KARACHI: The Federal Board of Revenue (FBR) has been proposed to restore group taxation laws in its initial form as introduced through Finance Act, 2007 and Finance Act, 2008.
Karachi Tax Bar Association (KTBA) in its proposals for budget 2022/2023 urged the authorities to restore group taxation laws.
It said through second amendment, exemption on inter-corporate dividend between companies eligible for group taxation U/s. 59B of Income Tax Ordinance, 2001(Group Relief) has been revoked.
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The incentive for investment through expansion of groups has been done away with.
It suggested that group Taxation laws should be restored in its initial form as introduced via Finance Act 2007 and Finance Act 2008
Furthermore clause 103C, Part I, Second Schedule of the Ordinance, providing exemption from inter-corporate dividends to group companies eligible U/s. 59B should be reinstated.
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Amendments made in Clause 11B, Part IV, Second Schedule via Finance Act 2015 and Finance Act 2016, should be revoked to ensure exemption from withholding tax is provided on inter-corporate dividends exempt under clause 103A and the repealed clause 103C, Part I, Second Schedule of Ordinance.
Giving rationale to the proposal, the tax bar said it will restore the investment incentive for expansion of group companies to third party investments.
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Similarly, the KTBA sought amendment to inter – corporate services and contractual receipts under Section 59A of the Income Tax Ordinance, 2001.
Inter-corporate payment for goods, services and contract within the group companies that is tax as a one fiscal unit of group are though not be taxable in the return of income yet are subject to withholding of taxes. It is completely unnatural to tax the member of the same group separately which cash from each other.
It is proposed to exempt the payment of good, services contract from withholding of income tax. The tax bar added that it would bring the withholding law at par with the realism.
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