ISLAMABAD: Federal Board of Revenue (FBR) has issued rules for determination of value of bonus shares issued by a company not quoted on the stock exchange to the shareholders of the company.
The FBR on Friday issued SRO 1085(I)/2016 to make part the procedure to Income Tax Rules, 2002. Earlier this month the FBR issued draft rules of this procedure for inviting feedback from the stakeholders.
In the latest notification the FBR introduced Rules 231 G for determination of value of bonus shares issued by a company not quoted on the stock exchange, to the shareholders of the company.
The sub-rule (1) stated that the value of bonus shares issued by a company, not quoted on the stock exchange, to its shareholders in terms of sub-section (6) of Section 236N of the Ordinance shall be the face value, or the breakup value, as determined below, whichever is higher.
236N. Bonus shares issued by companies not quoted on stock exchange .-
(1) Notwithstanding anything contained in any law for the time being in force, every company, not quoted on stock exchange, issuing bonus shares to the shareholders of the company, shall deposit tax, within fifteen days of the closure of books, at the rate of five percent of the value of the bonus shares on the first day of closure of books, whether or not tax has been collected by the company under sub-section (3).
(2) Issuance of bonus shares shall be deemed to be the income of the shareholder and tax deposited under sub-section (1) shall be treated to have been deposited on behalf of the shareholder.
(3) A company liable to deposit tax under sub-section (1), shall be entitled to collect and recover the tax deposited under sub-section (1), from the shareholder, on whose behalf the tax has been deposited, before the issuance of bonus shares.
(4) If a shareholder neither makes payment of tax to the company nor collects its bonus shares, within three months of the date of issuance of bonus shares, the company may proceed to dispose of its bonus shares to the extent it has paid tax on its behalf under sub-section (1).
(5) Tax paid under this section shall be a final tax on the income of the shareholder of the company arising from issuance of bonus shares.
(6) The Board may prescribe rules for determination of value of shares under sub-section (1).
The sub-rule (2) of Rule 231G stated that the breakup value of the bonus share shall be determined in the following manner:
(a) The total equity of the company divided by the total number of ordinary shares (after the issuance of bonus shares), as of the last day of the period for which financial statements are prepared and approved by the board of directors for the purpose of issuance of bonus shares. The total equity of the company shall be determined by adding paid up capital of the ordinary shares and the reserves.
(b) For the purpose of sub-clause (a) above, the term ‘reserve’ shall have the same meaning as defined under sub-section (3) of section 5A of the Ordinance.
