Tax credit for eligible capital investment allowed

Tax credit for eligible capital investment allowed

ISLAMABAD: Tax credit of 25 percent on capital investment on an industrial undertaking has been allowed under Tax Laws (Second Amendment) Ordinance, 2021.

Sources in Federal Board of Revenue (FBR) said that a new Section 65G has been introduced to Income Tax Ordinance, 2001 through amended ordinance.

According to the new section:

“65G Tax credit for specified industrial undertakings.- (1) When making certain eligible capital investments as specified in sub- section (2), the eligible taxpayers defined in sub-section (3) shall be allowed to take an investment tax credit of twenty-five percent of the eligible investment amount, against tax payable under the provisions of this Ordinance including minimum and final taxes. The tax credit not fully adjusted during the year of investment shall be carried forward to the subsequent tax year subject to the condition that it may be carried forward for a period not exceeding two years.

(2) For the purposes of this section, the eligible investment means investment made in purchase and installation of new machinery, buildings, equipment, hardware and software, except self-created software and used capital goods.

(3) For the purpose of this section, eligible person means –

(a) green field industrial undertaking as defined in clause (27A) of section 2 engaged in –

(i) the manufacture of goods or materials or the subjection of goods or materials to any process which substantially changes their original condition; or

(ii) ship building:

Provided that the person incorporated between the 30th day of June, 2019 and the 30th day of June, 2024 and the person is not formed by the splitting up or reconstitution of an undertaking already in existence or by transfer of machinery, plant or building from an undertaking established in Pakistan prior to commencement of the new business and is not part of an expansion project; and

(b) industrial undertaking set up by the 30th day of June 2023 and engaged in the manufacture of plant, machinery, equipment and items with dedicated use (no multiple uses) for generation of renewable energy from sources like solar and wind, for a period of five years beginning from the date such industrial undertaking is set up.”

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