All the taxes imposed in the Federal Budget 2004-05 on the sale and purchase of shares and withholding tax on earnings through carry over transactions would be collected by the stock exchanges of the country on behalf of the Central Board of Revenue.
According to notice issued by the Karachi Stock Exchange (KSE) to all members, the management has circulated all the notification in the Finance Act, 2004, regarding deduction of withholding tax by a registered stock exchange on sale of shares, regarding deduction of withholding by a registered stock exchange on commission income of a member of stock exchange, deduction of withholding tax by a registered stock exchange on carry-over trade mark-up and collection of capital value tax (CVT) by a registered stock exchange.
The finance ministry released four circulars which said that a registered stock exchange in Pakistan shall collect tax at the rate of 0.005 percent on the sale of trading value of shares, 0.005 percent of the purchase value, 0.005 percent on sale value of shares, and CVT at the rate of 0.01 percent transacted through its automated trading system in ready, future, provisional and any other counter(s), from July 1, 2004.
The exchanges would also collect advance tax at the rate of 10 percent on carry over trades commonly known as ''badla'' mark-up transacted through its automated system in CoT market.
Any sale of shares carried by the brokerage houses and/or their agents either manually or through electronic system, including matching of orders in any interest-based trading system, and not routed through the stock exchange automated system, shall also be liable to be taxed at the same rate.
Regarding CoT, the notification said the member concerned of the stock exchange shall collect tax from its financiers and together with tax on proprietary trading, if any, shall pay tax on such transactions to the stock exchange along with the statement. In case, of no transactions, a nil statement shall be submitted by the member concerned.