PTI govt to waive tax, duties on Eurobonds & Sukuk

Exemptions aimed at attracting capital from the international financial market

ISLAMABAD: The federal government has decided to waive income tax and duties for those investing in Eurobonds and Sukuk as per its medium-term note programme (MTN).

The finance ministry has already sent a summary to the government for the exemptions citing that the Income Tax Ordinance 2001 had a provision for it in its schedule II.

As per clause 75 of the schedule, any international government institution, private company, firm, association of persons or resident could be given tax exemption on income or interest against any loan agreement, foreign currency instrument, government scheme or treasury receipts.

However, as per the Rules of Business 1973, the federal government must be served with a formal request for the exemptions. After the federal government’s approval, the Federal Board of Revenue (FBR) will issue a formal notification for the exemptions permitted, according to finance ministry sources.



The waiver in income tax and duties on sovereign bonds is given to attract capital from the international financial market. As per the summary, previous governments had also exempted income tax on Eurobonds and Sukuk.

According to finance ministry's spokesperson Umar Hameed, the finance division completed the shortlisting of transaction advisers for its one-year Eurobonds and Sukuk under the MTN program on October 18.

The biddings were invited until October and after scrutiny of the applications, the finance division appointed seven international advisers for its sovereign bonds.

The finance division is scheduled to form two consortiums comprising of five conventional banks and five financial institutions each for Eurobonds and Sukuk bonds respectively. The consortiums will guide the finance ministry about floating, operations and effective transaction practices for the sovereign bonds, the sources said.

Pakistan will need to obtain the International Monetary Fund’s (IMF) permission to float its government securities comprising, Eurobonds, Sukuk and three-year bonds for exporters.

The process will take about three months before the government releases its securities by the end of this year. As per IMF guidelines, Pakistan can float sovereign receipts amounting to 3.5% percent of the GDP while the recent figure stands at 4.5% of the GDP. This has prompted the IMF to prohibit Pakistan from issuing further treasury receipts.

The federal cabinet had given approval for institutionalisation of the international capital market in its meeting held on July 16 this year.

As per decisions of the meeting, financial advisers were to be appointed for release and operation of sovereign bonds while the services of local and international legal counselors and rating agencies were also to be hired. As per the sources, the task will be completed soon.