Revenue body submits draft of CGT rules

FBR submits a draft of rules and procedures for capital gains taxation to ministry of finance for approval.

ISLAMABAD: The Federal Board of Revenue (FBR) has submitted a draft of the rules and procedures for capital gains taxation to the ministry of finance for approval. The rules are aimed at curbing possible capital gains tax evasion by cross-trading or wash trading.

A senior official of the FBR said that Finance Minister Dr Abdul Hafeez Shaikh will return to the country on Wednesday and approve the draft. The officer added that the rules will be implemented through a notification issued by the ministry.

All stakeholders had been included in the drafting process and the decision to include transactions that consist of shares held for less than a day in the taxation net has been addressed in the draft, and that clauses have been placed to ensure that capital gains tax evasion does not occur during such transactions.

One of the clauses in the draft makes the broker responsible for any unpaid tax, the official said, adding that if the investor were to walk away without paying tax, then the tax will be the responsibility of the broker.

He said that the initial aim was to have investors and brokers file their returns by October 7. Although the tax could not be implemented by that date, the capital gains tax collection target will be met, he said.

Gains on shares held for a single day will be subject to the same tax bracket as shares held for six months. However, gains on shares held for more than a year will be exempt from taxation.

Published in The Express Tribune, October 13^th, 2010.