ISLAMABAD: The Federal cabinet has approved 100 percent tax credit for resident or non-resident Pakistanis on repatriating their declared foreign assets into Pakistan for investment into industry.
According to the summary available with this scribe, the Cabinet through circulation has approved the Promotion Package for Industry (PPI) by Promulgation of Ordinance for Amendments in the Income Tax Ordinance 2001 Via Income Tax Amendment Ordinance 2022.
Incentivization of capital investment into various industrial sectors is common to most tax systems. Pakistan has also provided tax incentives to the industrial sector through the introduction of Special Economic Zones (SEZs), Export Processing Zones (EPZs), and Special Technology Zones (STZs).
There may, however, be a need to extend similar benefits to all geographic areas in Pakistan and also envisage the entrepreneurs to invest in industrial undertakings out of their undisclosed assets so that employment is generated and sick industrial units are revived.
It is also Imperative to incentivize non-resident Pakistanis and resident Pakistani individuals to repatriate their foreign exchange into Pakistan and invest in the industry.
The matter of extending a Promotion Plan for Industry (PPI) sponsored by M/o Industries & Production (MoIP) came under discussion in a meeting chaired by the Prime Minister on January 25, 2022, and approved in principle.
The PPI has three strands including incentives for investment in new and existing industrial undertakings, incentives for revival of sick units and incentives for investment in industries by non-resident Pakistanis and resident Pakistani individuals having declared foreign assets.
Incentives for Setting up New Industries
Under the PPI, a 5% across-the-board tax rate will immune the investor from probe about his sources of investment as provided under the Income Tax Ordinance, 2001 (hereinafter “the Ordinance”). The investor will establish a new industrial undertaking through creation of a new company. Similarly existing units can avail the facility for balancing and modernization. The cutoff date for filing such declarations will be 31.12.2022 with a condition to start commercial production by the new unit by 30.06.2024.
Incentives for Revival of Sick Units
PPI provides that those companies returning a net loss in the last 3 years will be eligible to be acquired through acquisition (not amalgamation) by a healthy profit-making company, which will be incentivized to adjust the sick company’s tax losses for the next 3 years.
Tax incentives for Foreign Investment
PPI further provides that if eligible non-resident Pakistanis and resident Pakistani individuals repatriate their declared foreign assets into Pakistan for investment into industry, they would be entitled to 100% tax credit for the next five years.
