30% Tax Cut For Shariah Compliant Listed Companies
30% Tax Cut For Shariah Compliant Listed Companies: In another happening Government is considering a tax cut of 30% to encourage listings of shariah-compliant companies on the stock exchange in the new budget for the fiscal year 2019 under clause 18(b) has been inserted in the Second Schedule Part-II of the Income Tax Ordinance, 2001 through the Finance Act.
The Securities and Exchange Commission of Pakistan (SECP) proposed to the FBR to reduce 30% of the tax payable by Shariah-compliant companies for listing on the stock exchange in order to develop Islamic capital market in line with the government policy.
Federal Board of Revenue (FBR) confirmed that a tax cut proposal is in active consideration and tax credit facility in the range of 10 to 20% might be granted through the upcoming Finance Bill of 2018/19.
Benefits of Tax Cut
- Analysts said the Shariah-Compliant listings would attract capital inflows from Islamic countries, which hold billions of dollars in surplus and are searching investment avenues.
- SECP said the tax incentive will develop Shariah-Compliant capital market, which will lead to equitable distribution of wealth and income.
- Shariah-Compliant listings would attract capital inflows from Islamic countries, which hold billions of dollars in surplus and are searching investment avenues.
- provide more avenues to Shariah-Compliant avenues to the investors
- Employment generation in the respective sectors will also increase the tax revenue.
The screening criteria to become eligible for the tax rebate will be approved by the State Bank of Pakistan (SBP), the SECP and the Federal Board of Revenue (FBR).
Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI)
SECP is implementing standards issued by the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), an Islamic international non-profit body that prepares accounting, auditing, governance, ethics and Shariah standards for Islamic financial institutions. Bahrain, Oman and Pakistan have so far made AAOIFI standards adoption mandatory. One of AAOIFI’s main goals is to provide a set of standards for Islamic finance transactions similar to the roles of International Accounting Standards and International Financial Reporting Standards for conventional banks and financial institutions.
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