FBR finalises modalities for capital gains tax

Day trading to be classified as short-term investment

KARACHI: The Federal Board of Revenue (FBR) has decided that the 10 per cent capital gains tax will be applicable on day trading of equities. The decision came on Thursday during a meeting between FBR officials and the committee on capital gains tax set up by the Karachi Stock Exchange (KSE).

Sources privy to the meeting informed The Express Tribune that it has been decided that day trading will be treated as ‘within six months investment activity’ and that the ‘respective 10 per cent tax rate will apply.’

They added that stock purchases under the new Securities Lending and Borrowing Act will be taxed similar to previous leverage products and that the ten per cent tax on the spread earned by the margin financier or margin trading funding provider will be treated as full and final liability.

Margin trading

KSE board members were expected to convene a meeting with KSE Chairman Zubyr Soomro on Thursday but the meeting was postponed. Approval of the new margin trading system was stalled when Soomro raised concerns over its risk management capabilities. Experts assert this has led to low volumes and falling equity prices.

“There is a general consensus that multiples of main board needs to come down for trading comfortably,” contended Hasnain Asghar Ali, an equity analyst.

However, other stakeholders have expressed hope that the approval will be obtained in the coming week.

Published in The Express Tribune, August 27^th, 2010.