PCMA demands restoration of group tax facility

KARACHI: Chemical manufacturers have urged the government to restore group tax facility to encourage corporatisation in the country, a statement said on Wednesday.

“The process of corporatisation would be discouraged if the government did not restore group tax facility under Section 59B along with clause (103A) of the Income Tax Ordinance, 2001,” Pakistan Chemical Manufacturers Association (PCMA) Senior Vice President Zafar Mahmood said.

He said the group tax relief should be revived before the final approval of the federal budget by the National Assembly.

The government has introduced the concept of group taxation and group relief to promote corporatisation and group formation, allowing the corporate entities to grow into conglomerates.

For this purpose, section 59B along with clause (103A) of the Income Tax Ordinance, 2001 regarding group relief remained active till the announcement of the current federal budget.

Under this facility, a company owning 55 percent or more of a subsidiary company was to pay tax on dividend received from the subsidiary at the time of distribution to

ultimate shareholders;

thus, curbing the chances of double taxation on dividend, he said.

Mahmood said that the facility was adopted by the government in line with the best international practices to promote corporatisation in the country, as a result of which a number of industrial groups had formed the group structures.

“But, to the surprise of the industry, the Section 59B that deals with the group relief, has been omitted and benefit of exemption of inter-corporate dividend has been withdrawn,” Mahmood said, adding that the situation has forced large industrial groups to pay double tax on dividend in case of one subsidiary and triple tax on dividends in case of dividend received from the subsidiary of a subsidiary.