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Tax exemption withdrawal may save Rs100 billion

KARACHI: The government plan to withdraw tax exemption granted to various sectors may help the authorities to save up to Rs100 billion, analysts said on Monday.

The analysts at Arif Habib Limited said that reported the upcoming finance bill may propose withdrawal of various tax exemptions for industries.

With the Federal Cabinet reportedly approving said proposals, resulting in savings of an estimated Rs70-100 billion for the government, the same will be presented in the National Assembly (for an amendment in the Income Tax Ordinance under Budget 2021/2022).

Listed below are some key proposals with respect to the stock market.

Tax credit on enlistment (65C) – It has been proposed to remove the tax credit of enlistment of new companies. To recall, the enlisted entity is currently eligible for a tax credit of 30 percent in the first year and 10 percent each in the second and third year of listing.

Exemption of tax on dividend income of holding company – It has been proposed to withdraw the exemption of tax on dividend income for the holding company as opposed to the prevailing group tax relief.

Exemption for refinery sector – It has been suggested to remove tax exemption (for a period of 20 years) on the profit and income for refineries setup between Jul-2018 to Jun-2023, with a minimum capacity of 100k/bpd.

Exemption on sale of property to REITs – It has been recommended to withdraw tax exemption on profit to person (s) while selling and transferring the property to REITs.

Exemption on the tax of Power Company – It has been proposed to eliminate the tax exemption on profits of Power Generation Company’s whereby the letter of intention has been issued after 30th Jun’21.

Exemption on Shariah compliant listed company – It has been proposed to withdraw 2 percent tax exemption on Shariah compliant listed companies.

Exemption on profit from RLNG terminal – It has been proposed to withdraw tax exemption of five years from CoD on profit of RLNG terminals.