Tax clearance certificate made mandatory: stock exchange investors

The Federal Board of Revenue (FBR) has made it mandatory for investors of stock exchanges to obtain 'tax clearance certificate' from respective tax authorities for clearance of their tax liabilities of capital gains tax (CGT) before closure of their brokerage account with the stock brokers.
The FBR on Saturday amended Income Tax Rules 2002 through an SRO 112(1)/2011 to notify procedure on computation of capital gains tax on stock market. A new rule (13J Liability of broker) has been included in the Income Tax Rules.
According to the rules, every broker or stock exchange member, before closing the brokerage account of an investor, shall require an investor to obtain a tax clearance certificate from the concerned tax authority to the effect that the investor has no tax liabilities outstanding against him.
Any broker or stock exchange member who closes an investor's brokerage account without obtaining a tax clearance certificate and the investor disappears from the market without satisfying the tax authorities that he has no tax liabilities outstanding against him, such broker shall be liable to discharge such investor's outstanding tax liabilities to the satisfaction of tax authorities, rules added.
When contacted, an analyst explained that if any investor of stock exchange wants to close his account, the broker would direct the investor to obtain tax clearance certificate from the concerned Regional Tax Office (RTO) about the clearance of his tax liabilities. The broker would ask the investor, intending to close the account, to submit the certificate confirming clearance of the tax liability. However, if the investor disappears from the market without submitting the certificate to the broker, the concerned stockbroker would be responsible for the clearance of his tax liability.
Experts said that the clause of 'tax clearance certificate' would ensure clearance of the CGT liabilities of the brokers. In this case, the brokerage house would be given responsibility to obtain the certificate from the concerned investor, they added.