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Draft amended: NCCPL to collect CGT

July 26, 2012

ISLAMABAD, July 26: The Federal Board of Revenue (FBR), in an amended draft of Capital Gains Tax, has authorised the National Clearing Company of Pakistan Limited (NCCPL) to collect tax made on profit during the purchase and sale of shares at the capital markets.

NCCPL will also be responsible to deposit the tax collected to the FBR as opposed to previously where investors were liable to deposit the Capital Gains Tax (CGT) themselves.

“The main point of this new amendment is that the major emphasis is on automation, and human interaction has been minimised with regards to the collection of CGT,” an FBR official said, in hopes of increasing CGT collection.

The amended draft is available on FBR’s website and the public is encouraged to give its feedback by August 3.

“If any serious kind of objections are not received that the authorities have overlooked, the ordinance is expected to be notified by the end of August 2012,” said an FBR official.

Under the new regime, to compute the CGT, transactions and their corresponding values with NCCPL, stock exchanges and the Central Depository Company of Pakistan Limited will be taken into account.

The CGT collection during 2011-12 was around Rs445 million, and the officials accounted the low collection due to the self-filing regime, in which most investors did not pay their CGT.

The draft law on the FBR website stated that, “these rules shall apply to capital gains derived from listed securities on or after the April 24, 2012.”

The CGT rate would remain the same; 10 per cent capital gains tax will be imposed on profits made from stocks sold within six months of purchase and eight per cent on stocks sold between 6 months to a year. CGT will not be applicable for shares that have been held by investors for over one year and the base of computation will be from April 24, 2011. Officials said the time of holding the stocks will be calculated from April 24, 2011 for shares sold after April 24, 2012. A FBR official said that the collection procedure had been simplified to “A-B”, which is the purchase price minus sale price.

The draft law also highlighted that ‘capital gain or loss arising on the disposal of listed securities shall be computed on the basis of FIFO method.”

There has been confusion among investors over the timing of the sale of a stock as they maintained that shares that they had sold were of the same company’s shares they had bought earlier.

“Under the new regime, scrip of the same company would be counted as one entity and the same number of shares purchased on the first date would be taken for computing the CGT,” according to the FBR official.