NCCPL carves out its share of capital gains tax pie

Tax charged on profits made on sale of securities held for specific periods.

KARACHI: Under a newly-established system for the computation and collection of capital gains tax (CGT), the National Clearing Company of Pakistan Limited (NCCPL) has collected Rs103.2 million and Rs206.3 million as CGT for trades executed and settled during April 24-June 30 and July 1-September 30 respectively.

Speaking to The Express Tribune on Wednesday, NCCPL Business Development Executive Afsheen Adnan said the levy was collected from approximately 40,000 people bearing as many Unique Identification Numbers.

In a separate statement, NCCPL CEO Muhammad Lukman said the collection of CGT for October is already underway. “The success of the new CGT regime should be assessed by its wide acceptability to investors, who relied on the CGT system developed by the NCCPL and discharged their CGT obligation in a transparent manner through an automated collection process without any human intervention,” Lukman said.

It should be noted that the CGT is applicable only when a profit is realised through the sale of a security. The NCCPL collects the CGT on behalf of the Federal Board of Revenue (FBR) under the newly-developed CGT system.

The CGT regime applies to individual investors, brokers and corporate entities. However, mutual funds, banks, non-banking finance companies, insurance companies, modaraba companies and people registered with the NCCPL as foreign institutional investors are exempted from the tax.

Under the new regime, the tax is applicable on securities sold for a profit within a holding period of less than 12 months. There is no tax on capital gains on the sale of securities held for a period of more than 12 months.

The NCCPL computes CGT by setting off capital losses against capital gains in a financial year. It is calculated at the rate of 10% if a security is sold at a profit within six months of its purchase. But the CGT rate decreases to 8% if the security is sold at a profit between six and 12 months of its purchase. Furthermore, capital losses in one financial year are not carried over to the next financial year.

The CGT system will henceforth be collected on a regular basis for transactions settled in a month – after the adjustment of losses or refunds of any amount collected in the previous month, or months – of the same financial year.

Published in The Express Tribune, November 29^th, 2012.