Karachi, July 30, 2024 – The Federal Board of Revenue (FBR) has announced a significant update in the taxation process for acquiring shares, following the amendments introduced through the Finance Act, 2024.
Previously, individuals acquiring shares of a company were required to deduct tax at a rate of 10% based on the fair market value of the shares from the gross amount paid. This process was focused on ensuring that tax obligations were met only after the payment was made for the shares.
Under the new regulations, the tax deduction process has been revised to streamline compliance and enhance efficiency. As per the updated rules, the person acquiring the shares must now deduct tax from the gross amount paid or payable at the time of payment or at the time of registration of shares, whichever occurs earlier. This means that the 10% tax on the fair market value of the shares must be deposited by the acquirer even if the payment for the shares has not yet been made, as long as the shares are registered in the acquirer’s name.
The adjustment aims to address delays in tax collection that have historically been associated with share transactions. By mandating the tax deduction and deposit at the earlier of payment or registration, the FBR seeks to ensure more timely and accurate tax collection. This proactive approach is designed to mitigate potential compliance issues and expedite the revenue collection process.
The new provision is expected to impact the timing of tax deductions and may necessitate changes in financial planning for both buyers and sellers of shares. It underscores the FBR’s commitment to tightening regulatory oversight and ensuring that tax obligations are fulfilled in a timely manner. For companies and investors, this change emphasizes the importance of adhering to updated tax regulations and adjusting transaction processes accordingly.
These amendments are part of broader efforts to reform the tax system and improve overall revenue collection. The FBR’s updated guidelines reflect a strategic move to reinforce compliance and streamline tax processes in the financial transactions of companies and investors.