Pkrevenue.com

Author: Mrs. Anjum Shahnawaz

  • Rupee falls by 34 paisas against dollar

    Rupee falls by 34 paisas against dollar

    KARACHI: The Pak Rupee fell by 34 paisas against the dollar on Monday owing to demand for import and corporate payments.

    The rupee ended Rs153.70 to the dollar from last Friday’s closing of Rs153.36 in the interbank foreign exchange market.

    Currency experts said that due to first day of the week the demand for import and corporate payments was high.

    They said that the improved GDP growth forecast would escalate the domestic demand for imported raw material and finished products.

    The rising demand for import payment would depress the local currency in coming days.

  • PTA issues billing advisory for telecom consumers

    PTA issues billing advisory for telecom consumers

    ISLAMABAD: Pakistan Telecommunication Authority (PTA) has issued advisory for telecom consumers to avoid billing shocks while subscribing broadband internet packages.

    The PTA on Sunday said that following options may be considered/exercised to avoid billing issues and avail mobile broadband services at affordable rates/prices:

    — Standard / baseline mobile data (default) rates are generally costly/expensive, therefore, consumers are encouraged to opt/subscribe for daily, weekly or monthly mobile data bundles/packages/offers as they are more affordable / cheaper and provides good value for money.

    — Consumers who do not wish to use mobile internet may change their mobile handset internet settings as follows:

    > click on settings

    > Select network/ SIM cards / internet / mobile data

    > Select SIM card/Mobile Data options

    > Select preferred network type / voice and data

    > select 2G or 3G

    — To void ‘bill shocks’, data connection may be switched off while not in use.

    — Before subscribing any mobile broadband data package / offer/ bundle, “terms and conditions” should be read carefully. Subscription of new or additional bundle may result in removal of existing bundles’ free incentives and resource such as SMS, minutes and data.

    — After activation of any specific offer or package through mobile application, consumers are advised to use the same after receipt of confirmation SMS from operator.

    — In case any complaint related to auto subscription of offer, package or bundle, overcharging, billing related issue, helpline and quality of service etc. consumers can contact concerned operator first. In case of no response from concerned operator, the issue may be escalated to the PTA.

  • Removal of sunset clauses on CGT exemptions for real estate sector demanded

    Removal of sunset clauses on CGT exemptions for real estate sector demanded

    KARACHI: Pakistan Stock Exchange (PSX) has pointed out that at present timelines for exemption from Capital Gain Tax (CGT) are discouraging long-term investors from entering the Real Estate Sector.

    Moreover, different Real Estate Investment Trust (REIT) categorization have created distortion and excluded commercial and mixed-use REIT projects, the PSX highlighted the issue in its proposals for the upcoming budget 2021/2022.

    It further said that higher rate of tax on dividends as compared to mutual funds (enhanced through Finance Act 2019, rate of tax on dividend from REITs Schemes was enhanced from 15 percent to 25 percent.

    Sale of real estate to a REIT scheme at market value is a paper transaction required to transfer title of real estate in the name of trustee.

    Furthermore, REIT Scheme is exempt from income tax when 90% income is distributed as dividend and therefore advance tax cannot be adjusted.

    The PSX proposed exemption from CGT provided in clause 99A, Part 1, 2nd schedule of Income Tax Ordinance, 2001 should be applied to all categories of REITs (mix-use projects)

    – Remove sunset clauses

    • June 2023 for Developmental REIT Scheme and Rental REIT Scheme.

    — Rate of tax on dividend, which is 25% at present, be synchronized with mutual funds15 percent [First schedule, Part-1, Division-Ill, paragraph B]

    — Exempt advance tax on property transfers to/from a REIT Scheme u/s 236C & 236K.

    Giving rational to the proposals, the PSX said it will promote documented real-estate will attract more investments particularly by companies with disclosure of actual prices and income. Revenue impact will be positive as it will generate indirect and additional revenues from allied businesses.

  • Withholding tax exemption sought on commodity future contracts

    Withholding tax exemption sought on commodity future contracts

    KARACHI: Federal Board of Revenue (FBR) has been urged to exempt withholding tax on transactions made for future contracts at commodity exchange.

    The Pakistan Stock Exchange (PSX) in budget proposals 2021/2022 submitted to the FBR, highlighted the issue and stated that currently, buyer of a commodity withholds tax (4 percent-9 percent) from seller before making payment with the exception of growers.

    This tax adds cost and puts the investors at a disadvantageous position when dealing in actual commodity exchange at PMEX in futures contracts/e-WHR5 as grain markets are not documented and as such this tax is actually not being paid.

    The stock exchange proposed to exempt commodity futures contracts and EWRs from the application of section 153 of the Income Tax Ordinance, 2001 like these are exempt from GST under SRO 445(1)12004 June 14, 2004.

    It will be only applicable on physical settlement of futures contract by exchange of delivery of underlying commodity. On contract, CGT is already applicable.

    Giving rationale to the proposal, the PSX said that development of regulated and organized commodity markets will greatly benefit the agriculture sector.

    Revenue impact will be neutral to positive due to adjustability of withholding tax while documentation leading towards more income tax from traders and related parties.

  • Tax rate disparity discourages corporatization: PSX

    Tax rate disparity discourages corporatization: PSX

    KARACHI: Inequality in tax rates for corporate and non-corporate businesses has discouraging corporatization in the country, Pakistan Stock Exchange (PSX) noted in its proposals for budget 2021/2022.

    The stock exchange pointed out that corporate business profits are taxed twice: once at company level at 29 percent and on dividend distribution at 15 percent.

    As compare to 44 percent of total tax in case of companies, unincorporated businesses are being taxed from 0 percent to 35 percent in slabs.

    This inequity in taxation is discouraging corporatization and documentation as unincorporated businesses are subject to substantially lower taxes.

    Absence of clarity in tax laws is causing issues of taxation of Limited Liability Partnerships (LLP5) as companies whereas LLPs are essentially AoPs with perpetual life.

    Therefore, the PSX recommended that inequality of taxation of businesses shall gradually be removed by reducing corporate tax rate/increasing tax rates for AoPs [First Schedule Part 1, Division I, II, hA & Ill]. Rationale

    It said that equality of tax regime will promote corporatization culture leading towards documentation and will therefore generate more tax revenue.

    Adding clarity with respect to status of LLP will encourage more businesses particularly in services sector to opt for this perpetual business structure. It will also help in increasing tax revenue from these segments.

  • FBR enhances refund to export ratio

    FBR enhances refund to export ratio

    ISLAMABAD: Federal Board of Revenue (FBR) has revised the processing parameters and increased refund to export ratio to 15 percent.

    According to Sales Tax General Order (STGO) No. 05 of 2021, the FBR announced to re-fix the ceiling of parametric refund-to-export ratio from the previous 12 percent to 15 percent of the export value for processing of sales tax refunds of the commercial exporters.

    The FBR defined the commercial exporters as those exporters who do not have a manufacturing facility, and are not registered in the manufacturer category under the Sales Tax Act, 1990.

    “This shall be maximum ceiling of admissible refund processed through FASTER against valid exports after confirmation of realization of export proceeds as per rule,” the FBR said.

  • Weekly Review: stocks likely trade in positive on expectation of unchanged policy rate

    Weekly Review: stocks likely trade in positive on expectation of unchanged policy rate

    KARACHI: The stock market likely to remain positive during next week on expectation of no change in policy rate in the monetary policy statement schedule to be announced on May 28, 2021.

    Analysts at Arif Habib Limited said that the market likely to remain positive in the upcoming week.

    With the monetary policy scheduled to be unveiled next week (28th May’21), we foresee the SBP to maintain status-quo on its benchmark policy rate. We believe market performance will be dictated by budgetary expectations while key risk for the medium term remains spike in COVID-19 cases, the analysts said.

    The benchmark KSE-100 index of Pakistan Stock Exchange (PSX) is currently trading at a PER of 6.8x (2021) compared to Asia Pac regional average of 15.8x while offering a dividend yield of ~7.2 percent versus ~2.6 percent offered by the region.

    After long Eid Holidays, the market commenced on a positive note given ease in lockdown restriction following drop in COVID-19 cases.

    Moreover, optimistic sentiment also stemmed from the MSCI Semi Annual Review, where Pakistan’s weight witnessed an increase (0.023 percent from 0.016 percent earlier), in lieu of the LUCK and TRG’s addition to the EM Standard Index and Small Index, respectively.

    Meanwhile, favorable budgetary measures for the capital market under the FY22 budget kept the momentum green. Whereas, oil prices (Arab Light) during the week dropped by 4 percent WoW, settling at USD 64.72/bbl. The market settled at 45,915 points, gaining by 740 points (up by 1.6 percent) WoW.

    Sector-wise positive contributions came from i) Cements (139  points) ii) Oil & Gas Marketing Companies (102  points), iii) Fertilizers (90  points), iv) Food & Personal Care Products (89  points) and v) Technology & Communication (64  points). Meanwhile, the sectors that contributed negatively include Commercial Bank (32  points) and Power Generation & Distribution (18  points). Scrip-wise positive contributors were TRG (93  points), UNITY (68  points), LUCK (62  points), MARI (57  points) and ENGRO (46  points).

    Foreign selling continued this week clocking-in at USD 49.4 million compared to a net buy of USD 1.0 million last week. Selling was witnessed in All other sector (USD 43.4 million) and E&P (USD 7.8 million). On the domestic front, major buying was reported by Individuals (USD 37.2 million and Companies (USD 18.1 million). Average volumes arrived at 609 million shares (up by 153 percent WoW) while average value traded settled at USD 137 million (up by 84 percent WoW).  

  • PSX recommends modification in tax laws for Shariah compliant criteria

    PSX recommends modification in tax laws for Shariah compliant criteria

    KARACHI: Pakistan Stock Exchange (PSX) has recommended modification in Shariah compliance criteria under Income Tax laws to make it practically possible to meet the requirement.

    The PSX in its proposals for budget 2021/2022 said that the modification would held the promotion and development of Islamic capital markets by encouraging new listings of companies on PSX through mobilizing resources towards faith-based investor savings.

    Giving rationale, the stock market said that the conditions imposed through the ITO, 2001 are impractical to implement given the inadequate depth of Islamic markets of Pakistan, constraining the taxpayers from achieving the Shariah Complaint status and therefore failing the reforms’ underlying objective – (e.g. 100 percent income from manufacturing operations, financing through licensed Islamic financial institutions only, issuing dividends in last five consecutive years etc.

    Highlighting the background, the PSX said that in 2016, the Federal Government through Finance Act 2016, had introduced certain amendments in the ITO which allowed 2 percent rebate in corporate income tax rate to companies which qualified the criteria for Shariah Compliance specified in Clause 18B of Part II of Second Schedule of ITO.

    Thereafter in January 2017, Rule 231H was inserted in Income Tax Rules, 2002 (Rules) which provided further guidance on the Shariah Compliance criterion mentioned in ITO.

    The objective for this rebate, as explained by Securities and Exchange Commission of Pakistan (SECP) in its press release of July 11, 2016, was to incentivize listed manufacturing companies to become Shariah Compliant and that this was introduced in the ITO as part of reforms, with collaboration of SECP, for promotion and development of Islamic Capital market.

    Thereafter, in November 2018, the corporate regulator introduced the landmark Shariah Governance Regulations 2018 (Regulations), which entailed a comprehensive jurisdictional framework to regulate and govern the corporate sector, including the capital markets, Islamic capital markets, Shariah-compliant securities and Islamic financial institutions.

    The framework was a major break-through to lay the foundation for a true Islamic financial and economic system. The Regulations encompass a number of elements of Shariah governance which are practical to adopt and implement, ensuring long-term sustainability.

    On the other hand, the requirements contained in the ITO, as introduced in 2016, are comparatively stringent and impractical for taxpayers to adopt in letter and spirit, which is ultimately defeating its underlying objective i.e. development of Islamic market in Pakistan.

    Hence, a re-alignment of income tax requirements with the SECP Regulations is critical so as to enable more companies to obtain Shariah Compliant status and avail the accompanying tax benefits.

    Under clause 18B of Part II of Second Schedule of the ITO, 2001, a reduction in corporate tax rate by 2 percent is allowed to a company which meets the criteria specified in the said clause and Rule 231H of the Income Tax Rules, 2002.

    However, the existing compliance requirements are very impracticable and more stringent then the requirements mentioned by SECP in Shariah Governance Regulations, 2018, which makes it practically impossible for the taxpayers to fulfill the criteria and achieve the desired status.

  • Short term tax policies should be avoided to attract investors

    Short term tax policies should be avoided to attract investors

    KARACHI: The government should avoid short term tax policies to ensure stable economic environment so investors can plan their investments in the country.

    Pakistan Stock Exchange (PSX) in its proposals for budget 2021/2022 said that as much as favorable tax treatment, investors need a stable and predictable tax environment.

    When making a long-term investment decision, they need to know what tax treatment their investment will receive over the term of their investment horizon. Otherwise, they may simply decide not to invest or adopt short term trading strategies (like most investors unfortunately tend to do).

    It should also be considered that the changes in policies should be prospective rather than retrospective in nature. One of such example is the amendment made in section 65B of the Income Tax Ordinance, 2001 through Finance Act 2019 where tax credit for investment in plant and machinery for the purpose of balancing, modernization and replacement was reduced from 10 percent to 5 percent retrospectively of the amount invested.

    Therefore, the stock exchange proposed to rectify all such amendments which have retrospective effect so that all the amendments made have a prospective effect.

    It further said that the government must move away from short term measures and frequent changes to tax treatment and adopt long term measures to promote savings and investment and development of the capital market.

  • Total foreign investment surges by over 98pc in 10 months

    Total foreign investment surges by over 98pc in 10 months

    KARACHI: The inflow of total foreign investment into Pakistan has surged by over 98 percent during first 10 months (July – April) 2020/2021 of the current fiscal year owing to massive investments in public debt securities.

    According to data released by State Bank of Pakistan (SBP) on Friday, the total foreign investment into the country increased to $3.736 billion during first ten months of the current fiscal year as compared with $1.884 billion in the corresponding months of the last fiscal year.

    The foreign public investment in debt securities has increased to $2.463 billion during the period under review as compared with the outflow of $234 million in the same period of the last fiscal year.

    The foreign private investment fell by around 40 percent to $1.273 billion during first ten months of the current fiscal year as compared with $2.118 billion in the corresponding months of the last fiscal year.

    The major component of foreign private investment i.e. foreign direct investment (FDI) registered a decline of 32.5 percent to $1.553 billion during July – April 2020/2021 as compared with $2.301 billion in the same period of the last fiscal year.

    The other component of the foreign private investment i.e. portfolio investment in the stock market witnessed a sharp outflow of $280 million during the period under review as compared with the outflow of $182.7 million in the same period of the last fiscal year.