FBR to allow NCCPL toverify tax liabilities, refunds

KARACHI: The Federal Board of Revenue (FBR) on Tuesday proposed a law that will enable the National Clearing Company of Pakistan Limited (NCCPL) to verify the tax liabilities and compute refunds of members and investors of Pakistan Stock Exchange (PSX) and Pakistan Mercantile Exchange (PMEX). 

The FBR, in the draft amendments into the Income Tax Rule, 2002, said the NCCPL will verify the tax liabilities calculated by asset management companies and PMEX.  “It (NCCPL) will compute the net capital gains, tax liability or refund for each investor to be collected from or refunded to the asset management companies or PMEX,” said the draft.

The amendments will authorise the FBR to directly obtain information from the NCCPL regarding member, broker and investors of the PSX as well as members of PMEX and unit holders in mutual funds.

Under the new amendments, a PSX or PMEX investor has to submit affidavit of true declaration regarding securities’ transaction conducted during the tax period as per the ledger statement and Central Depository Company’s statements.

The FBR said the amendments will be implemented after seven days in consultation with the stakeholders and allow the NCCPL to regulate the PMEX members. The FBR said if cumulative yearly refund per investor is below Rs1,000, then it will be carried forward for adjustment in the next month. “However, any refunds, irrespective of the amount, shall be refunded at the year end,” it added.

Currently, the NCCPL is regulating only PSX members on behalf of the FBR.  The NCCPL will issue a certificate of capital gains to a taxpayer to certify that the tax is deducted and deposited into the national exchequer.

“In case of portfolio transfer where ownership of securities is not changed then no capital gain tax will be computed,” the draft law said. “In such a case, the date and cost of acquisition of the securities shall not be changed owing to such portfolio transfer.”

In other cases, including transfer by investor from one fund in an asset management company to another fund maintained by same or another asset management company, such transfer will be treated as disposal and will be taxed accordingly.

The FBR said units of open-end mutual funds and future commodity contracts have been brought under NCCPL from July 1. “Accordingly, the investor will be entitled to have the capital loss adjusted against the capital gain, while NCCPL will calculate capital gains tax liability after adjustment of capital losses for the year,” it said.