A taxing tale

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The Karachi Stock Exchange (KSE) Thursday notified to its members and other stakeholders the revised tax structure promulgated by the federal government through a presidential ordinance on April 24. “Members are hereby informed that in terms of amendments made in the Finance Act, 1989 and the Income Tax Ordinance, 2001… the taxes currently collected by the Exchange have been revised,” said the KSE. In total two changes have been made in the existing taxation structure at the bourse that would come in effect immediately.
Under the new Ordinance a Capital Value Tax (CVT) of 0.01 percent has been imposed on the purchase of shares of a public company listed on one of the country’s registered stock exchanges. Another change in the law is the omission of the 0.01 percent Advance Tax on the trade value of shares. The levies that have been kept unchanged are the 0.01 percent Advance Tax on purchase value of shares traded in lieu of tax on commission, 0.01 percent Advance Tax on sale value of shares traded in lieu of tax on commission and 10 percent carry over charges or Advance Tax in respect of financing of carry over trades in share business. “The advance tax on trade value of shares collected under section 233A (1)(c) has been omitted in the Finance (Amendment) Ordinance, 2012,” said the KSE. About the Capital Gains Tax (CGT), the Exchange said matters pertaining to the previously controversial levy were being dealt with separately by the National Clearing Company of Pakistan Limited (NCCPL as specified in the Presidential Ordinance. According to a senior broker, under the assurances made by the federal finance minister the rate of CGT, which was to be increased up to 12.5 percent in next two years, was to be put on freeze at the existing 10 percent by June 2014. The Ordinance provides that the tax on capital gains would be computed and collected, through an automated system, by the NCCPL on behalf of the Federal Board of Revenue and would deposit the collected amount in a separate account in the National Bank of Pakistan. To ensure transparency, the PRAL or any other firm approved by the FBR would conduct quarterly audits of the NCCPL accounts.