Karachi, November 16, 2023 –Pakistan has placed additional tax burdens on banks, introducing a 40% levy on windfall income profits from foreign exchange transactions.
The move comes as part of the enforcement of Section 99D to the Income Tax Ordinance, 2001, approved by the federal cabinet in a meeting chaired by Caretaker Prime Minister Anwaar-ul-Haq.
The imposition of a 40% tax on windfall profits earned by banks on foreign exchange transactions during the years 2021 and 2022 has been recommended by the Federal Board of Revenue (FBR) and approved by the cabinet. This move is in response to the changing economic landscape and aims to enhance revenue streams for the government.
The recently passed Finance Act, 2023, introduced the new section 99D in the Income Tax Ordinance 2001, empowering the government to tax windfall income profits and gains of banks.
The banks are already paying higher corporate tax rate of 39 percent with additional 6 percent super tax.
In a related development, the federal cabinet also greenlighted amendments to the Hajj Policy 2024. Unutilized sponsorship schemes quotas, both from the government and private sectors, will be returned to the Saudi Government. Additionally, a robust monitoring system for financial arrangements by Hajj group organizers will be enforced, ensuring compliance with Saudi laws. The new policy allows children below the age of 10 years to perform the religious obligation, easing conditions for pilgrims above 80 years, and introducing a reduction in the hardship Hajj quota.
Furthermore, the cabinet approved negotiations on Bilateral Investment Treaties with Saudi Arabia and Qatar, following recommendations from the Investment Board. A committee, spearheaded by the Minister for Trade and featuring members from the ministries of law and planning, was constituted to hear appeals against orders of Trade Organizations Regulators.
In a move to facilitate international business, the cabinet added Democratic Republic of Congo, Malawi, Zambia, Zimbabwe, and Kyrgyz Democrat to the business visa list. It also authorized the removal of 18 names from the Exit Control List (ECL) and added nine others, based on recommendations from the Interior Ministry.
In an effort to streamline environmental practices, the cabinet approved the signing of the Hong Kong International Convention 2009 for the safe and environmentally sound recycling of ships. The convention will pave the way for legislation on ship recycling in Pakistan, focusing on safety, training, and the proper disposal of hazardous wastes.
Lastly, the cabinet granted exemption to the Trading Corporation of Pakistan from specific regulatory rules for the procurement of 200,000 metric tons of urea from the international market, a move aimed at addressing agricultural needs in the country.
As these changes take effect, stakeholders are closely monitoring the economic impact and potential adjustments within the banking sector and other affected industries.
