PSX seeks WHT exemption on bonus shares

KARACHI: Pakistan Stock Exchange (PSX) on Friday sought a withdrawal of withholding income tax on bonus shares issued by listed companies from the Federal Board of Revenue.

The PSX proposed this in its tax proposals for the fiscal year 2017/18 at a meeting attended by Special Assistant to Prime Minister on Revenue Haroon Akhtar Khan and Chairman FBR Muhammad Irshad. Zafar Hijazi, chairman of the Securities and Exchange Commission of Pakistan, Munir Kamal, chairman and Nadeem Naqvi, managing director of PSX and senior officials of FBR also attended the meeting.

Sources in the FBR said the stock exchange demanded the exemption on the ground that the listed companies are documented and there are problems in adjustment of paid withholding tax.

Currently, listed companies are required to withhold five percent tax on the bonus shares issued to the shareholders. The stock exchange also asked for an extension in the period for tax credit in case of a new listing. Presently, tax credit is allowed to a new listing for two years, which is very short period. The PSX demanded an extension in the period to five years.

Currently, there is a 7.5 percent capital gains tax on shares sold after two years. The stock exchange asked this period to be restricted to five years. After five years, there should not be any tax on the shares disposal, it was proposed.

The PSX also proposed that income tax on rental real estate investment trust should be exempted. Further, the earnings of the stock exchange should be treated as stock rather than money market fund for the taxation purpose.

Stock brokers also urged the FBR to withdraw the minimum tax regime and they be allowed adjustment against expenditures. Currently, they fall under the services sector and bear eight percent minimum tax, much higher considering their return on commission. 

The stock brokers also demanded the settlement of stuck refunds on account of tax paid under the transfer of membership rights of a stock exchange. Arif Habib, former president of the exchange along with Abdul Qadir Memon, chairman of the Taxation Committee of the PSX, explained the present key issues and proposals for the growth and betterment of the capital market, which would result in revenue generation and contribution to the national exchequer.