FBR Planning to Remove These Corporate Income Tax Exemptions

The Federal Board of Revenue (FBR) is presently reviewing the following list of corporate income tax exemptions with revenue impact for possible withdrawal before the next fiscal year:

1. Tax credit for investment in balancing, modernization, and replacement of plant and machinery (corporate manufacturing sector), Rs. 65.168 billion.
2. Tax credit for enlistment in Stock Exchange (Companies opting for enlistment in a registered stock exchange), Rs. 357 million.
3. Tax credit for newly established industrial undertakings corporate industrial units (including corporate dairy farming), Rs. 5.573 billion.
4. Tax credit for industrial undertakings established before the first day of July 2011 (corporate industrial units including corporate dairy farming), Rs. 6.486 billion.
5. Income tax exemption to the ECO Trade and Development Bank (The ECO Trade and Development Bank), Rs. 495 million.
6. Income tax exemption to Pakistan Mortgage Refinance Company Limited, Rs. 0.9 million. (Income tax exemption on any income derived by Sukuk holder in relation to Sukuk issued by “The Second Pakistan International Sukuk Company Limited” and the Third Pakistan International Sukuk Company Limited, including any gain on disposal of such Sukuk. Sukuk holders, Rs. 2.771 billion impact)
7. Profit on debt derived by Hub Power Company Limited on or after the first day of July 1991 (Hub Power Company Limited). Exemption impact of Rs. 1.66 million.
8. Any income of an agency of a foreign government, a foreign national (company, firm, or association of persons), or any other non-resident person approved by the Federal Government for the purposes of this clause, from profit on money borrowed under a loan agreement or in respect of foreign currency instrument approved by the Federal Government. Agencies of foreign governments, foreign nationals, or any other non-resident person approved by the Federal Government, Rs. 6.557 billion.
9. Income tax exemption to the Collective Investment Schemes or a REIT Schemes Collective Investment Schemes and REIT Schemes that are distributing more than 90 percent of their incomes to certificate holders/shareholders, Rs. 5.228 billion.
10. Income tax exemption available to the Modarabas, Rs. 425 million.
11. Venture capital companies and venture capital funds registered under Venture Capital Companies and Funds Management Rules, 2000, and a Private Equity and Venture Capital Funds (Venture capital companies venture capital funds, and Private Equity and Venture Capital Funds), Rs. 1 million impact.
12. Distributions received by a taxpayer from collective investment schemes or mutual funds (which are debt or money market funds and do not invest in shares) out of capital gains Investors investing in debt or money market mutual funds and collective investment schemes. Impact of Rs. 1 million.
13. Income tax exemption available to the income derived by the Government of Kingdom of Saudi Arabia being dividend of the Saudi-Pak Industrial and Agricultural Investment Company Limited. Government of Kingdom of Saudi Arabia, Rs. 25 million.
14. Income derived by Kuwait Foreign Trading Contracting and Investment Company or Kuwait Investment Authority being dividend of the Pak-Kuwait Investment Company in Pakistan (Kuwait Foreign Trading Contracting and Investment Company, and Kuwait Investment Authority), Rs. 38 million revenue impact of exemption.
15. Income received by a taxpayer from a corporate agricultural enterprise, distributed as a dividend out of its income from agriculture. Taxpayers receiving dividend income from corporate agricultural enterprises, Rs. 43 million.
16. Any gain on transfer of a capital asset, being a membership right held by a member of an existing stock exchange, for the acquisition of shares and trading or clearing rights acquired by such member in new corporatized stock exchange in the course of the corporatization of an existing stock exchange. Zero impact.
17. Any gain by a person on transfer of a capital asset, being a bond issued by Pakistan Mortgage Refinance Company to refinance the residential housing mortgage market, during the period from the 1st day of July 2018 till the 30th day of June 2023. (Persons deriving gain from bonds issued by Pakistan Mortgage Refinance Company), zero impact.
18. Income tax exemption available to the listed companies on the income derived by China Overseas Ports Holding Company Limited, China Overseas Ports Holding Company Pakistan (Private) Limited, Gawadar International Terminal Limited, Gawadar Marine Services Limited, and Gawadar Free Zone Company Limited from Gawadar Port operations for a period of twenty-three years, with effect from the sixth day of February 2007, Rs. 3 million revenue impact.
19. Profit on debt derived by (a) any foreign lender, or (b) any local bank having more than 75 percent shareholding of the Government or the State Bank of Pakistan, under a Financing Agreement with the China Overseas Ports Holding Company Limited Foreign lenders or public sector banks/State bank having financing agreement with the China Overseas Ports Holding Company Limited, zero revenue impact.
20. Income derived by contractors and sub-contractors of the China Overseas Ports Holding Company Limited, China Overseas Ports Holding Company Pakistan (Private) Limited, Gawadar International Terminal Limited, Gawadar Marine Services Limited, and Gawadar Free Zone Company Limited from Gawadar Port operations Contractors and sub-contractors of listed companies from Gawadar Port operations, zero revenue impact.
21. Income derived by China Overseas Ports Holding Company Limited being dividend received from China Overseas Ports Holding Company Pakistan (Private) Limited, Gwadar International Terminal Limited Gwadar Marine Services Limited, and Gwadar Free Zone Company Limited China Overseas Ports Holding Company Limited, zero revenue impact.
22. Profit and gains derived by Khalifa Coastal Refinery (Khalifa Coastal Refinery), revenue impact zero.
23. Income tax exemption available to the Oil refineries, Rs. 443 million revenue impact.
24. Industrial undertakings set up in Larkana Industrial Estate, Zero revenue impact.
25. Income derived by a zone enterprise as defined in the Special Economic Zones Act, 2012 and developer of the zone for a period of ten years (Zone enterprise as defined in the Special Economic Zones Act, 2012, and developers of zones), Rs. 198 million revenue impact.
26. Exemption to the Income of Astro Plastics (Pvt) Limited derived from their project Biaxially Oriented Polyethylene Terephthalate (BOPET) Project, and Income of Novatex Limited derived from their project Biaxially Oriented Polyethylene Terephthalate (BOPET) Project. Astro Plastics (Pvt) Limited, M/s. Novatex Limited, Zero revenue impact.
27. Industrial undertakings engaged in the manufacture of plant, machinery, equipment, and items with dedicated use for generation of renewable energy (Manufacturers of plant, machinery, and equipment for use in the generation of renewable energy sources), Rs. 11 million.
28. Income tax exemption available to the profits and gains derived by industrial undertakings set up for establishing and operating a halal meat production unit. Halal meat production units, Rs. 21 million.
29. Industrial undertakings set up in the Provinces of Khyber Pukhtunkhwa and Baluchistan Industrial undertakings set up in the Provinces of Khyber Pukhtunkhwa and Baluchistan between the 1st day of July 2015 and 30th day of June 2018. The revenue impact of Rs. 9 million.
30. Income tax exemption to the profits and gains derived by a taxpayer from a transmission line project set up in Pakistan (Companies deriving income from transmission line projects in Pakistan), Rs. 7 million.
31. Profits and gains derived by a taxpayer from an industrial undertaking, duly certified by the Pakistan Telecommunication Authority, engaged in the manufacturing of cellular mobile phones (Local cellular mobile phone manufacturers), Rs. 12 million.
32. Profits and gains of a company from a greenfield industrial undertaking incorporated on or after the first day of July 2019. Greenfield industrial undertakings, Zero revenue impact.
33. Royalty, commission, or fees earned from a foreign enterprise in consideration for the use outside Pakistan of any patent, invention, model, design, secret process or formula, or similar property right. Innovators and technical experts, Rs. 2 million.
34. Income tax exemption available to the electric power generation projects on the profits and gains derived by a taxpayer from an electric power generation project set up in Pakistan on or after the 1st day of July 1988, Rs. 26,888 million impact.
35. Profit and gains derived by Bosicor Oil Pakistan Limited. Bosicor Oil Pakistan Limited (refinery), Zero revenue impact.
36. Coal mining projects in Sindh, supplying coal exclusively to power generation projects. Coal mining projects in Sindh, Zero revenue impact.
37. Income from exports of computer software or IT services or IT-enabled services (exemption available to the exporters of computer software, IT services or IT enabled services), Rs. 1,239 million revenue impact.
38. Income derived by non-residents from investment in OGDCL exchangeable bonds issued by the Federal Government. Non-residents deriving income from investment in OGDCL exchangeable bonds issued by the Federal Government, zero revenue impact.
39. The income of a special purpose vehicle as defined in the Asset-Backed Securitization Rules, 1999 (Special purpose vehicles as defined in the Asset-Backed Securitization Rules, 1999), zero revenue impact.
40. Income tax exemption to the profit and gains derived by LNG Terminal Operators and Terminal Owners LNG Terminal Operators and Terminal Owners, Rs. 732 million revenue impact.
41. Income from social security contributions derived by the four provincial Social Security institutions. Provincial social security institutions, Rs. 5,017 million impact.
42. Income tax exemption available to the start-ups’. Startups as defined in clause (62A) of section 2 of the ITO-2001, the revenue impact of Rs. 635 million.
43. The income of individuals domiciled or companies and associations of persons resident in the erstwhile Tribal Areas. Individuals domiciled or companies and associations of persons resident in the ex-Tribal Areas, Rs. 4,454 million revenue impact.
44. The rate of tax shall be reduced by 2 percent in case of a company whose shares are traded on the stock exchange if it fulfills prescribed shari’ah compliant criteria approved by State Bank of Pakistan, Securities and Exchange Commission of Pakistan, and the Board, and derives income from manufacturing activities only. Shari’ah-compliant companies whose shares are traded on the stock exchange, revenue impact of Rs. 6 million.
45. The rate of tax under section 148 on import of hybrid cars shall be reduced as for the Consumers of Hybrid Cars: Upto 1200 cc – 100 percent; 1201 to 1800 cc – 50 percent; and 1801 to 2500 cc – 25 percent, revenue impact of Rs. 23 million.
46. For the e-commerce sector, the rates of tax as specified in Division II of Part-IV of the First Schedule shall be five percent in the case of a person running an online marketplace as defined in clause (38B) of section 2, revenue impact zero.
47. The reduction in tax liability is available for the old and used automotive vehicles, tax under section 148 shall not exceed the amount specified in Notification No. S.R.O. 577(I)/2005, dated the 6th June 2005 for the importers of old and used cars, revenue impact would be Rs. 1 million.
48. The provisions of section 148 shall not apply for import of plant, machinery, and equipment in the case of (a) M/s China State Construction Engineering Corporation Ltd. (M/s CSCEC), and (b) M/s China Communication Construction Company (M/s CCCC), the revenue impact of Rs. 836 million.
49. The provisions of section 148 shall not apply to the import of firefighting equipment by industrial undertakings set up in the special economic zones established by the Federal Government. The revenue impact of Rs. 23 million.
50. The provisions of the Income Tax Ordinance shall not be applicable to the M/s TAISEI Corporation under the agreement between National Highway Authority. The revenue impact of Rs. 84 million.
51. Provisions of sections 148 and 153 shall not be applicable on import and subsequent supply of items with dedicated use of renewable sources of energy importers and suppliers of items with dedicated use of renewable sources of energy. Revenue impact zero.

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