KARACHI: Companies maintaining provident, gratuity and superannuation funds have asked the Federal Board of Revenue (FBR) to issue no-objection certificates (NOCs) for ensuring their registration under the Sindh Trust Act (STA) 2020.

Through the STA 2020, the Sindh government recently formalised the registration process for specialised funds such as employees’ provident, gratuity and superannuation funds. Previously, these funds operated as trusts and were registered under the Trust Act 1882.

The FBR has been the regulator of specialised funds, which are governed through the provisions of the Income Tax Ordinance 2001. However, with effect from Jan 1, 2022, the FBR has asked all such funds in Sindh to be registered under the STA 2020.

According to M. Abdul Aleem, secretary general of the Overseas Investors Chamber of Commerce and Industry, the STA 2020 does not “clearly mention” the status of already approved and recognised provident, superannuation and gratuity funds.

“This has raised alarm bells among the existing trust fund managers.

They have requested the Sindh government to provide explicit exemption to all funds registered prior to the introduction of the STA 2020,” said the head of the chamber representing more than 200 foreign investors operating in the country.

The employees’ retirement funds created before the enactment of the STA 2020, which are already registered with the FBR, should not be required to obtain NOCs from the federal body, he added.

The requirements of the STA 2020 regarding the application for registration, verification of application and registration of properties shouldn’t be applicable to employees’ retirement funds created before the enactment of the STA 2020, he said.

So far, the FBR hasn’t issued any NOC to specialised funds. As a result, all trusts created before the passage of the STA 2020 are facing difficulties in obtaining the registration under the provincial piece of legislation.

In the absence of registration certificates issued under the STA 2020, provident, gratuity and superannuation funds aren’t able to receive their withholding income tax exemption certificates from respective commissioners of the FBR.

Published in Dawn, April 19th, 2022