Karachi, January 17, 2024 – Pakistan has taken a significant step to boost its economy by announcing a tax amnesty for certain foreign currency transactions during the tax year 2024.
The Federal Board of Revenue (FBR), the apex tax agency of Pakistan, has updated the Income Tax Ordinance, 2001, to introduce this amnesty and encourage individuals to engage in foreign currency-related activities.
The updated Income Tax Ordinance, 2001, includes specific provisions in section 111, which pertains to unexplained income or assets. According to the amendment, these provisions will not apply to:
(i) Any amount of foreign exchange deposited in a private Foreign Currency account held with an authorized bank in Pakistan in accordance with the Foreign Currency Accounts Scheme introduced by the State Bank of Pakistan. However, the exemption clause will not be available for incremental deposits made on or after the 16th day of December, 1999, in such accounts held by a resident person or in respect of any amount deposited in accounts opened on or after the said date by such a person.
(ii) Any amount invested in the acquisition of Three Years Foreign Currency Bearer Certificates issued under the Foreign Currency Bearer Certificates Rules, 1997.
(iii) Rupees withdrawn or assets created out of such withdrawal in rupees from private foreign currency accounts, or encashment of Foreign Exchange Bearer Certificates, US Dollar Bearer Certificates, and Foreign Currency Bearer Certificates.
This tax amnesty is a strategic move by the Pakistani government to attract foreign currency transactions and investment. By exempting certain foreign currency activities from the scrutiny of unexplained income or assets regulations, the government aims to create a conducive environment for individuals to participate in legal and transparent foreign currency transactions.
The State Bank of Pakistan’s Foreign Currency Accounts Scheme has played a crucial role in facilitating foreign exchange deposits in authorized banks within the country. The exemption provided for deposits made in accordance with this scheme encourages individuals to utilize private Foreign Currency accounts, promoting the stability and growth of the foreign exchange market.
Additionally, the inclusion of Three Years Foreign Currency Bearer Certificates in the tax amnesty highlights the government’s focus on encouraging investments in financial instruments that contribute to the country’s economic development. This move not only provides a secure investment avenue for individuals but also stimulates economic activities by channeling funds into productive sectors.
Furthermore, the exemption for rupees withdrawn or assets created from private foreign currency accounts demonstrates the government’s commitment to supporting individuals who choose to convert their foreign currency holdings into the local currency. This can potentially boost liquidity in the domestic market and enhance financial stability.
The tax amnesty for foreign currency transactions is expected to have a positive impact on Pakistan’s economic landscape, attracting foreign investments and fostering financial transparency. The government’s proactive approach in updating tax regulations reflects its commitment to creating a business-friendly environment and encouraging responsible financial practices. As individuals take advantage of this amnesty, Pakistan anticipates a surge in foreign currency transactions that will contribute to the nation’s economic growth in the coming years.
