ISLAMABAD: The Pakistan Business Council (PBC) has expressed serious concern over the Federal Board of Revenue’s (FBR) SRO 229(I)/2023 for maintaining records of beneficial owners by companies despite similar documentation required under the Securities and Exchange Commission of Pakistan’s (SECP) laws.
FBR Chairman Asim Ahmad has received a letter from the PBC on the implications of the FBR’s SRO on the corporate sector.
The FBR had issued SRO 229(l)/2023 dated February 28, 2023 that proposed amendments to the Income Tax Rules, 2002 to introduce a new chapter of ‘Record of Beneficial Owners’ for the companies.
PBC objects to SRO on records of firms’ beneficial owners
The PBC has requested the FBR to immediately withdraw the SRO about the retention and provision of records of beneficial owners of companies.
The SECP has already mandated that companies maintain a record of Ultimate Beneficial Owners through the introduction of Section 123A of the Companies Act 2017, and through amendments to the Companies (General Provisions and Forms) Regulations, 2018 in the form of SRO 928(I) / 2020, which includes new 19A - Additional Particulars of Ultimate Beneficial Owners.
The SECP’s legal requirements contain a detailed procedure for companies to identify and obtain information on their ultimate beneficial owners, and to report the same to the SECP through several prescribed forms.
As per the SECP’s SRO 928(I) /2020, the company is required to make a note of declarations in a register of ultimate beneficial owners maintained by it for such purpose containing various particulars such as name, father’s name/ spouse’s name, CNIC/ NICOP/ passport number along with date of issue, nationality, country of origin, usual residential address, email address, date on which shareholding, control or interest was acquired in the company, date on which shareholding, control or interest was acquired in the company from former ultimate beneficial owner, and in case of indirect shareholding, control or interest being exercised through intermediary companies, entities or other legal persons or legal arrangements in the chain of ownership or control, the company shall take reasonable measures to obtain names and particulars of the ultimate beneficial owner of the legal persons or arrangements.
As such, complying with the existing requirements set by the SECP is already a considerable undertaking, given the extensive and comprehensive list of particulars required. Therefore, the FBR’s SRO 229(I)/ 2023 is not only redundant but it also doubles the work, which will certainly go against the slogan of “ease of doing business in Pakistan” for foreign investors.
Rather than improving collaboration and data sharing between the various regulators, however, FBR is attempting to introduce additional rules and documentation to an already well-documented sector. Not only does this impose additional responsibilities on companies and shareholders, it also goes beyond the necessary scope for effective exchange of information for tax transparency.
The companies are already heavily burdened with numerous compliance requirements, interalia of identifying and obtaining information of ultimate beneficial owners and reporting the same to SECP. Sharing such information with FBR, through yet another prescribed manner, including enhanced testing requirements in certain cases to identify and obtain names and particulars of ultimate beneficial owners, would be a step towards over regulation of an already well-documented and regulated sector.
Similarly, there is a risk that the provision on retaining and providing data may end up violating the provisions of the proposed Personal Data Protection Act, 2021, and data protection laws internationally. Moreover, companies should only deal with one regulator as far as beneficial ownership and its data are concerned so that one format and a uniform approach is followed, PBC added.
Copyright Business Recorder, 2023