ISLAMABAD: The Federal Board of Revenue (FBR) is expected to incorporate a budget proposal of the Securities and Exchange Commission of Pakistan (SECP) in the Finance Bill, 2022 to grant tax incentives on the issuance of Green Bonds and Gender Bonds from the next fiscal year (2022-23).
In this connection, the budget makers are seriously considering this budget proposal in the upcoming budget.
Another proposal under consideration is to grant tax credit for the issuance of Green Bond and Gender Bond, sources said.
Sources explained that the SECP has defined Green bonds as “debt securities, including Sukuks, issued by an issuer including corporates, entities owned or controlled by the government, whether through public offer or by way of private placement, where the proceeds exclusively applied to finance or re-finance, in part or in full, new and/or existing eligible Green Projects.”
All issuers who are eligible to issue debt securities, including Sukuk either by way of a public offer or private placement, are eligible to issue green bonds while ensuring compliance with the applicable regulatory framework.
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Moreover, the Gender Bonds would increase the financial inclusion of women and encourage female entrepreneurship. This would facilitate companies and issuers of debt securities to diversify their source of financing and provide an additional financial instrument to a particular class of investors.
As a step towards the promotion of gender equality – the issuance of gender bonds will improve women’s access to leadership positions and gender-positive corporate policies.
The SECP has informed the FBR that the government should provide tax incentives relating to the issuance of green bonds and gender bonds. Such tax incentives would attract both issuer(s) and investors.
An increase in the issuance of green bond/gender bond would also contribute toward Social Economic Developmental Goals, benefiting society as a whole.
The proposed section in the Income Tax Ordinance 2001 reads as: The Second Schedule - Part IV Exemption from Specific Provision Income, or classes of income, or persons or classes of persons, enumerated below, shall be exempt from the operation of such provisions of this Ordinance, subject to such conditions and to the extent, as are specified hereunder:-(36E) The provisions of section 151 shall not apply on profit on debt paid on bonds issued under the Federal Government Duty Drawback Bonds Rules,2019]”. “36F) The provisions of section 151 shall not apply on profit/return of Green/Gender/ sustainable Bonds or Sukuks issued under SECP’s Guidelines for issuance of Green/Gender/ sustainable bonds.”
In case, the FBR grants tax credit facility, the following new section is proposed to be inserted in the ITO 2001: “65 H. Tax credit for issuance of Green Bond/Gender/sus-tainable Bond. — Where a taxpayer being a company issues a green/gender/sus-tainable bond as per the guidelines issued by SECP, a tax credit equal to five percent of the tax payable shall be allowed till redemption of said bonds, the proposed section in the Income Tax Ordinance 2001 added.
Copyright Business Recorder, 2022
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