Federal Govt Incentives
(A) Gwadar: Exemption of custom duties (apply to all) on import of machinery, equipment for setting up of Power Generation, Water Treatment, and infrastructure related projects. Concessionary rate of 5% CD on import of machinery & equipment for hotels and Gwadar port.
(B) Mineral Sector:
- Exemption of CD on import of machinery, equipment, specialized vehicles, accessories, Spares Chemicals and consumables.
- For Mine Construction & Extraction Phase concessionary rate of 5% CD on machinery, equipment, specialized vehicles, accessories, spares, chemicals and consumables.
(C) Thar Coal Field: Exemption of customs duty and sales tax on import of coal mining machinery, equipment materials, spares and vehicles for site use. Exemption from Income Tax on profits & gains of Coal mining projects.
(D) Renewable Energy: Exemption of CD on import of machinery, equipment and spares for power generation through solar, wind, micro-hydel, bio-energy, ocean, waste-to waste & hydrogen cell. Exemption from sales tax and Income tax on import of plant and machinery not manufactured in Pakistan for solar, nuclear and renewable energy.
(E) Energy Projects: First Year Depreciation Allowance of 90% of cost , in lieu of initial allowance. Private sector power project is exempt from Income tax. Dividends to the shareholders are taxed at reduced rate of 7.5%, then at 10%.
(F) Oil Exploration and Production Sector: SRO 678(I)2004 provides concessionary rate of Custom duty & exemption of Sales tax on machinery, equipment, chemicals, consumables specialized vehicles and helicopters.
(G)Temporary Importation Scheme: Exemption of customs duty and sales tax on Materials, components & accessories. Prior authorization not required. Transfer of ownership allowed
(H) Exemption of Interest Income: Exemption of interest on loan received by a non-resident person for project in Pakistan is exempt from all tax subject to certain conditions. Export Finance Credit is allowed at substantially reduced interest
(I) Head office expenditure: Head office expenditure is allowed to non-resident operating through a branch in Pakistan.
Relief Package Announced in Budget 2014-15
A) Investment Incentives for Foreign Direct Investment: To attract Foreign Direct Investment in manufacturing , construction and housing, corporatetax rate has been reduced to 20% if the investment is in a new industrial undertaking, construction or housing project.
(B) Relief for Capital Market: To ensure continued stability in the stock market, from 1 st July 2014 CGT rates have been reduced to 12.5% for securities held up to 12 months and 10% for securities held for a period between 12 to 24 months, whereas the securities held for more than 24 months are exempt from CGT.
(C) Incentives for Processing Industries of Special Areas: To encourage food processing units in Makran, Gilgit-Baltistan, Swat Valley and FATA Duty and tax-free import of imported machinery a tax holiday has been announced.
(D) Incentives for Joint Ventures between Companies and AOPs: The nonresident companies have to create a joint venture with a local company. To remove the hardship for the nonresidents, if one member of the joint venture is a company, it would be taxed separately at the applicable rate while the individuals would be taxed as an AOP separately.
(E) Reduction in the Corporate Tax Rate: In accordance with the already announced policy for tax year 2015, the corporate tax rate shall be 33%.
(F) Reduction in Maximum Rate of Tariff and Tariff Slabs: The number of slabs is brought down to 6 and the highest tariff is 25%. The luxury items are subjected to regulatory duty equivalent to the above facility.