The Federal Board of Revenue (FBR) has informed the Ministry of Commerce (MoC) that incentive package for Pakistan-China investment zones in manufacturing sector has allowed system-based withholding tax exemption on the import of plant and machinery by the Chinese investors.
Sources told Business Recorder on Tuesday that the FBR had elaborated details of the tax incentives available to the investors in the Pakistan-China investment zones. The FBR conveyed to the Commerce Ministry that the tax authorities had taken various steps for implementation of the package of incentives listed at clauses of the annexure attached with the "Amending Protocol to the Free Trade Agreement (FTA) between Pakistan and China."
As far as income tax is concerned, SRO.947 (I)/2008 grants a system-based exemption on import of plants/machinery, where only a certificate is required to be issued by the concerned Commissioner of Income Tax. The provisions of sub-section (1) of section 148 of Income Tax Ordinance would not be applicable to different categories of investors/importers, including new industrial undertakings under SRO.947 (I)/2008.
Besides this, section 23A of the Income Tax Ordinance, 2001 read with Third Schedule of the said ordinance allows 90 percent First Year allowance to plant, machinery and equipment to investors in "specific areas" notified by the Federal government.
On the sales tax side, exemption from sales tax under section 13 of the Sales Tax Act 1990 is available to plant, machinery and accessories, including capital goods, if not manufactured locally, through SRO issued on April 12, 2007. The FBR's Customs Wing has also notified exemption from customs duties/sales tax on import of capital equipment for utilisation in Pak-China investment zone vide an SRO of January 19, 2009.
The sources said that the Incentive Package for Pakistan-China investment zones in the manufacturing sector has been implemented in terms of SRO 42(1)/2009. Through this notification, the FBR exempted customs duty and sales tax if imported for the development of Pakistan-China investment zones and for establishing projects in these zones. However, the capital equipment (plant, machinery, equipment and accessories), imported for the zones, will not be removed from the zones without the permission of the FBR within five years of their importation.
In case of partial shipments of machinery and equipment for setting up a plant, the importer shall, at the time of arrival of first partial shipment, furnish complete details of the machinery, equipment and components required for the complete plant, duly supported by the contract, layout plan and drawings. Exemption of sales tax under section 13 of the Sales Tax Act, 1990 is already available to plant, machinery, equipment and accessories, including capital goods, if not manufactured locally, through Customs notification SRO.316(I)/2007.
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