Amendment in Finance Bill: over a dozen listed firms to pay more taxes in fiscal year 2016

The market observers have identified more than a dozen listed companies that, they believe, would be paying more taxes during FY16 under the government tax regime on undistributed stocks income. More than 100 listed firms, mostly from textile sector, were not complying as the federal government in new budget for FY16 had to make it mandatory for the companies to share profits with their shareholders.
The following companies are worth analysing that need to pay higher dividend or would be liable to pay more taxes, said analysts at Topline Research. Cherat Cement, DG Khan Cement, Engro Foods, Ghani Glass, Gillette Pakistan, Gul Ahmed Textile, IBL HealthCare, Kohat Cement, Kohinoor Textile Mills, Maple Leaf Cement, Nishat Chunian, Nishat Mills, Pak Elektron and Searle Pakistan.
Of the above Cherat Cement, DG Khan Cement, IBL, Kohat Cement, Kohinoor Textile and Nishat Mills had declared Rs 2, Rs 3.5, Re 1, Rs 2, Re 1 and Rs 4 dividend during FY14. The proposed Budget FY16 envisaged that if a listed company does not distribute cash dividends within six months of the end of the income tax year or distributes dividends to such an extent that its reserves, after such distribution, are in excess of 100 percent of its paid-up capital, the excess amount may be taxed at 10 percent.
Stamped by the parliament, legislative changes have now been made according to which this said provision would not apply to companies which distribute profit equal to either 40 percent of its after tax profits or 50 percent of its paid-up capital, whichever is less. Moreover, this provision would not be applicable to companies in which the government has more than 50 percent shareholding. Also excluded are the banks and Modarabas.
Based on FY14 results, an analysis made by Topline researchers suggests that more than 100 companies were not complying with the new rules. "Most of the companies belong to textile sector," the report said. However, in textile, the profitability of FY15 would be substantially less than last year due to what analysts said Pak Rupee appreciation against US dollar and low demand from China.