President Dr. Arif Alvi signed the Foreign Investment (Promotion and Protection) Bill, 2022 on Tuesday.
The bill provides investment/tax incentives to certain qualified foreign investments in exchange for the confidentiality of investors’ banking transactions. The president approved the bill under Articles 70(1) and 75 of the Constitution.
The new bill will provide for the promotion and protection of certain qualified foreign investments in order to ensure sustainable economic activity and growth, and improve the investment climate in Pakistan by providing incentives in direct and indirect taxes, as well as ease of transfer and repatriation. Under principal offerings streamlined by the new bill, the federal government, provincial governments, local governments, and other relevant authorities will be able to collaborate and work together to ensure the provision of incentives and protection to qualified investments.
The qualified investment model of the bill would cover Reko Diq including all work done by the Reko Diq Mining Company (Private) Limited (formerly Tethyan Copper Company Pakistan (Private) Limited) (“RDMC”) and its affiliated companies.
The federal government may notify additional investments, sectors, industries, or projects as qualified investments via the Foreign Investment Bill. It also has the authority to select and approve qualified investments, provided that no investment shall be notified as a qualified investment unless the amount to be invested is greater than $500 million.
More importantly, the secrecy of all qualified investors’ banking transactions shall be strictly observed by all banks and financial institutions, regardless of who owns, controls, or manages them.
Pertinently, qualified foreign investments would be eligible for tax exemptions under the Income Tax Ordinance, 2001, such as the tax on profits and gains, income tax, turnover tax, withholding tax on interest, capital gains tax, income tax on dividend income, and withholding tax on dividend, exemption or concession on sales tax under the Sales Tax Act, 1990; and sales tax on services under respective provincial laws.
Other exemptions may cover tax breaks from capital value tax, Customs duty under the Customs Act, 1969, any export duty or similar duty on exports of any products manufactured in Pakistan or raw materials, equipment, machinery, components, catalysts, spare parts, hardware, software, devices, instruments, accessories; and exemption from federation duty.