The Federal Board of Revenue (FBR) is set to gain direct access to transaction information of members, brokers, and investors within Pakistan’s equity market.
This move, facilitated by Rule 13J of the Income Tax Rules, 2002, aims to enhance transparency and streamline tax collection efforts.
Enhanced Information Sharing with NCCPL
Under Rule 13J, the FBR and the National Clearing Company of Pakistan Limited (NCCPL) will establish a direct information exchange system. This means the FBR can access crucial data regarding members (trading participants), brokers (intermediaries), and investors directly from the NCCPL, the central depository for securities in Pakistan.
Investor Recordkeeping Requirements
The Income Tax Rules also outline specific recordkeeping requirements for investors. Investors are obligated to maintain separate accounts and records for each brokerage account they hold. These records should be detailed enough to allow the FBR to verify that investors are fulfilling their tax obligations.
Mandatory Records for Investors
The FBR mandates investors to maintain the following records, specifically:
• Fortnightly Ledger Statements: Investors must obtain fortnightly statements (every two weeks) from their brokers detailing activity within their brokerage accounts.
• Fortnightly CDC Statements: Similar to the above, investors need to acquire fortnightly statements from the Central Depository Company (CDC) regarding their corresponding CDC sub-accounts linked to each brokerage account.
• Annual Security Holdings Record: Investors are required to maintain a record of their security holdings and their value as of June 30th of each year.
• Annual Cash Record: A record of the cash balance in their brokerage account on June 30th of each year must be kept.
• Deposit and Withdrawal Records: Detailed records of all funds deposited into and withdrawn from their brokerage accounts are necessary.
Improved Tax Administration
By gaining direct access to NCCPL data and mandating specific recordkeeping by investors, the FBR aims to achieve a more efficient and transparent tax collection system. This will enable the FBR to identify potential tax evasion activities and ensure that all market participants are complying with their tax obligations.
The move is expected to have a positive impact on Pakistan’s tax revenue collection and promote a fairer and more accountable financial ecosystem within the equity market.