FBR Introduces Tax Holiday for Gwadar Vehicle Imports

FBR Introduces Tax Holiday for Gwadar Vehicle Imports

Karachi, October 8, 2024 – In a major policy development aimed at fostering economic activity around the Gwadar Port and Free Zones, the Federal Board of Revenue (FBR) announced a tax holiday for vehicles imported by entities operating within these areas.

Through a draft amendment to the Customs Rules, 2001, the FBR has laid out comprehensive guidelines for the duty and tax exemptions that will apply to eligible companies. The tax concession is set to streamline the import process, promote infrastructural development, and facilitate business activities in Gwadar, one of Pakistan’s most strategically significant regions.

The FBR’s initiative, formalized through the issuance of SRO 1621(I)/2024, outlines the rules for importing vehicles free of duties and taxes. These amendments will become part of the main legislative framework after a 15-day public commentary period. The new regulations will be known as the “Import of Vehicles by Gwadar Zone and Free Zone Area Concession Holder and its Operating Companies Rules, 2024.”

Eligibility and Import Process

The key beneficiaries of this regulatory framework are concession holders and their operating companies. Under the rules, these entities can import vehicles under PCT Code 9917(3) (iii) of the Pakistan Customs Tariff, which governs duty concessions for specified imports. The vehicles imported under this scheme are solely intended for the construction, development, and operational activities of Gwadar Port and the surrounding Free Zones.

A declaration form must be submitted by the eligible importers to the Gwadar Port Authority or any other authorized officer, detailing the vehicles intended for import. This declaration, signed by the company’s chief executive, must confirm that the vehicles are required for legitimate operational purposes. The authority will evaluate the actual requirement of the vehicles based on the importer’s scope of activity and will regularize vehicles already imported under previous provisions.

Stringent Certification and Authorization

To avail the exemption, each vehicle imported under this scheme must be certified by the Gwadar Port Authority’s chairman. This certification verifies that the imported vehicles are genuinely needed for the company’s operational needs, in accordance with predefined quotas. The certification process will ensure that the conditions laid out in the rules are strictly adhered to before the issuance of an authorization letter, which will also require approval from the Ministry of Maritime Affairs.

This authorization will be submitted through the WeBOC system, Pakistan’s electronic system for customs clearance, allowing the importing company to initiate the import process.

Clearance and Compliance

The customs clearance of vehicles will be overseen by the Gwadar Collectorate to ensure centralized monitoring and compliance. In the case of imports arriving at other ports, transshipment permits will be used to transfer the vehicles to Gwadar for final clearance. Importers are required to provide an undertaking that they will comply with all regulations, failing which they will be liable to pay the applicable duties, taxes, and penalties.

Vehicle Registration and Record Keeping

Once imported, vehicles must be registered under the Motor Vehicle Ordinance, 1965, with the Excise and Taxation Department. The importers are also required to submit the registration certificates to the Collectorate of Customs, Gwadar, within 30 days of the vehicle’s registration.

Moreover, both the importer and the Gwadar Port Authority must maintain comprehensive records of all vehicles imported under this scheme. These records will be subject to inspection by customs officers, ensuring transparency and accountability in the use of the duty-exempt vehicles.

Restrictions on Disposal

One of the key conditions of this tax holiday is that the vehicles cannot be sold or otherwise disposed of without the prior approval of the FBR. Any unauthorized sale or disposal within ten years of importation will trigger the requirement to pay the full duties and taxes applicable at the time of import. In cases where vehicles are sold after ten years, a reduced duty payment of 75% will apply, and after 20 years, the payment will drop to 50%.

Surrender and Penalties

In the event that the vehicles are no longer needed, they can be surrendered to the Collector of Customs, Gwadar, for further disposal or governmental use. Any violation of the rules, such as unauthorized sales or transfers, will result in the full payment of duties and taxes, along with other penalties as dictated by law.

Conclusion

This tax holiday for vehicle imports into Gwadar’s Free Zones underscores Pakistan’s commitment to accelerating the development of its most strategically important port. By incentivizing businesses through tax exemptions and facilitating smoother operational processes, the government aims to transform Gwadar into a major hub for trade and industry, driving both local and national economic growth.