Islamabad: The Securities and Exchange Commission of Pakistan (SECP) has proposed the Federal Board of Revenue (FBR) to withdraw 5 per cent tax on bonus shares and applicability of current capital gains tax (CGT) as well as elimination of federal excise duty (FED) on mutual funds.
In its budget proposal for 2015-16, the corporate sector regulator said the current rate of CGT is 12.5pc on capital gains irrespective of holding period, and 5pc tax is charged on bonus shares.
It was suggested to restart bonus share issuance which will be taxed under CGT for all times to come.
The SECP has said that these measures would help curtail the loopholes in taxation regime.
Regarding mutual funds, the SECP proposed to the FBR to eliminate 16pc FED as these are already subjected to 16pc duty in Punjab and 15pc Sindh sales tax.
There is double taxation on unit holders of mutual funds due to these duties since July 1, 2014.
The SECP proposed realisation of income by corporate investors from money/income funds to be taxed at the applicable rate of 25pc instead of 12.5pc irrespective of mode whether realised through dividend or redemption in phased manner in next three years.
For the fiscal year 2015-16, 2016-17 and 2017-18, the proposed rate of tax is 15pc, 20pc and 25pc respectively.
The SECP proposed no tax on principal component of investment returned as part of dividend distribution in case of open-end mutual fund to maintain uniformity in Net Asset Value (NAV) for issuance and redemption.
It also proposed elimination of Workers Welfare Fund (WWF) at the rate of 2pc on mutual funds income applicable. Since 2008, FBR is acting as collecting agent. Mutual Funds are not an establishment and do not employ any workers. The Ministry of Labour has clarified that mutual funds do not come under WWF Ordinance.
The SECP said that FBR should not demand WWF from mutual funds.
The SECP also proposed to extend the existing exemption given to the seller of property to a Real Estate Investment Trust (REIT) scheme up to 2020 for not taxing the gain on sale of property which already exists up to June 2015.
The exemption of REIT from Advance Tax applicable at the rate of 1pc on purchase of immovable property is applicable since July 2014.
Regarding the Commodity Exchange, the SECP suggested imposition of CGT on transactions carried out on PMEX at proposed rate of 7.5pc.
