ISLAMABAD: Mutual Funds Association of Pakistan (MUNAF) has proposed Federal Board of Revenue (FBR) to abolish the condition for new funds to obtain tax exemption certificate for claiming exemption under relevant provisions of the Income Tax Ordinance 2001.

According to the budget proposals of the MUNAF for the federal budget of 2021-22, the requirement to obtain valid tax exemption certificate for claim of exemption under section 150, 151 and 233 of the Income Tax Ordinance 2001 in the cases where statutory exemption under clause 47B of Part IV of Second Schedule is available should be removed. The Federal Board of Revenue issued clarification/internal memo (May 12, 2015) to its field offices should be withdrawn and specific exemption should not be required from FBR every six months/ year in cases of those entities that have been provided statutory exemption in clause 47B of Part IV of Second Schedule of the Income Tax Ordinance.

Explaining the rationale behind the proposal, the association observed this is a cumbersome operational hassle as well as a difficulty to obtain for new funds who have not completed one year of operations. As the industry is growing new funds are being launched and their tax is withheld which is refundable and therefore there is no revenue loss for the government by removing this requirement, it added. The association has also proposed that the presently provisions of sections 150, 151, 233 and Part I, Division VII of the First Schedule shall not apply to any person making payment to National Investment Unit Trust or a collective investment scheme or a modaraba or Approved Pension Fund or an Approved Income Payment Plan or a real estate investment trust (REIT) scheme or a Private Equity and Venture Capital Fund or a recognized provident fund or an approved superannuation fund or an approved gratuity fund.

It has proposed a new addition of clause 150A to the Clause 47B of the Income Tax Ordinance 2001. Proposed clause 47B: The provisions of sections 150, 151, 233, 150A and (Part I, Division VII of the First Schedule) shall not apply to any person making payment to National Investment Unit Trust or a collective investment scheme or a modaraba or Approved Pension Fund or an Approved Income Payment Plan or a REIT Scheme or a Private Equity and Venture Capital Fund or a recognized provident fund or an approved superannuation fund or an approved gratuity fund. The rationale behind the proposal is to address the anomaly which exists where all avenues of income have been included in the withholding section except the Sukuks which affects the level playing field. A separate section was introduced for profit on corporate Sukuks and the same has been missed out for inclusion in the withholding section for entities exempt in section 47B of the Income Tax Ordinance 2001, it added.

Copyright Business Recorder, 2021