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Tag: OICCI

  • Foreign investors pay Rs1.4 trillion as annual tax revenue in Pakistan

    Foreign investors pay Rs1.4 trillion as annual tax revenue in Pakistan

    KARACHI: The foreign firms operating in Pakistan have paid around Rs1.4 trillion as duty and taxes during fiscal year 2020/2021, said Overseas Investors Chamber of Commerce and Industry (OICCI) on Monday.

    The OICCI is the chamber of leading over 200 foreign investors in Pakistan belonging to 35 countries. It released the consolidated financial contribution of its members for the year 2020 based on feedback from 170 members, 50 of whom are subsidiaries of Fortune 500 companies.

    The foreign investors have contributed significantly towards the GDP of the country and have maintained the OICCI position as the largest chamber of commerce in terms of economic contribution in the country. This comprehensive survey is being conducted annually since 2009.

    Elaborating on the key features of the OICCI 2020 Economic Contribution survey, Irfan Siddiqui, President OICCI highlighted that “we are proud that in the past twelve months, OICCI members, despite very challenging and uncertain business environment due to COVID-19 impact on the business and life of people globally and in Pakistan, contributed over Rs 1.4 trillion, or approximately Rs five billion each working day, towards the tax revenue of Pakistan, approximately one third of the total tax collection in the country.  Two of the OICCI members paid taxes in excess of Rs 100 billion each “.

    Commenting on the significant contribution of foreign investors in the economy of Pakistan, Irfan Siddiqui added “OICCI members believe in Pakistan and going forward are keen for playing a more prominent role in a growing economy supported by a predictable, transparent and stable policy framework and a business friendly regulatory and operating environment”. 

    OICCI members have in the past nine years invested over US $ 18 Billion, largely in the Energy, Telecom, Chemicals, Food /FMCG and Banking sectors. “With an asset base of US $ 137 Billion,” Secretary General, OICCI, M Abdul Aleem added,” OICCI members’ maintained their position as the leading investors in Pakistan during 2020 with new investments of over US $ 2.4 Billion mainly in the Energy, Telecom and Chemicals sectors.”

    Besides the monetary contribution, OICCI members also play a leading role in the transfer of technology, digital transformation, introducing latest inventions and sharing of best practices in the field of manufacturing operation, supply chain and marketing of internationally renowned brands.

    Moreover, OICCI members, as a group, are the largest contributor towards the social sectors. In the last one-year OICCI members contributed Rs 8 billion to social initiatives, benefiting 62 million people throughout the country, and also contributed an additional Rs 8 billion for the various government and private sector COVID-19 containing activities.

    In conclusion, OICCI Secretary General observed that “Pakistan suffers from negative perception which is largely uncalled for, requiring authorities to work in partnership with serious stakeholders, like OICCI, to ensure the country gets its due share of the significant FDI coming to this region.”

  • Foreign investors praise State Bank for facilitating remittances

    Foreign investors praise State Bank for facilitating remittances

    KARACHI: Foreign investors operating in the country have appreciated the significant improvement in the foreign exchange remittance processing time and in growing engagement of the State Bank of Pakistan (SBP) leadership with the key stakeholders.

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  • Foreign investors call for strong protection of intellectual property rights

    Foreign investors call for strong protection of intellectual property rights

    KARACHI: Foreign investors from the platform of Overseas Chamber of Commerce and Industry (OICCI) have demanded strong protection of intellectual property rights in Pakistan for encouraging innovation and creativity in people and society.

     ‘The Overseas Investors Chamber of Commerce and Industry (OICCI) has always championed the cause of protecting Intellectual Property Rights in Pakistan which is critical for attracting and retaining FDI in the country’, commented Irfan Siddiqui President of OICCI on “Intellectual Property Rights Day” celebrated worldwide on April 26th annually.

    Irfan Siddiqui  added that ‘close monitoring of IPR regime in Pakistan has always been a fundamental part of the OICCI agenda.  Laws which give a strong protection to Intellectual Property Rights (IPR) play a key role in encouraging innovation and creativity in people and society’.

    OICCI stated that this year’s World Intellectual Property Rights Day, theme “IP & SMEs: Taking your ideas to market”, will help to highlight the fact that a strong IPR is not only a requirement for multinationals, but a key point for all commercial entities and consumers. Pakistan’s recent accession to the Madrid Protocol has given local businesses, especially exporters, protection of  their Trade Marks in 196 different member countries. There are various indigenous Geographical Indication (GI) products in Pakistan (eg, Peshawari chappals, Ajrak print and Sindhri mangoes). The GI (Registration and Protection) Act 2020 is crucial to secure worldwide recognition of the Pakistani products and has helped establish a system for the registration and protection of GI rights in Pakistan.

    ‘IPR protection motivates innovators, promotes business growth, creating employment, and diversifying the choice of products available to consumers. Strong and effective enforcement of IPR legal framework benefits consumers as they get the feeling of purchasing safe and guaranteed products, especially healthcare products”, commented Erum Shakir, OICCI Managing Committee member and Chairperson of the OICCI IPR Subcommittee

    Sharing the experience and way forward for improving the IPR regime in Pakistan, OICCI members representing the collective voice of top 200 foreign investors in Pakistan, have observed that while the IPR laws in Pakistan are, by and large, world class, its implementation is far from being effective. While appreciating various initiative of the IPR regulator in Pakistan, Intellectual Property Organization of Pakistan (IPO-P) towards facilitating IP protection and rationalizing the associated costs, the registration process for IPR ( copyrights, patents and Trade Marks) needs to be fully digitalized and fast turnaround timing to facilitate all IPR owners, spread all over the country.  This is needed to encourage, new innovators and SMEs to opt for IP Registration. Moreover, a fast track resolution of IP disputes, with enhanced capacity and knowledge sharing on IPR in special courts / tribunals is expected to accelerate new  registration of IPR and build positive image for the country.

    In conclusion, Irfan Siddiqui, OICCI President, observed, “we are proud of OICCI members contribution over the years in raising the awareness about the importance of Intellectual Property Rights in Pakistan for  attracting new FDI, and in promoting innovation and creativity and jobs in the country .  Working in partnership with IPOP and all relevant stakeholders, OICCI is promoting knowledge sharing for a more effective and business friendly IPR regime , so as to encourage innovators in Pakistan and worldwide to share their invention , including latest patents in medicine, in the country.  Without adequate IP protection, local innovators are unable to attract investments, business creation is slow, and jobs lost. Economic prosperity relies on job growth, and strong, effective IP rights have a role to play in creating both”.

  • FBR advised to simplify withholding tax regime on imports

    FBR advised to simplify withholding tax regime on imports

    KARACHI: Federal Board of Revenue (FBR) has been urged to simplify the withholding tax regime on imported goods under Section 148 of the Income Tax Ordinance, 2001.

    Overseas Investors Chamber of Commerce and Industry (OICCI) in its proposals for budget 2021/2022 urged to FBR to simplify the withholding taxes on goods at the import stage.

    It suggested that the criteria for obtaining exemption under Section 148 of the Income Tax Ordinance, 2001 should be based on discharge of advance tax liability as per section 147 of the Income Tax Ordinance, 2001 and clause 72B of the part 1 of the second schedule should be restored.

    Raw materials imported at the rate of 5.5 percent withholding tax should not be subject to minimum taxation. This anomaly should be clarified by FBR at the earliest.

    Procedure for application of reduced rate of 2 percent on import of raw material for own use which are not covered under Part II of Twelfth Schedule is highly cumbersome and should be simplified.

    Section 148 (1) of the Ordinance to amended via the following insertion:

    “Provided that the Commissioner shall issue exemption certificate/ certificate of non-deduction / collection of advance tax at source at import stage within fifteen days of filing of application to exempt entities upon verification:

    Provided further that the Commissioner shall be deemed to have issued the exemption certificate upon the expiry of fifteen days to the aforesaid company and the certificate shall be automatically processed and issued by Iris”.

  • FBR urged to revise slabs for advance tax collection on motor cars

    FBR urged to revise slabs for advance tax collection on motor cars

    KARACHI: Federal Board of Revenue (FBR) has been urged to revise slabs of engine capacity of motor cars to give benefit to buyers in payment of withholding tax.

    Overseas Investors Chamber of Commerce and Industry (OICCI) in its proposals for budget 2021/2022 submitted to the FBR, said that advance tax under section 231B of Income Tax Ordinance, 2001 is collected by manufacturers on following categories:

    On engine capacity 1001cc to 1300cc the advance tax is collected at Rs25,000.

    While on engine capacity 1301 cc to 1600cc the advance tax is collected at Rs50,000.

    OICCI recommended that as locally manufactured sedans passenger cars fall slightly above the 1300cc category the slightly higher engine capacity size results in these vehicles falling in higher tax bracket making it more expensive with higher upfront cost to customers.

    Amendment should be made in the categories of vehicles mentioned in Division VII of Part IV of First Schedule as follows:

    On engine capacity 1001cc to 1350cc the advance tax rate should be Rs25,000.

    While on engine capacity 1351 cc to 1600cc the advance tax rate should be Rs50,000.

    In its proposals for auto sector, the OICCI recommended that minimum tax rate should be reduced to 0.2 percent for authorized dealers of local vehicle manufacturers as they have high turnover and low margins.

    The OICCI further said that exempt imports made under SRO 655(I)/2006 & SRO 656(I)/2006 from ACD levied vide SRO 1178 (I) 2015 and enhanced vide SROs 630 (I)/2018 and 670 (I)/2019.

    Federal Excise Duty (FED) on locally manufactured vehicles should be withdrawn.

    Levy of FED on locally manufactured vehicles be withdrawn by deleting the serial no. 55B of Table I of First Schedule to the Federal Excise Act, 2005 as it has resulted in significant increase of sales price of vehicles with consequential reduction in sales volume of the respective vehicle categories.

  • FBR recommended to reduce minimum tax for chemical companies

    FBR recommended to reduce minimum tax for chemical companies

    KARACHI: Federal Board of Revenue (FBR) has been urged to reduce minimum tax rate for chemical companies having large turnover with low profit margins.

    Overseas Investors Chamber of Commerce and Industry (OICCI) in its proposals for budget 2021/2022 submitted to the FBR, recommended that minimum tax rate should be reduced to 0.2 percent for large chemical companies with large turnover with low profit margins.

    It further recommended that clause b of Section 148(7) of Income Tax Ordinance,  2001 as deleted by the Finance Act, 2017 should be restated, which read as follows: “148(7) b fertilizer by manufacturer of fertilizer” to allow adjustment of tax deducted at import stage for fertilizer imported by a fertilizer manufacturer so as not to make it a final tax.

    It recommended that exemption under Clause 42 read with section 153(3) of the Income Tax Ordinance, 2001 be available to all terminals without discrimination. The said clause be re-worded as follows:

    “(42) The provisions of sub-section 3 of section 153 shall not apply in respect of payments received by a resident person for providing services by way of operation of terminal(s) at a sea-port in Pakistan or of an infrastructure project covered by the Government’s Investment Policy, 1997.”

    For the fertilizer industry, the GST on supply of natural gas as feed stock is at 5 percent and as fuel stock is 17 percent. However, the output GST rate on sales of finished goods i.e. urea is 2 percent. This mismatch between input and output GST results in excessive input tax refundable build-up.

    GST rate on supply of natural gas for fertilizer industry should be zero percent.

    For the sales tax rate on raw material of paints, the OICCI made following recommendations:

    i. Sales tax of 25 percent should be imposed on some basic raw materials like Titanium dioxide and other following categories for commercial importers.

    ii. Enforcement measures to be made more effective in consultation with OICCI members, who are established taxpayers, to penalize tax evaders.

    The OICCI highlighted that macro nutrients being imported under Chapter 31 of Pakistan Customs Tariff, enjoy reduced duties and taxes representing only 8 percent of the value imported whilst in case of micronutrients being imported under Chapter 28, the import duties and taxes are quite high representing 29% of import value.

    It recommended to make necessary amendments in the revenue regulation to reduce sales tax and import duties on import of micronutrients.

  • Normal corporate tax rate for banking sector recommended

    Normal corporate tax rate for banking sector recommended

    KARACHI: Foreign investors have recommended that corporate tax rates for the banking sector should be aligned with other sectors.

    At present the banking sector is paying 35 percent corporate tax rate as compared with 29 percent corporate tax rate for other sectors.

    Overseas Investors Chamber of Commerce and Industry (OICCI) in its proposals for budget 2021/2022 submitted to the Federal Board of Revenue (FBR) recommended that corporate tax rates for the banking sector should be aligned with other sectors.

    Further super tax relief, as granted to other industries, should be given to banking sector as well.

    Regarding the issue of Tax Deduction on Profit on Debt under section 151 of Income Tax Ordinance, 2001, the OICCI recommended that there should be a uniform withholding tax rate of 15 percent for all payments of profit on debt by omitting below provision inserted through Finance Act, 2020:

    “Provided that the rate shall be 10 percent in cases where the taxpayer furnishes a certificate to the payer of profit that during the tax year yield or profit paid is rupees five hundred thousand rupees or less”, and Circular be withdrawn, to avoid litigation between banks and department.

    For enhanced rate of tax on Additional income from additional investment in Federal Government Securities (Rule 6C of Seventh Schedule), the OICCI recommended Rule 6C of seventh schedule of Income Tax Ordinance, 2001 should be deleted whereby enhanced rate of 37.5 percent is applied on banks income from additional investment in Federal Government Securities.

    According to Rules for person not appearing in Active Taxpayer List (Section 100BA and Tenth Schedule) if a withholding tax agent is satisfied that a person not appearing in Active Taxpayers List (ATL) is not required to file return, then before deducting tax he will furnish to the Commissioner a notice carrying particulars of taxpayer along with reason on the basis of which it is considered that the person is not required to file a return.

    The OICCI recommended to delete the rule as branch managers are not conversant with tax laws. Alternatively, if FBR is satisfied that a person is not required to file return of income, his CNIC/Name should be included in an Exempt Taxpayer List (Similar to ATL) which should be issued periodically.

    The original provision of the Seventh Schedule should be restored where provision for bad debts as per the Prudential Regulations of SBP and supported by an Auditors certificate was allowable as a tax deduction to the banks. Alternatively, threshold for allowing provision for bad debts should be increased to 2 percent of gross advances to corporate customers.

    The rule 9 of the Seventh Schedule of ITO 2001 should be deleted as it is being misused and leading to unnecessary litigation.

  • Abolishing withholding tax, reducing sales tax rate on telecom services recommended

    Abolishing withholding tax, reducing sales tax rate on telecom services recommended

    KARACHI: Federal Board of Revenue (FBR) has been urged to abolish withholding tax rate at 12 percent on telecom services to promote the accessibility of internet/data services to the low-income group.

    Similarly, Federal Excise Duty (FED) is charged at 17 percent on telecom services which is on higher side as compared to other sectors, and general rate.

    Provincial authorities levy a much lower rate of sales tax on other services. Since sales tax is a consumption tax (on usage), the decrease in sales tax rate will result in increased usage of telecom services and consequently drive tax collection upwards.

    There should be single sales tax rate across all jurisdiction to remove the anomalies and undue hardships being faced by telecom sector in terms of compliances in different jurisdictions, thus, to provide ease of doing business.

    These recommendations have been sent by Overseas Investors Chamber of Commerce and Industry (OICCI) to the Federal Board of Revenue (FBR) for the budget 2021/2022.

    The OICCI further recommended that since the insertion of 9th Schedule in Sales Tax Act, 1990 effective 1st July 2014, the matter is in litigation. This tax should be abolished, ab initio, by accepting the decision of Lahore High Court as the resolution of the matter will result in additional upside on the corporate tax side for the exchequer and eliminate the undue litigations.

    On the issue of advance tax on Auction/ Renewal of telecom licenses at 10 percent under section 236A of Income Tax Ordinance, 2001, the OICCI recommended that this tax should be abolished being irrational and burdensome on CMOs keeping in view the financial/ tax position.

    The chamber said that as large utility providers, Cellular Mobile Operators’ (CMO) are subject to deduction/collection of withholding of income tax on large number of transactions, which increases the cost and complexity of tax compliance and an additional administrative burden for the telecom sector and negatively impacts the overall business environment.

    It is recommended:

    i. Exemption should be given to the telecom sector from deduction or collection of all types of withholding taxes, like banking and oil sector. There will be no loss of revenue to the exchequer as the tax collection mechanism will be simplified in terms of real time payment of advance tax Under Section 147 on quarterly basis.

    Furthermore, this measure will also make the tax claims and its verification mechanism more transparent with minimum operational hassles as maintaining the thousands of records especially for advance tax on utility bills and imports is itself a very cumbersome procedure.

    ii. Amendments need to be made in the section 147 for the calculation of tax liability. Currently the calculation of tax liability is based on the last assessed position and turnover of the year. The assessed position should not be used as a basis of calculation of tax liability until and unless an independent forum (i.e. At least Tribunal) has also confirmed the assessed position.

    The OICCI recommended to reduce the custom duty rates for batteries (8507.6000) to 5 percent and to abolish additional custom duty and Regulatory duty, as these batteries are used with solar and power systems and are core asset for telecom infrastructure services provider. Reduction in duties will further encourage alternate energy resources for Telecom sector e.g. Solar etc.

    On the issue of custom duty and Regulatory duty on import of telecom equipment, it is recommended to restore SRO 575, reduce Custom duty to 5 percent and abolish the Additional Custom duty and Regulatory duty as the core assets needs to be imported for provisioning of telecom services.

    The OICCI demanded exemption from advance tax on electricity for Telecom Tower Infrastructure Companies. The chamber said that currently taxpayers can obtain exemption certificate for non-deduction of tax on electricity bills under section 235(3) of ITO 2001 if their income is exempt under the law or by discharging their advance tax liability for the year. Such exemption is not available to telecom service providers as their tax liability is minimum under section 153(3) of the ITO, 2001.

    Enabling provision may be inserted in section 235 of the ITO, 2001 to empower the Commissioner to issue exemption certificate to Service Providers under minimum tax regime for non-deduction of advance tax on electricity bills.

  • Foreign investors demand pending refunds payment in six months

    Foreign investors demand pending refunds payment in six months

    KARACHI: Foreign investors operating in Pakistan have demanded to clear all pending sales tax refunds in next six months.

    Overseas Investors Chamber of Commerce and Industry (OICCI), the representative body of foreign investors, in its proposals for budget 2021/2022 demanded that all pending tax refund be cleared within next six months in an orderly/ prearranged manner.

    The OICCI further suggested that verification process for refunds should start automatically as soon as an application for refund is filed by the taxpayer and tax refunds should be cleared within 45 days.

    With introduction of MIS on IRIS, it has become easy to introduce an online self-verification of refund. Wherein taxpayer after applying for refund verification us 170 may be given an option to select CPRNs online against each section wherein tax deduction/ collection has been made and create a virtual verification file for easy processing by assessing officers. In case of any discrepancy, only missing CPRNs will be verified manually.

    It is suggested that inter adjustment of Income tax and Sales tax refunds should be made part of the law.

    A timely settlement of the determined refunds should be made, and if there is a liquidity issue then issuing marketable government bonds/ securities be considered.

    Amend current fixed interest rate of 10 percent to floating interest rate linked with KIBOR, it is suggested.

  • Listed companies should be exempted from electronic tax surveillance

    Listed companies should be exempted from electronic tax surveillance

    KARACHI: Federal Board of Revenue (FBR) has been urged to exempt listed companies from electronic surveillance of business and records.

    Overseas Investors Chamber of Commerce and Industry (OICCI) in its proposals for budget 2021/2022 said that through SRO 888 of 2020 dated September 21, 2020, a new chapter was introduced in Sales Tax Rules, 2006 whereby all registered persons are made liable to give continuous and full real-time electronic access to the premises, stocks, record, accounts and data, whether maintained electronically or otherwise, as and when required by an authorized officer as provided under section 38 of the Act.

    The OICCI recommended that the scope should be restricted to the taxpayers having series of defaults or misconduct.

    “Other taxpayers especially listed companies should be exempted from this requirement as they are subject to rigorous external audits, internal audit requirements by SECP and tax audits and monitoring by FBR,” it recommended.