Tax on undistributed profits not to applicable beyond tax year 2019

KARACHI: The tax on undistributed profits will not be applicable beyond tax year 2019 as limit has been introduced through Finance Supplementary (Second Amendment) Bill, 2019 presented in the National Assembly on Wednesday.

 

 

 

Through Finance Act, 2017 a tax on undistributed profits was introduced through Section 5A to Income Tax Ordinance, 2001 for tax year 2017 and onwards.

However, the latest bill proposed to limit this Section till Tax Year 2019.

Therefore, the Section will be read as after approval from the National Assembly:

Section 5A: Tax on undistributed profits.

Sub-Section (1): For tax year 2017 to 2019, a tax shall be imposed at the rate of five percent of its accounting profit before tax on every public company, other than a scheduled bank or a modaraba, that derives profit for a tax year but does not distribute at least twenty percent of its after tax profits within six months of the end of the tax year through cash:

Provided that for tax year 2017, bonus shares or cash dividends may be distributed before the due date mentioned in sub-section (2) of section 118, for filing of a return.

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