The Karachi Chamber of Commerce and Industry (KCCI) has proposed a comprehensive plan to tax income derived from cryptocurrency transactions within Pakistan’s jurisdiction, marking a significant step towards regulating the burgeoning digital asset market in the country.
Outlined in its proposals for the Budget 2024-25, the KCCI emphasized the need to bring cryptocurrency gains into the tax net, citing the remarkable growth of cryptocurrency investments in Pakistan in recent years. Drawing parallels with international practices observed in countries like India and Thailand, the KCCI sees the implementation of taxation on virtual assets as an opportunity for Pakistan to tap into additional revenue streams while ensuring financial oversight and compliance.
In India, for instance, cryptocurrency gains are subject to a 30% tax rate along with a 4% surcharge, with a 1% Tax Deducted at Source (TDS) for transactions exceeding specific thresholds. This model serves as a potential blueprint for Pakistan’s taxation framework on cryptocurrency investments.
Moreover, in a bid to secure a crucial $3 billion bailout package, the International Monetary Fund (IMF) has stipulated that the Federal Board of Revenue (FBR) must impose Capital Gain Tax (CGT) on cryptocurrency investments, further underlining the urgency for regulatory measures in this domain.
The KCCI’s proposed plan encompasses several key measures aimed at bringing digital assets into the tax net:
(i) Development of a comprehensive regulatory framework and national strategy for cryptocurrencies to ensure financial stability and investor protection. (ii) Launch of a one-time asset declaration scheme to facilitate the conversion of cryptocurrencies into Pakistani Rupee with minimal or no tax implications, thereby encouraging compliance and transparency. (iii) Definition of cryptocurrencies as securities under Section 37A, subjecting them to a 15% tax rate on capital gains. Additionally, the proposal includes a recommendation for a 1% adjustable tax on cryptocurrency transactions to generate revenues and effectively regulate the market.
These measures are designed to strike a balance between fostering innovation and ensuring regulatory compliance in Pakistan’s evolving cryptocurrency landscape. By providing clarity and transparency in taxation policies, the government aims to harness the potential of digital assets while safeguarding the interests of investors and promoting financial stability in the country.
As discussions surrounding the budget for the fiscal year 2024-25 intensify, stakeholders will closely monitor developments in the implementation of taxation measures for cryptocurrency income, recognizing the pivotal role it plays in shaping the future of Pakistan’s digital economy.