FBR agrees to amend Capital Gains Tax rules

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KARACHI – The Federal Board of Revenue (FBR) has agreed to amend rules and regulations pertaining to the filing of Capital Gains Tax (CGT) at the country’s stock exchanges. According to sources, officials of FBR and the Taxation Committee of the Board of Karachi Stock Exchange (KSE) reached a consensus during a meeting held here at KSE on Monday.
FBR was led by Revenue Division Additional Secretary Asrar Raouf, while investors were represented by Taxation Committee Head Abdul Qadir Memon in a meeting held on instructions of the Finance Minister Dr Abdul Hafeez Shaikh. The meeting primarily focused on the ‘controversial’ SRO 112(1)/2011, issued by the FBR on February 11 with respect to the computation of CGT.
“They (FBR) have agreed to address our reservations and would be amending and re-notifying the relevant rules within the next few days,” a senior stock broker told Pakistan Today. It may be recalled that the tax collector, through the above notification, had made it mandatory for stock investors to seek a tax clearance certificate or NOC before closing their accounts in any of the three local bourses.
The SRO also barred investors to adjust their capital losses through wash sales, cross trades and tax swaps. “They agreed to remove the conditions for an NOC from the tax authorities in case of account closure,” the broker said, adding that the FBR officials had also nodded to the KSE-backed definition of wash trade.
Sources, privy to Monday’s meeting, said while the FBR was suspecting investors to evade CGT, a majority of the latter were also not prepared to pay the new tax. A senior broker, however, rejected the claim saying “there is no such thing as the law is law.”
Meanwhile, a joint statement of the FBR and KSE said that the former had assured the latter that all of its concerns and anomalies would be given due consideration and the required amendments would accordingly be made and issued at the earliest. The stakeholders at KSE, however, said that they would not heave the sigh of relief until the FBR take concrete measures in line with their demands for amendments in the computation rules.
“We won’t believe in their verbal assurances until they amend and notify rules accordingly as soon as yesterday,” said a member of KSE. Ironically, it took the funds-starved government and so-called bureaucracy therein over seven months to promulgate and notify rules to local bourses for collection of CGT, imposed in the federal budget in June last year. It is for this reason that many of the individual and institutional tax payers could not file their tax returns on time.
“The FBR has expressed concern over the non-filing of CGT Quarterly Return by few of the companies and requested the KSE to extend any assistance in this respect,” the joint statement said. The investors think the contrary and cite an unnecessary delay in the formulation and introduction of relevant rules as a primary reason for the non-filing of CGT.
“You finalise rules in February 2011 for a tax that has been imposed in June 2010 – main reason is for the long delay,” the senior stock broker viewed. A member director at the KSE Board also cited absence of rules and lack of awareness as major reasons for the non-payment of CGT on the part of some investors.
According to the FBR-KSE joint statement, the meeting had discussed proposals in respect of issues already agreed in the January 17th meeting.