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Taxation 5.3 No income tax on any foreign source income derived by of such Sukuk (Second Schedule, Part I, Clause 72A of the a citizen of Pakistan in a tax year and in the following Ordinance). tax year, who was not a resident individual in any of 6.2 No income tax on any distribution received by a taxpayer the four tax years preceding the tax year in which the from a Collective Investment Scheme including NIT or individual became a resident (Section 51(1) of the REIT Scheme or a private equity and Venture Capital Fund Ordinance). out of capital gains of the said scheme or trust or fund. 5.4 No income tax on salary earned outside Pakistan where Provided that this exemption shall be available to only such a citizen of Pakistan leaves Pakistan during a tax year and mutual funds, collective investment schemes that are debt remains abroad during that tax year (Section 51(2) of the or money market funds and these do not invest in shares ordinance). (Second Schedule, Part I, Clause 103 of the Ordinance). 5.5 Any salary received by an employee of a foreign 6.3 No income tax on any income received by a taxpayer from a corporate agricultural enterprise, distributed as government as remuneration for services rendered to such government shall be exempted from income tax dividend out of its income from agriculture (Second Schedule, Part I, Clause 105B of the Ordinance). (Section 43 of the Ordinance). 5.6 Any Pakistan-source income which Pakistan is not 6.4 No income tax on all payments on account of principal, interest or fee received by the Overseas Private permitted to tax under a tax treaty shall be exempted Investment Corporation (OPIC) from development from income tax (Section 44(1) of the Ordinance). project undertaken (Second Schedule, Part I, Clause 140 5.7 Any salary received by an individual (not being a citizen of the Ordinance). of Pakistan) shall be exempted from income tax to 6.5 No income tax on any profit on debt received by Japan the extent provided for in an aid agreement between International Cooperation Agency (JICA) from Islamabad- federal government and a foreign government or public Burhan Transmission Reinforcement Project (Phase I) international organisation provided salary is paid out of undertaken (Second Schedule, Part I, Clause 140A of the funds or grants released as aid to Pakistan (Section 44(2) Ordinance). of the Ordinance). 5.8 Any income received by a person (not being a citizen Conclusion of Pakistan) engaged as a contractor, consultant or expert on a project in Pakistan shall be exempted from Pakistan is a tax heaven for resident Pakistanis, overseas Pakistanis income tax to the extent provided for in a bilateral or and foreigners because of the following advantages in addition to the income tax exemptions stated above: multilateral technical assistance agreement between a. Income tax rates in Pakistan are the lowest in the world. federal government and a foreign government or public b. A lot of concessions in income tax has been given which international organisation provided the income is paid out includes reduced rate of income tax, reduction in tax liability of the fund of the grant (Section 44(3) of the Ordinance). and exemption from the operation of many income tax 5.9 Any profit received by a non-resident person on a provisions under Second Schedule attached to the Income Tax security issued by a resident person shall be exempted Ordinance 2001. from income tax where such security issued and profit c. Simple and straight system of filing of income tax return under was paid outside Pakistan (Section 46 of the Ordinance). Self-Assessment Scheme with exemption to many persons 5.10 No income tax on profit on debt derived by any under Section 114 of the Ordinance. foreign lender or any local bank having more than 75% d. Many persons are not required to furnish income tax return shareholding of the government or the State Bank of under Section 115 of the Ordinance. Pakistan under a financing agreement with the China e. Many persons who are subjected to final taxation under Overseas Ports Holding Co. Ltd. for a period of 23 years income tax withholding regime are just required to furnish to w.e.f July 1, 2016 (Second Schedule, Part I, Clause 1126AB the commissioner a statement instead of furnishing Income Tax of the Ordinance). Return under Section 115 of the Ordinance. 5.11 No income tax on any income derived by a non-resident from investment in Oil and Gas Development Company Businessmen living in Pakistan and abroad may take advantages Limited (OGDCL) exchangeable bonds issued by the of tax holidays, exemptions and concession in income tax given by federal government (Second Schedule, Part I, Clause the government of Pakistan for their growth and attractive rate of 135A of the Ordinance). return on their investments. 6. Income from other sources 6.1 No income tax on any income derived by Sukuk holders The writer is a chartered accountant with 27 years of experience in different capacities and is currently engaged in relation to Sukuk issued by Second and Third Pakistan as management and business and life insurance/Takaful International Sukuk Co. Ltd. and also on gain on disposal consultant, Karachi. January - March 2018 The Pakistan Accountant 41