Provisions related to CGT: No exemption available for income derived from criminal activity: SECP
RECORDER REPORT
KARACHI: The Securities and Exchange Commission of Pakistan (SECP) has announced that the exemption under provisions related to Capital Gain Tax (CGT) for the stock market investment is not available for income derived from a criminal activity under any other law for the time being in force.
“The said provisions shall only be applicable under the Income Tax Ordinance, 2001 (ITO) and does not bar asking source of income under any other law including Anti Money Laundering Act, 2010 (AMLA), the SECP said in a letter sent to all three stock exchanges.
“Pursuant to amendments in the Income Ordinance, 2001 notified through the Finance (Amendment) Ordinance 2012 dated April 24, 2012 whereby provisions related to Capital Gains Tax for the stock market investment have been implemented,” the letter said, the stock exchanges are advised to immediately circulate the following for compliance of the members/brokers:-
a. The said provisions shall only be applicable under the Income Tax Ordinance, 2001 (ITO) and does not bar asking source of income under any other law including Anti Money Laundering Act, 2010 (AMLA). Therefore, the exemption under these provisions is not available for income derived from a criminal activity under any other law for the time being in force.
b. The requirements of AMLA and the rules and regulations made thereunder are not affected by these provisions of the ITO and no exemption, in whole or in part, is available for any AML/CFT preventative measures under the AMLA. The KYC/CDD and Suspicious Transaction Report (STR) reporting required vide stock exchange regulations and guidelines dated February 01, 2012 shall continue regardless of the above amendments. Therefore, brokers shall take reasonable measures for establishing the source of wealth and source of funds for high risk customers and also to obtain sufficient information to determine the expected source of funding for the account.
c. The Financial Monitoring Unit may refer any STR to tax authorities notwithstanding the provisions of ITO and tax authorities will continue to cooperate with law enforcement agencies on AML matters.
The SECP said that the Section 33 of the AML Act 2010, inter alia specifically provides for criminal sanctions on failure to file STRs and for providing false information. Furthermore, in case any member/broker is found to be in violation of above legal requirements, a simultaneous regulatory action shall be initiated.