The Federal Board of Revenue (FBR) has shown surprise that so far not a single investor has availed the lucrative 'tax credit for equity investment scheme' announced in budget (2011-2012) for newly established industrial undertakings and tax credit to companies with 100 per cent equity investment in the purchase and installation of plant and machinery for balancing modernisation, replacement.
Sources told Business Recorder here on Monday that 'tax credit for equity investment scheme' was the biggest tax relief measure announced in last budget (2011-2012). So far, no new investor has availed the benefits of the tax credit scheme.
However, exact status of the 'tax credit for equity investment scheme' would be known at the closure of current financial year on June 30, 2012. By the end of current fiscal, the FBR will be in a better position to give proper status of the 'tax credit for equity investment scheme' based on data being collected from the field formations.
It is important to mention that a new section 65D was introduced in the Income Tax Ordinance in last budget to provide incentive for investment in new industrial undertaking in Pakistan. Tax rebate equal to 100 of the tax payable by a newly established company is admissible where all laid down conditions are fulfilled.
The industrial undertaking managed by such company is set up/established in Pakistan between July 1, 2011 and June 30, 2016. The said industrial undertaking is established with 100% equity owned by the said company. The company or the industrial undertaking is not established by the splitting up or reconstruction or reconstitution of an industrial undertaking already in existence and the company or the industrial undertaking is not established by transfer of machinery or plant from an existing industrial undertaking.
Tax credit under this section shall be available for a period of five years, which will begin from the date of setting up of such industrial undertaking or from the date of commencement of commercial production.
In case of tax credit for equity investment for BMR/Expansion in Industrial unit, the newly introduced section 65E is meant to provide tax credit on investment by a company with 100% equity investment in balancing, modernisation, replacement, or for expansion of the plant and machinery already installed, in an industrial undertaking set up in Pakistan before July 1, 2011 subject to the fulfilment of laid down conditions. Tax credit shall be allowed on the basis of proportion which such equity investment bears to the total investment in the company. The tax credit shall be allowed if the plant and machinery is purchased and installed at any time between July 1, 2011 and June 30, 2016 and amount of tax credit shall be allowed against the tax payable by the taxpayer in respect of the tax year in which the plant or machinery is purchased and installed and for the subsequent four years, FBR added.