Enterprises in SEZs, STZs: NA panel recommends capping tax exemptions

ISLAMABAD: The National Assembly Standing Committee on Finance and Revenue on Monday recommended a budget proposal of the government regarding capping the tax exemptions to enterprises in Special Economic Zones (SEZs) and Special Technology Zones (STZs) — a condition of the International Monetary Fund (IMF), at the earlier of tax year 2035 or the completion of the 10 year period.

The committee which met with Naveed Qamar in the chair also gave nod to the budgetary proposals of tax on pension income exceeding Rs10 million for individuals under the age of 70.

Federal Minister for Finance and Revenue Muhammad Aurangzeb told the committee that tax exemptions are not economically sustainable. The SEZs already enjoying them were not productive as per the desired results.

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The Federal Board of Revenue (FBR) chairman said that a sunset clause for SEZs and STZs are included in the finance bill. He said that IMF was stressing to limit this tax exemption for SEZs and STZs to 2027; however, after hectic efforts the deadline was extended to 2035.

The committee members raised serious concerns over the move, while saying that it would discourage the investors and not a single dollar investment would be brought to these zones. However, the committee gave its nod after it was told that it was an IMF benchmark and needed to be fulfilled.

The committee gave its nod for another IMF-backed proposal by removing the distinction between Table-I and II, all Non-Profit Organizations (NPOs) are now subject to standard compliance requirements to qualify for 100 percent tax credit. This ensures better oversight, reduces misuse of blanket exemptions and align tax benefit with clearly defined regulatory conditions, the FBR added.

Regarding the rate deduction for payment through digital means and cash on delivery, the FBR informed the committee that the measures is expected to generate around Rs59 billion. However, instead of the current proposed different rates of levy ranging 1-2 percent, the Finance Ministry informed the committee that a single levy would be proposed after consultations and the committee would be informed accordingly.

The committee also gave its nod to the budgetary proposals of tax on pension income exceeding Rs10 million for individuals under the age of 70. Tax at five percent rate proposed on pension income exceeding Rs10 million for individuals less than 70- years old for high earnings pensioners to broaden the tax base.

Talking about FBR transformation plan interventions (already approved by the Cabinet), the FBR chairman summarised it as war on significant economic transactions by non-filers and filers without resources, financial disclosures for high value translations, conditions access to financial transactions, use of technology to enhance compliance, data sharing for risk based enforcement and expanded audit capacity with confidentiality safeguards.

Copyright Business Recorder, 2025