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Budget 2014-15: Incentives and relief measures announced

Budget 2014-15: Incentives and relief measures announced

ISLAMABAD: While announcing the budget for year 2014-15, the Finance Minister Ishaq Dar announced these relief measures:

  • Relief for Capital Market: A star performer of Pakistani economy during the FY 2013-14 has been the stock market. The rate of capital gains tax was to increase from 10% to 17.5% with effect from 1st July 2014. However, to ensure continued stability in the stock market, it is proposed that with effect from 1st July 2014 CGT rates shall be 12.5% for securities held up to 12 months and 10% for securities held for a period which is between 12 to 24 months, whereas the securities held for more than 24 months shall be exempt from CGT.
  • Investment Incentives for Foreign Direct Investment: To achieve the vision of an industrialized Pakistan in the foreseeable future we want to attract both domestic and foreign investment into the manufacturing sector. This august House would recall that the Prime Minister had earlier announced a special package for promoting investment in the manufacturing, construction, housing and mining sectors for the domestic investors. In order to attract Foreign Direct Investment in manufacturing, construction and housing sectors, it is proposed that corporate tax rate be reduced to 20% if the investment is in a new industrial undertaking or a construction or housing project to be set up by 30th June 2017 and at least 50% of the total project cost in the form of equity through FDI. This will also generate employment, which is one of our major challenges.
  • Incentive for Joint Ventures between Companies and AOPs: The non-resident companies investing in Pakistan had to create a joint venture with a local company and the contract receipts of such joint ventures were taxed as final tax in the hands of the joint venture/AOP and thus the non-resident companies could not enjoy their status of being a non-resident. To facilitate such arrangements for the non-residents, it is proposed that if one member of the joint venture is a company, it should be taxed separately at the applicable rate while the individuals should be taxed as an AOP separately.
  • Incentives for Agriculture: To promote agricultural sector we are proposing concessions for encouraging tunnel farming by removing customs duty on import of plastic coverings and mulch film, anti-insect net and shade net. Sales tax on high irrigation equipment and equipment for green house farming is also proposed to be exempted.
  • Reduction in the Corporate Tax Rate: Business community has been agitating that corporate tax rates are quite high and act as deterrent to the promotion of corporatization. In accordance with the already announced policy it is being proposed to reduce the corporate tax rate by one percent. Therefore, for tax year 2015, the corporate tax rate shall be 33%.
  • Reduction in the Withholding Tax on Marriages and Functions: Last year the adjustable advance withholding tax @ 10% was introduced on persons arranging marriage and other functions for the purpose of documenting expenses made by persons out of the tax net. At present, the rate of advance income tax on functions and gatherings is 10%. Marriage functions at shadi halls are becoming the norm. Therefore the 10% rate is creating hardship even for the middle class. It is proposed to reduce the rate from 10% to 5%.
  • Relief for the Disabled Persons: The Government feels that the disabled persons need empathy and special consideration. It is being proposed to reduce tax liability of such persons having income up to Rs.1 million by 50%.
  • Reduction of Taxes on Telecommunication Sector: Telecommunication has become a necessity for all segments of society. Telecom Services are highly taxed as both FED and GST on Services continue to be imposed on them. In order to simplify the tax regime, it has been decided to withdraw FED from those provinces which have imposed GST on Telecom Services. In areas where FED shall continue to be collected, the rate is proposed to be reduced from 19.5% to 18.5%. Furthermore, it has been decided to reduce the rate of Withholding Income Tax on telephone services from 15% to 14%.
  • Removal of Income Support Levy: Income Support Levy Act was promulgated through the Finance Act, 2013. The aim was to mobilize additional resources for the economically distressed persons. However, the public at large did not accept this measure as it was considered harsh and was perceived as double taxation. The Government has decided to accept the demand and it is proposed to repeal the Income Support Levy Act, 2013.