KARACHI: The Federal Board of Revenue (FBR) has notified that no exemption, whatsoever, from withholding tax (WHT) under Eighth Schedule (Capital Gains Tax) of the Income Tax Ordinance, 2001 is available to foreign institutional investors.
The FBR has specified through SRO 161(I)/2015 that in case of foreign institutional investors, these rules shall be applicable on capital gain derived from July 1, 2014.
“For the removal of doubt, it is clarified that all foreign institutional investors shall be subject to the regime as laid down in the Eighth Schedule and no exemption whatsoever from withholding tax under the Eighth Schedule or under these rules is available to foreign institutional investors for any reason,” the board added.
The rules said that for the purpose of computation of capital gains and collection of tax thereon with respect to foreign institutional investors, the date of acquisition and disposal, the consideration received and cost of acquisition shall be determined in the laid down manner.
For the purpose of computation of capital gains, securities held on June 30, 2012 shall be deemed as “having held for a period of more than two years” and the cost of such securities shall be deemed to be the market price (day-end price) of the securities, as on the June 30, 2012.
Where securities have been acquired or disposed of between July 1, 2012 and June 30, 2014 (both days inclusive), the cost of acquisition and consideration received for disposal shall be determined in the said manner:
In case of market-based transactions, the cost will be determined through the transaction price of the securities.
In case of transactions other than market-based transactions, the cost will be determined through deal price provided by the stock exchange; and in all other cases, the market price (day-end price).
Meanwhile, the Securities and Exchange Commission of Pakistan (SECP) said that where physical securities are deposited on or after July 1 , 2014 in an account maintained with the Central Depository Company of Pakistan Limited, date and cost of acquisition shall be taken into account.
A foreign institutional investor may apply to the National Clearing Company of Pakistan Limited for separate Unique Identification Numbers (UIN) for each of the sub-funds under its umbrella. Where separate UINs have been obtained by a foreign institutional investor for each of the sub-funds under its umbrella, capital gain or loss shall be computed separately for each sub-fund and loss under one UIN shall not be allowed to be set off against capital gain arising to another sub-fund with separate UIN. Where a foreign institutional investor opts not to apply to the NCCPL, loss arising to any sub-fund shall not be allowed to be set off against capital gain of any sub-fund.
However, such loss of a sub-fund may be adjusted against gain arising to such sub-fund at the time of filing of return by the sub-fund, the FBR added.
