KARACHI: Through the Tax Laws (Second Amendment) Ordinance, 2019, the government has made it mandatory for all banking companies and financial institutions maintaining special convertible rupee account (SCRA) to withhold income tax on capital gains made by non-resident companies.
“Every banking company or a financial institution maintaining special convertible rupee account (SCRA) of a non-resident company having no permanent establishment in Pakistan, shall deduct tax from capital gain arising on the disposal of debt instruments and government securities including treasury bills and Pakistan investment bonds invested through SCRA at the rate specified in Division II of Part III of the First Schedule to Income Tax Ordinance, 2002,” the amendment notes.
This tax shall be a final tax on the income of non-resident company arising out of such capital gain.
Foreign persons and institutions as well as non-resident Pakistanis can invest in debt securities and government securities. It is mandatory for a foreign investor to open a Special Convertible Rupee Account (SCRA). SCRA allows for remittance of funds to & from the account for purchase and sale of securities by the foreign investor.
It may be mentioned here that the provisions of Section 236P; sub section 5B of Section 147, and provision of Section 115(4) and Section 181 of Income Tax Ordinance shall not apply.