Govt to abolish advance tax on sale, purchase of shares
ISLAMABAD: The government has agreed to abolish 0.02 per cent advance tax on sale and purchase of shares in the upcoming mini-budget. It was a major demand of the stock market players.
The Ministry of Finance in its summary has suggested that Section 65C of the Income Tax Ordinance (ITO) allows incentives for listing by companies through tax credits. This incentive can be further enhanced to encourage new listings.
Details available from the finance ministry regarding the mini-budget, which will be announced on Jan 23rd, show that advance tax of 0.02pc on sale/purchase of shares will be abolished.
It has been highlighted that rates of advance tax on sale and purchase of securities was doubled from 0.01pc to 0.02pc through Finance Act 2016.
The advance tax of 0.02pc on purchase and sale of securities in lieu of tax on the commission earned is considered on the higher side.
The PSX proposals in this regard have been recommended by the Federal Board of Revenue too.
The second demand of the stock market players in regard to allow carry forward of capital losses up to 3 years. The finance ministry has also recommended that amendments may be carried out in the ITO to allow carry forward of capital losses made on disposal of securities.
The third demand was rationalisation of Capital Gains Tax (CGT) on equities in line with real estate. The government acknowledged that anomaly in tax rates imposed on disposal of securities and sale of immovable property was discouraging investments in the capital market.
A flat rate of 15pc CGT was introduced irrespective of holding period in the Finance Act 2017, while there is no tax on gain on disposal of immovable property if the holding period is three years or more.
Meanwhile, a senior official of the finance ministry said the mini-budget will be focused on ease of doing business, encourage savings and investments in stock market and real estate sectors. For finalising the matter and take stakeholders into confidence in this regard, the Securities and Exchange Commission of Pakistan chairman and Commissioner Securities Market Division will meet the stockbrokers on Thursday in Karachi.
Published in Dawn, January 17th, 2019