KARACHI, September 14, 2024 – The Federal Board of Revenue (FBR) has announced the continuation of the tax credit for employment generation under Section 64B of the Income Tax Ordinance, 2001 for the tax year 2024-25.
This incentive aims to encourage manufacturers to create more jobs by providing a significant tax benefit for eligible companies.
The FBR, in its recently updated version of the Income Tax Ordinance 2001, which was amended up to June 30, 2024, extended the provision of tax credits to manufacturers that meet certain employment criteria. This initiative continues to be part of the government’s strategy to stimulate job creation and economic growth in Pakistan’s manufacturing sector.
Overview of Section 64B
Section 64B of the Income Tax Ordinance 2001 provides a tax credit for companies that establish and operate new manufacturing units, encouraging businesses to contribute to employment generation. Here’s a breakdown of the key provisions:
1. Eligibility Period: The tax credit is available to companies that set up a new manufacturing unit between July 1, 2015, and June 30, 2019. These companies are eligible for a tax credit for a period of ten years, starting from the tax year in which the unit becomes operational.
2. Amount of Tax Credit: Eligible companies can claim a tax credit equal to two percent of the tax payable for every fifty employees registered with either The Employees Old Age Benefits Institution (EOBI) or the Employees Social Security Institutions of Provincial Governments. This credit is subject to a maximum of ten percent of the total tax payable in any given tax year.
3. Conditions for Tax Credit: To qualify for the tax credit, companies must meet the following conditions:
o The company must be incorporated and the manufacturing unit must have been set up within the specified time frame (July 1, 2015, to June 30, 2018).
o The manufacturing unit must employ more than 50 registered employees in a tax year, either with the EOBI or a Provincial Social Security Institution.
o The unit must be operated by a company registered under the Companies Act, 2017 (XIX of 2017) and have its registered office in Pakistan.
o The manufacturing unit cannot have been established by splitting, reconstructing, or reconstituting an existing enterprise, or through the transfer of machinery or plant from any unit established in Pakistan before July 1, 2015.
4. Compliance and Reassessment: If any of the conditions are later found to have not been met, the tax credit will be considered as incorrectly granted. The Commissioner of Inland Revenue has the authority to re-compute the tax liability for the relevant year and recover the incorrectly allowed credit.
5. Date of Operation: A manufacturing unit is considered to have been set up on the date when it becomes ready for either trial or commercial production.
Encouraging Employment and Economic Growth
The continuation of this tax credit is aimed at fostering job creation in Pakistan, particularly in the manufacturing sector. By providing financial relief to companies that meet employment targets, the government hopes to stimulate industrial growth and contribute to broader economic development.
This tax incentive, along with others introduced in the Income Tax Ordinance, reflects the government’s commitment to supporting businesses that contribute to employment generation, ultimately helping to reduce unemployment and improve economic conditions in the country.
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