Pakistan amends CGT rules
26 July 2011 Lahore
Image: Shutterstock
The Pakistani Federal Board of Revenue (FBR) has issued draft amendments to the Income Tax Rules relating to the treatment of the capital gains tax (CGT).
According to the draft rules, for the purpose of calculating CGT, the cost of acquisition of shares will include the borrowing cost when investment is made through the margin trading system or any other leverage product approved by the Securities and Exchange Commission of Pakistan (SECP).
This adjustment bodes positive for the margin trading system, which has so far not lured interest of market participants. Furthermore, profit earned through sale of borrowed shares, under the securities lending and borrowing mechanism, will be treated as capital gain and it will be calculated as the difference between sale and purchase price net of all borrowing costs.
Wash sales by the same investor have been allowed for tax adjustments against the capital gains under the new draft rules; however, the same within related parties continue to be non-adjustable for CGT.
The filing of quarterly CGT for non-individual investors has been increased to 21 days from seven days previously. Moreover, the Federal Board of Revenue will directly obtain information regarding market participants from the National Clearing Company of Pakistan Limited (NCCPL).
According to the draft rules, for the purpose of calculating CGT, the cost of acquisition of shares will include the borrowing cost when investment is made through the margin trading system or any other leverage product approved by the Securities and Exchange Commission of Pakistan (SECP).
This adjustment bodes positive for the margin trading system, which has so far not lured interest of market participants. Furthermore, profit earned through sale of borrowed shares, under the securities lending and borrowing mechanism, will be treated as capital gain and it will be calculated as the difference between sale and purchase price net of all borrowing costs.
Wash sales by the same investor have been allowed for tax adjustments against the capital gains under the new draft rules; however, the same within related parties continue to be non-adjustable for CGT.
The filing of quarterly CGT for non-individual investors has been increased to 21 days from seven days previously. Moreover, the Federal Board of Revenue will directly obtain information regarding market participants from the National Clearing Company of Pakistan Limited (NCCPL).
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