The Federal Board of Revenue (FBR) has issued Income Tax Circular No. 1 of 2024-25, detailing significant changes introduced under the Finance Act 2024.
Key Changes:
- 100% Tax Credit: Entities engaged in coal mining and supplying exclusively to power generation projects in Sindh will now enjoy a full tax credit. Businesses engaged in coal mining and supplying exclusively to power generation projects in Sindh are eligible for a full tax credit.
- Startups: Startups certified by the Pakistan Software Export Board can claim a tax credit for the tax year of certification and the following two years.
Key Criteria for a Startup:
- Incorporation Date: The business must have commenced operations on or after July 1, 2012.
- Nature of Business: The startup must be engaged in or intending to offer technology-driven products or services.
- Certification: The business must be registered with and certified by the Pakistan Software Export Board (PSEB).
- Turnover Limit: The startup’s annual turnover should be less than one hundred million rupees for the last five tax years.
Conditions for Tax Credit: To claim the tax credit, taxpayers must file income tax returns, withholding tax statements, and sales tax returns, as applicable.
- Advance Tax for Builders and Developers: Builders and developers must submit detailed computation statements for advance tax based on specific criteria.
- Capital Gains Tax on Shares: The tax on acquiring company shares has been adjusted to apply at the time of payment or registration, whichever is earlier.
- Toll Manufacturing Tax: The tax rate for toll manufacturing has increased to 9% for companies and 11% for other entities.
- Exemption for Special Purpose Vehicles (SPVs): SPVs purchasing Diversified Payment Rights through Authorized Dealers are now tax-exempt.
- Tax Exemption Extension: The tax exemption for residents and companies in erstwhile Tribal Areas has been extended until June 30, 2025.
These amendments aim to stimulate specific sectors, such as coal mining and construction, while also enhancing tax compliance and revenue generation.
