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  • Pakistan enhances income tax rates for banks

    Pakistan enhances income tax rates for banks

    ISLAMABAD: Pakistan has enhanced tax rates for banks through amendments introduced through Finance Act, 2022.

    In this regard the apex tax agency of the country, i.e. Federal Board of Revenue (FBR) on Thursday issued Income Tax Circular No. 15 of 2022/2023 to explain important amendments made to Income Tax Ordinance, 2001 through Finance Act, 2022.

    READ MORE: Declaring beneficial owner made mandatory for companies, AOPs

    The FBR said that tax rates for banking companies are enhanced as explained hereunder:

    The taxable income arising from additional income of banking companies earned from additional investment in Federal Government securities for tax year 2020 and 2021 was taxable at the rate of 37.5 per cent instead of rates provided in Division II of Part I of First Schedule of the Income Tax Ordinance, 2001.

    READ MORE: Pakistan reintroduces capital value tax on motor vehicles

    This provision was further amended through Finance Act, 2021, whereby income attributable to investment in the Federal Government securities of banking companies was made taxable on the basis of advances to deposit ratios at graduated tax rates of 40 per cent, 37.5 per cent and 35 per cent, if ratio was up to 40 per cent, 40-50 per cent and above 50 per cent respectively.

    The Finance Act, 2022 has introduced enhanced rates of tax on taxable income of banks attributable to investment in Federal Government securities.

    READ MORE: Customs duty exemption, concession granted

    The enhanced rates for tax year 2022 are 55 per cent, 49 per cent and 35 per cent if gross advances to deposit ratio was upto 40 per cent, 40-50 per cent or above 50 per cent respectively.

    For tax year 2023, and onwards tax rates will be 55 per cent, 49 per cent and 39 per cent if gross advances to deposit ratio is up to 40 per cent, 40 -50 per cent or above 50 per cent respectively.

    The changes have been incorporated by substituting sub-rule (6A) of rule 6C of Seventh Schedule to the Ordinance.

    READ MORE: Commodities’ illegal movement to be treated as smuggling

    The tax rate on income of banking companies has been enhanced to 39 per cent for tax year 2023 from current 35 per cent through amendment in Division II of Part I of First Schedule of the Ordinance.

    Additionally, the application of section 4B has been restricted up to tax year 2022 in case of banking companies.

  • Declaring beneficial owner made mandatory for companies, AOPs

    Declaring beneficial owner made mandatory for companies, AOPs

    ISLAMABAD: The Federal Board of Revenue (FBR) on Thursday said that declaration of beneficial owner has been made mandatory for companies and Association of Persons (AOPs) under income tax laws.

    The FBR issued Income Tax Circular No. 15 of 2022-2023 to explain the important amendment made through Finance Act, 2022 to Income Tax Ordinance, 2001.

    READ MORE: Pakistan reintroduces capital value tax on motor vehicles

    The FBR said that previously companies and AOPs were not required to disclose the natural individuals who are ultimate beneficial owners.

    Thus beneficial ownership could be hidden through intervening companies and trusts.

    READ MORE: Customs duty exemption, concession granted

    To bring transparency and to remove this obscurity, as per best international practices, companies and AOPs are now required to disclose details of their beneficial owners who are natural persons.

    Definition of term ‘beneficial owner’ has been provided by inserting new clause (7A) in section 2 of the Income Tax Ordinance 2001.

    READ MORE: Commodities’ illegal movement to be treated as smuggling

    Corresponding new section 181E has been inserted in the Ordinance whereby every company and association of persons will furnish electronically, particulars of its beneficial owners and will be required to update these particulars as and when there is a change in particulars of beneficial owners.

    Penalty of Rs. 1,000,000 has also been prescribed by incorporating entry No. 30 in the Table, in sub-section (1) of section 182 for each default of company or association of persons who contravenes the provisions of section 181E of the Ordinance.

    READ MORE: Special tax regime for pharma sector introduced

  • Pakistan’s forex reserves decline to $15.24 billion

    Pakistan’s forex reserves decline to $15.24 billion

    KARACHI: Pakistan’s foreign exchange reserves have declined by $368 million to $15.242 billion by week ended July 15, 2022, State Bank of Pakistan (SBP) said on Thursday.

    The foreign exchange reserves of the country were $15.61 billion a week ago i.e. July 07, 2022.

    READ MORE: Pakistan’s forex reserves drop to $15.61 billion

    The country’s foreign exchange reserves hit all-time high of $27.228 billion on August 27, 2021. Since then the foreign exchange reserves have declined by $11.986 billion.

    The official reserves of the State Bank also depleted by $388 billion to $9.329 billion by week ended July 15, 2022 as compared with $9.717 billion a week ago.

    READ MORE: Pakistan’s forex reserves deplete to $15.74 billion

    The SBP attributed the decline in foreign exchange reserves to external debt repayments.

    It is pertinent to mention that the SBP received about $2.3 billion from Chinese banks for buildup of foreign exchange reserves. However, despite receiving the amount the external debt payment kept the pressure on the reserves.

    READ MORE: State Bank’s reserves dip to 32-month low at $8.238 billion

    The foreign exchange reserves held by the central bank witnessed a record high at $20.146 billion by week ended August 27, 2021. Since then the official reserves of the SBP declined by $10.817 billion.

    The commercial banks held foreign exchange increased to $5.913 billion by week ended July 15, 2022 when compared with $5.893 billion a week ago, showing a rise of $20 million.

    READ MORE: Pakistan’s central bank reserves shrink to one month import cover

  • Pakistan may increase petrol prices from August 1, 2022

    Pakistan may increase petrol prices from August 1, 2022

    KARACHI: Pakistan may review prices of petroleum products for the next fortnight on July 31, 2022, which also consider the massive depreciation of rupee value.

    Previously the present government had started increasing the petroleum prices on May 26, 2022 when the benchmark Brent Oil was at $112 per barrel and now as of today July 21, 2022, the international prices of Brent Oil have fallen to $103 per barrel.

    Considering the latest price slump of international oil, the government had reduced the prices of petroleum products from July 15, 2022. However experts believed it was political decision as the government had to increase petroleum levy and apply sales tax.

    Furthermore the Pakistani Rupee (PKR) has sharply fell against the dollar leaving no room for the government but to increase the prices of petroleum products.

    READ MORE: New petroleum prices in Pakistan from July 15, 2022

    The local currency depreciated by around 11 per cent during the month of July to close at 226.81 to the US Dollar on July 21, 2022.

    Pakistan is net importer of petroleum products and spends huge foreign exchange for the purchase.

    The country imported petroleum products worth $23.32 billion during fiscal year 2021-2022 as compared with $11.35 billion in the preceding year, showing a growth 105 per cent.

    In the previous announcement on July 14, 2022, the government announced the following prices of petroleum products.

    The new prices of petrol have been decreased by Rs18.50 per liter to Rs230.24 from Rs248.74.

    The rate of high speed diesel has been decreased by Rs40.54 per liter to Rs235.95 from Rs276.54.

    The rate of kerosene oil has been decreased by Rs33.81 per liter to Rs196.45 from Rs230.26.

    Similarly, the rate of light speed diesel has been decreased by Rs34.71 per liter to Rs191.44 from Rs226.15.

    READ MORE: New prices of petroleum products in Pakistan from July 01, 2022

    The Prime Minister on July 12, 2022 directed the authorities to pass on the full benefit of falling oil prices in the international markets to the masses.

    The previous government of PTI had kept both the petroleum levy and sales tax at zero in order to provide relief to the masses. The PTI government also provided a huge subsidy on prices of petroleum products in order to lower the rates and provide relief to the masses.

    However, former Prime Minister Imran Khan was removed through a vote of no-confidence motion on April 10, 2022.

    Since then the new coalition government led by PML-N increased the prices of petroleum products sharply on three different occasions.

    READ MORE: New petroleum prices in Pakistan from June 16, 2022

    The new government of Prime Minister Shehbaz Sharif increased the prices of petroleum products on May 26, 2022, June 02, 2022 and June 15, 2022. Cumulatively, the government increased the price of petrol by 84 per liter in these price hikes.

    The present government in the budget estimated to collect Rs750 billion as petroleum levy during the fiscal year 2022/2023. As this fiscal year is starting from July 01, 2022, it is likely that the government will opt to impose the levy from this date.

  • Rupee ends to new low at Rs226.81 against dollar in interbank

    Rupee ends to new low at Rs226.81 against dollar in interbank

    KARACHI: The Pakistan Rupee (PKR) fell to a new historic low at Rs226.81 to the US dollar on Thursday due to scarcity of the greenback and further rise in political instability.

    The exchange rate recorded a decline of Rs1.89 in rupee value to end at Rs226.81 to the dollar from previous day’s closing of Rs224.92 in the interbank foreign exchange market.

    Currency dealers said that the importers were running pillars to post for dollars to make payments to their foreign suppliers.

    READ MORE: PKR plunges Rs227 to dollar at interbank midday trading

    They further said that the market remained uncertain due to political instability. The dealers said that the fall in foreign exchange reserves also fueled the uncertainty in the market.

    The foreign exchange reserves of Pakistan have depleted by $454 million to $15.742 billion by the week ended June 30, 2022. The foreign exchange reserves of the country were at $16.196 billion a week ago i.e. June 24, 2022.

    The country’s foreign exchange reserves hit an all-time high of $27.228 billion on August 27, 2021. Since then the foreign exchange reserves have declined by $11.486 billion.

    READ MORE: Rupee hits fresh low Rs224.92 to dollar at interbank closing

    The official reserves of the State Bank also recorded a decline of $493 million to $9.816 billion by the week ended June 30, 2022 as compared with $10.309 billion a week ago.

    The central bank attributed the decline in foreign exchange reserves to external debt repayments.

    It is pertinent to mention that the SBP received about $2.3 billion from Chinese banks for buildup of foreign exchange reserves. However, despite receiving the amount the external debt payment kept the pressure on the reserves.

    The foreign exchange reserves held by the central bank witnessed a record high at $20.146 billion by the week ended August 27, 2021. Since then the official reserves of the SBP declined by $10.33 billion.

    READ MORE:

    READ MORE: Pakistani Rupee crashes to Rs222 against Dollar at closing on July 19, 2022

    The SBP on July 07, 2022 announced a hike of 125 basis points in policy rate to bring it to 15 per cent. The purpose of increasing the interest rate was to curb the demand and support the rupee value. However, the effort of the SBP failed to support the rupee value.

  • Pakistan reintroduces capital value tax on motor vehicles

    Pakistan reintroduces capital value tax on motor vehicles

    KARACHI: The federal government of Pakistan has reinstated the Capital Value Tax (CVT) at a rate of one percent on the value of both locally manufactured and imported motor vehicles. This move marks the revival of a tax that was previously withdrawn in phases and ultimately abolished in 2020.

    (more…)
  • Rupee hits fresh low Rs224.92 to dollar at interbank closing

    Rupee hits fresh low Rs224.92 to dollar at interbank closing

    KARACHI: The free-fall continued in Pakistan Rupee (PKR) against the dollar on Wednesday as the local currency ended fresh low of Rs224.92 in the interbank foreign exchange market.

    The exchange rate recorded a decline of Rs2.93 to end at Rs224.92 to the dollar from last day’s closing of Rs221.99, the previous historic low of the rupee, in the interbank foreign exchange market.

    READ MORE: Pakistani Rupee crashes to Rs222 against Dollar at closing on July 19, 2022

    Currency experts said that the local unit was under pressure due to political instability.

    Furthermore, the Fitch rating agency has downgraded the Pakistan outlook to negative from positive.

    The experts also believed that the falling foreign exchange reserves also putting pressure on rupee stability.

    The foreign exchange reserves of Pakistan have depleted by $454 million to $15.742 billion by week ended June 30, 2022. The foreign exchange reserves of the country were at $16.196 billion a week ago i.e. June 24, 2022.

    READ MORE: Rupee plummets record low at Rs215.20 to dollar

    The country’s foreign exchange reserves hit all-time high of $27.228 billion on August 27, 2021. Since then the foreign exchange reserves have declined by $11.486 billion.

    The official reserves of the State Bank also recorded a decline of $493 million to $9.816 billion by week ended June 30, 2022 as compared with $10.309 billion a week ago.

    The central bank attributed the decline in foreign exchange reserves to external debt repayments.

    READ MORE: Fitch revises Pakistan’s outlook to negative

    It is pertinent to mention that the SBP received about $2.3 billion from Chinese banks for buildup of foreign exchange reserves. However, despite receiving the amount the external debt payment kept the pressure on the reserves.

    The foreign exchange reserves held by the central bank witnessed a record high at $20.146 billion by week ended August 27, 2021. Since then the official reserves of the SBP declined by $10.33 billion.

    The SBP on July 07, 2022 announced a hike of 125 basis points in policy rate to bring at 15 per cent. The purpose of increasing the interest rate was to curb the demand and support the rupee value. However, the effort of the SBP failed to support the rupee value.

    READ MORE: PKR slips to Rs210.95 against dollar despite IMF agreement

  • Pakistan’s import of CBU motor cars surges by 21% in FY22

    Pakistan’s import of CBU motor cars surges by 21% in FY22

    ISLAMABAD: The import of Completely Built Unit (CBU) motor cars into Pakistan has surged by 21 per cent in fiscal year 2021/2022.

    According to data released by Pakistan Bureau of Statistics (PBS) on Tuesday, the import of CBU motor cars increased to $310.41 million during fiscal year 2021/2022 as compared with $256.2 million in the preceding last fiscal year.

    READ MORE: Prices of KIA Motors raised up to 19.3% amid rupee devaluation

    In terms of rupee, the import of CBU motor cars posted a growth of 34.51 per cent to Rs54.67 billion during fiscal year 2021/2022 as compared with Rs40.65 billion in the preceding fiscal year.

    The overall import of CBU vehicles registered an increase of 59.3 per cent to $616.39 million in the fiscal year under review as compared with $386.95 million in the preceding fiscal year.

    The country imported CBU buses, trucks and other heavy vehicles worth $302 million and CBU motor cycles worth $4.12 million during the fiscal year 2021/2022.

    READ MORE: Rolls-Royce, Hyundai signs pact to lead advanced air mobility market

    On the other hand the import of Completely Knocked Down (CKD) motor cars recorded a massive growth of 52 per cent to $1.7 billion during fiscal year 2021/2022 as compared with $1.12 billion in the preceding fiscal year.

    The overall import of CKD motor vehicles recorded an increase of 54 per cent to $2.44 billion in fiscal year 2021/2022 as compared with $1.58 billion in the preceding fiscal year.

    Analysts believed that the import of CBU and CKD motor vehicles would fall in the current fiscal year due to high interest rates, regulatory measures and significant rise in prices of raw material in the international market.

    READ MORE: Global car manufacturers agree to introduce electric mini-commercial vans

    Analysts believed that amid continuous decline of the local currency against greenback, further price hike in car prices is imminent. “This would be the first time where we have seen the highest frequency (4x) of price increases by the auto industry in a fiscal year,” analysts at Insight Research said.

    The main reasons are higher freight charges, abrupt movement in PKR/USD followed by launch of new model cars with lower localization which further add fuel to the price hike.

    The localization policy started in 1987 and continued till 2004, which required compulsory localization for the automotive industry. However, automobile assemblers are still behind the required level of localization.

    READ MORE: Pakistan car sales surge 54 per cent in FY22

    The major players including Indus Motors, Honda Car and Pak Suzuki have been assembling vehicles since 1992, but localization level of these assemblers are still very low despite their long presence in the market.

    In such situation, it will difficult for new players to achieve high localization as older players are still far behind the required level of localization. Moreover, local auto parts manufactures are sensitive to PKR/USD parity as they are reliant on imported raw materials for production. Thus, making the end product expose to PKR devaluation.

    The analysts said that higher interest rate environment, currency devaluation and auto financing hindrances may pose threat to demand going forward especially in low segment cars under 1000cc.

  • Pakistan’s textile exports hit record high at $19.33 bn in FY22

    Pakistan’s textile exports hit record high at $19.33 bn in FY22

    ISLAMABAD: Pakistan has exported textile products worth $19.33 billion during the fiscal year 2021/2022 making a record high on annual basis.

    The country exported textile products worth $19.33 billion during fiscal year 2021/2022, showing an increase of 25.53 per cent when compared with $15.4 billion in the preceding fiscal year, according to data released by Pakistan Bureau of Statistics (PBS) on Tuesday.

    READ MORE: Textile exports surge to record high $11 billion in 7MFY22

    The textile exports contributed around 61 per cent to the total exports of $31.8 billion during the fiscal year 2021/2022.

    Textile sector plays a significant role in supporting the economy of Pakistan and continue to be in the spotlight owing to country’s dependence on foreign exchange.

    According to analysts at Insight Research, the Pakistani Rupee (PKR) devaluation against the US dollar gave textile exporters a competitive advantage over its competitors in terms of pricing.

    READ MORE: PHMA cries foul on gas suspension to textile industry

    In terms of value, the export of knitwear recorded an increase of 34.23 per cent to $5.12 billion during the fiscal year 2021/2022 as compared with $3.81 billion in the preceding fiscal year.

    The export of readymade garments exhibited an increase of 28.75 per cent to $3.9 billion during fiscal year 2021/2022 when compared with $3.03 billion in the preceding fiscal year.

    Similarly, the export of bed wear recorded an increase of 18.8 per cent to $3.29 billion in the fiscal year 2021/2022 as compared with $2.77 billion in the preceding fiscal year.

    READ MORE: Textile exporters urge allowing cotton import from India

    Meanwhile, foreign buyers purchased Pakistani cotton cloths worth $2.44 billion during the fiscal year under review as compared with $1.92 billion in the preceding fiscal year, showing an increase of 27 per cent.

    The analysts said that some factors are posing threat to the textile industry for the current fiscal year such as i.e., increase in export refinance rate.

    Moreover, cotton shortage remains the key concern for the country as the demand for textile industry grows but cotton production has declined substantially over the last decade, mainly due to fall in cultivation area followed by lower yield resulting from water shortage and inconsistent rainfall.

    In the fiscal year 2021/2022, cotton production stood at 8.3 million bales, which is 2.2 million bales lower than the targeted production.

    However, production has increased by 1.3 million bales compared to last year.

    “Thus, due to the supply and demand gap, textile industry has to rely on imported cotton to meet the country’s demand, putting pressure on country’s import bill,” the analysts added.

    READ MORE: Value added textile exporters demand 50 percent reduction in withholding tax

    The government was eyeing to fetch textile exports of $25 billion for the fiscal year 2022-2023. However, domestic and global challenges are dampening the outlook.

    Possible increase in gas and electricity tariff amid the ongoing energy crises could hamper the local demand. In addition, global economic slowdown due to surging inflation will result in lower apparel demand.

    Moreover, in case of surge in covid-19 cases and imposition of lockdown, textile industry’s operating rate would get effected negatively. Having these challenges in mind, the analysts believe that it would be tough to achieve such growth in textile exports.

  • Pakistani Rupee crashes to Rs222 against Dollar at closing on July 19, 2022

    Pakistani Rupee crashes to Rs222 against Dollar at closing on July 19, 2022

    KARACHI: The Pakistani Rupee (PKR) crashed against the US dollar to make new historic low at around Rs222 on Tuesday at closing of interbank foreign exchange market.

    The exchange rate recorded a decline of Rs6.79 and ended at Rs221.99 to the dollar from previous day’s closing of Rs215.20 in the interbank foreign exchange market.

    READ MORE: Rupee plummets record low at Rs215.20 to dollar

    The rupee fell to the record low of Rs215.20 at interbank closing on July 18, 2022.

    Currency experts said that the local unit was under pressure due to political instability.

    Furthermore, the Fitch rating agency has downgraded the Pakistan outlook to negative from positive.

    READ MORE: Fitch revises Pakistan’s outlook to negative

    The experts also believed that the falling foreign exchange reserves also putting pressure on rupee stability.

    The foreign exchange reserves of Pakistan have depleted by $454 million to $15.742 billion by week ended June 30, 2022. The foreign exchange reserves of the country were at $16.196 billion a week ago i.e. June 24, 2022.

    The country’s foreign exchange reserves hit all-time high of $27.228 billion on August 27, 2021. Since then the foreign exchange reserves have declined by $11.486 billion.

    The official reserves of the State Bank also recorded a decline of $493 million to $9.816 billion by week ended June 30, 2022 as compared with $10.309 billion a week ago.

    READ MORE: PKR slips to Rs210.95 against dollar despite IMF agreement

    The central bank attributed the decline in foreign exchange reserves to external debt repayments.

    It is pertinent to mention that the SBP received about $2.3 billion from Chinese banks for buildup of foreign exchange reserves. However, despite receiving the amount the external debt payment kept the pressure on the reserves.

    The foreign exchange reserves held by the central bank witnessed a record high at $20.146 billion by week ended August 27, 2021. Since then the official reserves of the SBP declined by $10.33 billion.

    READ MORE: Rupee recovers 30 paisas to dollar on IMF agreement

    The SBP on July 07, 2022 announced a hike of 125 basis points in policy rate to bring at 15 per cent. The purpose of increasing the interest rate was to curb the demand and support the rupee value. However, the effort of the SBP failed to support the rupee value.