ISLAMABAD: President Dr. Arif Alvi signed an ordinance implementing the revocation of corporate tax exemptions and streamlining taxes to meet the requirements of the International Monetary Fund.
A senior FBR tax official told Dawn on Wednesday that the president had signed the ordinance, which will be released shortly.
The ordinance promulgation is one of the previous moves to approve the $ 500 million IMF tranche.
Islamabad had previously promised the IMF that it would introduce the legislation in parliament before March 20, with an agreement that it will come into force on July 1, 2021.
This was a requirement prior to the IMF Executive Board meeting that has not yet been announced.
The board of directors can only approve the tranche if Islamabad enacts the legislation according to the agreed deadline, which was now only possible by ordinance.
According to the official, the bill was tabled in the National Assembly with a delay of two days after the lower house had already been extended.
However, the Fund was unwilling to accept this apology and asked Islamabad to announce the proposed measures through a presidential decree.
With the introduction of the regulation, the decisions that were previously agreed to be effective from July 1, 2021 will come into force immediately. The effects on the income according to the regulation apply for three months and eight days of the tax year 2021.
The corporate tax reforms are in line with the recommendations of the IMF, which is estimated to generate annual sales of Rs 140 billion.
At the next session of the House of Commons, at the next session of the House of Commons, the FBR will introduce what will be called the Income Tax Act (second amendment) 2021.
With the introduction of the bill, the bill is expected to be approved from July 1, 2021 with its implementation.
The official said the regulation was only intended to meet the fund deadline agreed with the IMF. However, the fund has tied approval of the tranche to law to ensure Islamabad does not step down from its obligation.
Implementing the impact of tax exemptions from July 1st may not be a problem for the Fund.
Under the proposed regulation, the government will withdraw around 36 tax exemptions and streamline other corporate tax exemptions. There is no general exemption for non-profit organizations (NPOs). The tax credit is granted to NPOs based on the compliance level.
Tax exemptions are being replaced with tax credits for coal mining projects and IT exports. Sales tax is no longer charged for the IT sector. The use of tax credits is associated with the mandatory submission of income tax and sales tax returns as well as the submission of withholding tax returns.
There will be a tax credit for greenfield industries, exemption from sales tax on the supply chain of locally made cell phones. No exemption for IPP projects from July 1, 2021. There is also a change in penalties for non-compliant taxpayers.
Posted in Dawn on March 25, 2021