Pakistan

Sharif family's trust wins tax exemption

FBR says trust already not being taxed

Shahbaz Rana April 29, 2018

Sharif brothers shake hands. PHOTO: AFP

ISLAMABAD : The federal government has proposed exempting donations for a trust owned by the Sharif family from income tax and has tried to balance its act by proposing the same for more than two dozen charitable organisations and funds, including the Shaukat Khanum Memorial Trust.

In the Finance Bill 2018 tabled in the National Assembly on Friday by Finance Minister Miftah Ismail, the government has proposed that the donations people will give to the Sharif Trust would not be subject to tax from fiscal year 2018-19.

Interestingly, the trust belongs to the former ruling family and its income is already exempted from tax, according to the Federal Board of Revenue.

The Sharif Trust is one of the more than two dozen charitable organisations, funds and education institutions whose income or donations are exempted from tax.

Through the Finance Bill, the federal government has also proposed revival of the tax amnesty scheme that former prime minister Nawaz Sharif had announced for industrialists in November 2013.

However on April 3, the Lahore High Court had declared the industrialists-friendly scheme illegal and without lawful authority. But through the Finance Bill 2018, it has been proposed that the FBR will not ask for source of investment made by an individual in Greenfield projects, directly or as an original allottee in the purchase of a company’s shares.

The amnesty will be available on investment that is made on or after the 1^st of January, 2014 and commercial production commences on or before the June 30, 2019. The government has also proposed waiving off withholding taxes at the import stage on import of 35 armoured and security vehicles imported by the Ministry of Foreign Affairs for security of visiting foreign dignitaries.

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Subjective exemptions

Moreover, the FBR has proposed that donations paid to Pakistan Sweet Home, Angels and Fairies Place, Al-Shifa Trust Eye Hospital, Aziz Tabba Foundation, Sindh Institute of Urology and Transplantation, Kidney Centre Post Graduate Institute, Shaukat Khanum Memorial Trust, Third Pakistan International Sukuk Company Limited, SAARC Energy Centre, Pakistan Bar Council, Pakistan Centre for Philanthropy, Limited, Saylani Welfare International Trust, Forman Christian College, and Pakistan Disabled Foundation will be exempted from income tax.

The Lahore University of Management Sciences, Lahore has also been suggested to be treated as non-profit organisation, giving it permanent exemption.

The FBR has also proposed income tax exemption for Khyber-Pakhtunkhwa Retirement Benefits and Death Compensation Fund, Khyber-Pakhtunkhwa General Provident Investment Fund and Khyber-Pakhtunkhwa Pension Fund.

CPEC exemptions

As the tax concessions for the China-Pakistan Economic Corridor (CPEC) projects continued for the next fiscal year as well, the government has thus proposed lowering the income tax rates for contractors of the Lahore Orange Line Metro Train Project from 15% to 6%. Similarly, the income of the Chinese company responsible for the Lahore Matiari transmission line project is exempted from the 12.5% dividend tax.

The government has also cut the income tax rates for M/S CR-NORINCO JV, the Chinese contractor working for installation of electrical and mechanical equipment in the Orange Line project, to 6% of the gross amount of payment.

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Likewise, companies responsible for the import of plant, machinery and equipment including dumpers and special-purpose motor vehicles imported for construction of the Sukkur-Multan section of Karachi-Peshawar Motorway project and Karakorum Highway (KKH) Phase-II (Thakot to Havellian Section) are also exempted from withholding taxes.

Similarly, import of equipment to be furnished or installed for Rail Based Mass Transit Projects in Lahore, Karachi, Peshawar and Quetta under the CPEC are also exempted from withholding taxes.

COMMENTS (1)

Rustam | 5 years ago | Reply For a project, if the contract has already been signed, any exemption of tax at a later stage is an obvious favor to the contractor. It is unfair to the nation, as the price in the contract was already agreed in the circumstances when such exemption did not exist. Therefore, the contract price already includes the tax. Thus motive of enacting the exemption can be corruption. Are relevant regulatory authorities awake to check and balance such unfair practices?

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