KARACHI: The Federal Board of Revenue (FBR) has asked the non-profit organisations (NPOs) to keep their administrative expenditures below 15 percent of total income if they want to avail 100 percent tax credit.
The decision was in line with a proposal in the budget for the fiscal year of 2017-18. Finance Minister Ishaq Dar, in his budget speech, said NPOs have misused the incentive of 100 percent tax credit, while their expenses were very high, including expenditure on buying of luxury goods and vehicles.
The Pakistan Centre for Development Communication recorded more than 700 nonprofit organisations operating in the country in its directory published in 2012. Nonprofit sector is underdeveloped in the country. However, as the democratic institutions are getting stronger and globalisation is catching pace this sector is seeing increase in activism to support the government’s social services’ efforts.
The Finance Bill 2017 also unveiled some incentives for NPOs. At present, if NPOs do not spend more than 75 percent of their income on charitable and welfare activities they lose the status of NPO and their tax treatment happens to be 30 percent.
Under the budget proposal, if NPOs are unable to spend more than 75 percent of their income on charitable and welfare activities only the unspent amount will now be subject to 10 percent tax, while their status will remain intact.
