Tax rate on dividend paid by power generation companies doubled to 15%

KARACHI: The rate of tax on dividend distributed by power generation companies is proposed to be enhanced to 15 percent from existing 7.5 percent, suggests Finance Bill 2019.

Applicable tax rate including collection of advance tax on dividend distributed by purchaser of power project privatized by WAPDA or on shares of company set up for power generation or share of company supplying coal exclusively to the power generation projects is proposed to be enhanced from 7.5 percent to 15 percent. [the_ad id=”31605″]The rate of tax is proposed to be increased to 25 percent in the case of a person receiving dividend from a company where no tax is payable by such company due to exemption of income or carry forward of business losses or claim of tax credits.

Currently, reduced rate of tax of 7.5 percent on dividend declared or distributed by purchaser of a power project privatized by WAPDA or on shares of a company set up for power generation or on shares of a company, supplying coal exclusively to power generation projects; and 12.5 percent for dividend received from a mutual fund if the amount of dividend is above 2.5 million and 10 percent if the amount of dividend is less than or equal to 2.5 million are applicable.

The special rates provided for dividends received from Collective Investment Schemes, REITs and Mutual Funds are also proposed to be withdrawn. Consequently, dividends received from such schemes whose income becomes exempt shall also be taxable at 25 percent.

For withholding tax on dividend, a standard rate of 15 percent is proposed in all cases. The withholding tax rate for dividend otherwise subject to 25 percent enhanced rate should have been aligned with charge of tax.

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