Pakistan Extends Rs30 Billion Tax Exemption to Foreigners on Profit from Debt

Pakistan Extends Rs30 Billion Tax Exemption to Foreigners on Profit from Debt

Karachi, August 17, 2023 – In a bid to attract foreign investment and bolster the economy, Pakistan has granted a significant income tax exemption exceeding Rs30 billion to foreign entities for profits generated from debt during the fiscal year 2022-23.

A recently published report by the Federal Board of Revenue (FBR) highlights that the substantial sum of Rs30.19 billion was allocated as income tax relief to foreign investors under the provisions of clause 77 within Part 1 of the Second Schedule of the Income Tax Ordinance of 2001 throughout the fiscal year 2022-23.

Clause 77 of the Income Tax Ordinance, 2001, outlines the eligibility for income tax exemption applicable to profits earned from debt and capital gains. This exemption pertains to entities such as foreign governmental agencies and non-resident individuals who have received approval from the Federal Government. The approved entities must be pursuing investments in debt and debt instruments sanctioned by the Federal Government.

The tax exemption move is positioned as a strategic effort to make Pakistan an attractive destination for foreign investment by offering favorable tax policies. This decision is expected to encourage international investors to inject funds into the country, promoting economic growth and financial stability.

The Federal Government’s decision to provide tax incentives for foreign investors aligns with broader efforts to stimulate economic development and improve the investment climate. Experts suggest that such measures could enhance Pakistan’s global competitiveness and generate a positive impact on various sectors, including infrastructure, technology, and healthcare.

As Pakistan opens its doors to foreign investors through these tax exemptions, the country anticipates potential inflows of foreign capital that can help diversify its economy and foster innovation.

The Pakistani government’s grant of over Rs30 billion in income tax exemption to foreigners on profits generated from debt during the fiscal year 2022-23 marks a significant step towards attracting international investment. By leveraging tax incentives to entice foreign entities, Pakistan aims to stimulate economic growth and establish itself as a compelling destination for global investors seeking lucrative opportunities.