Zubair Yaqoob
Karachi
The Government has promulgated the “Tax Laws Amendment Ordinance 2019” (Ordinance number 26 of 2019) on December 27, 2019 whereby it has made certain changes amongst others to facilitate long term foreign portfolio investment in fixed income securities including PIBs, Treasury Bills and TFCs (corporate debt).
The ordinance has defined NRI (Non-resident Investors) as corporate investors who do not have a permanent establishment in Pakistan. The tax applicable on non-resident investors (NRI) on return from their investment in equity instruments is 15% on dividend and capital gain.
However, tax applicable on return from investment in debt securities is withholding tax at 10% whereas capital gains from disposal of debt instruments are taxed at 29%.
The Second Amendment Ordinance has rationalized the tax applicability through following amendments. NRIs are now required to pay 10% tax from capital gains arising on disposal of debt instruments and Government securities (including Treasury Bills and Pakistan Investment Bonds). Such tax deduction constitutes final tax on such capital gains. Interest income/Coupon from investment in debt securities continues to be taxed at 10%. The requirements to obtain NTN and name of Active Taxpayers List (ATL) has also been removed under the Tenth Schedule on interest income and capital gains relating to such securities.
