheme. Rather, it is a conditional tax concession.”
Under the circular, the FBR said that in order to promote industrialization in the country, immunity from probe under section 111 of the Income Tax Ordinance has been granted on equity investment made by eligible persons in a new company formed for establishing an industrial undertaking or to an existing company being an industrial undertaking (for investment in expansion and modernization) after paying an amount of tax equal to five percent on such investment and upon fulfilling other conditions as mentioned in this section.
The amount of undeclared funds for investment has to be credited into a dedicated bank account of such company before due date of filing of statement i.e. 30th September, 2022 and can only be used either for purchase or import of plant and machinery including IT hardware through a letter of credit or software and IT services, or for construction of building and structure in case of new industrial undertaking and for construction of only manufacturing premises in case of existing unit.
The FBR explained that in order to provide incentive for industrial promotion, section 65H has been inserted in the Income Tax Ordinance whereby all non-resident Pakistani citizens having non-resident status for more than five years and resident Pakistani citizens can avail the benefit of one hundred percent one-time tax credit equal to the amount invested as equity from foreign exchange remitted into Pakistan through normal banking channel in a dedicated rupee account opened by a company incorporated on or after March 1, 2022 to establish an industrial undertaking.
The said industrial undertaking is required to commence its commercial production by 30th June, 2024 and tax credit shall be available for adjustment against tax payable for the year in which commercial production commence and can be carried forward, if unadjusted, up to a period of maximum five years.
The resident person can remit foreign exchange into Pakistan out of declared assets in terms of section 116 or 116A of the Ordinance.
The minimum equity investment to avail benefit under this section shall be Rs50 million and procedure for remittance of foreign exchange into Pakistan shall be laid down by State Bank of Pakistan, the FBR said.
According to the FBR, the scheme offered under this section will not be applicable to a company or an industrial undertaking established by splitting up or reconstitution of a company or an industrial undertaking already in existence or by transfer of machinery or plant from an industrial undertaking established at any time before 1st March 2022.
Copyright Business Recorder, 2022