The Finance Act 2023 has brought about several changes to the taxation system in Pakistan. Let’s have a look at some of the key changes in tax credits and exemptions.
Withdrawal of Tax Credit on Employment of Fresh Graduates: One of the significant changes is the withdrawal of tax credit on the employment of fresh graduates. This tax credit was introduced by the previous government to promote employment opportunities for fresh graduates.
First Year Depreciation Allowance on Specified Assets: The government has introduced a first-year depreciation allowance on specified assets of 90% of the cost of assets. This measure aims to encourage investment in certain sectors and industries.
Tax Credit on Enlistment on Registered Stock Exchange: Another change made under the Finance Act 2023 is the tax credit on enlistment on registered stock exchanges. This tax credit encourages companies to enlist on registered stock exchanges and provides them with tax benefits.
Tax Credits on Establishment of Industrial Undertaking: The government has also provided tax credits on the establishment of industrial undertakings to promote investment in this sector.
Exemptions Available on Profits and Gains from Refining and Concentrating Business: Under the Finance Act 2023, certain exemptions are available on profits and gains from refining and concentrating businesses.
Exemptions Available to Oil and Gas Companies: Oil and gas companies can now enjoy certain exemptions, including a deduction of 100% depreciation expense in case of below-ground installations.
Profit on Debt Payable to Non-Resident in Respect of Loans: The Finance Act 2023 has also introduced a tax on the profit on debt payable to non-residents in respect of loans.
Tax Credit on Foreign Income: Under the new Act, a taxpayer earning foreign income on which they pay foreign tax is allowed a tax credit equivalent to the lower of the foreign income tax paid and the Pakistani tax payable. However, the foreign tax paid is not refundable in Pakistan.
In conclusion, the Finance Act 2023 has brought significant changes to the taxation matters in Pakistan. The government has introduced several tax credits and exemptions to promote investment and economic growth in the country. It is essential to understand these changes to comply with the new regulations and take advantage of the available benefits.