Photo courtesy PID
Under new scheme, investors will not be asked any questions on sources of funds if they pay 5% tax on total amount invested in industry
Prime Minister Imran Khan on Tuesday announced a new amnesty scheme for Pakistan’s industrial sector, claiming that it will attract investment and generate wealth while also boosting the country’s exports.
Following up on his announcements from a day earlier, when he unveiled cuts to fuel and electricity prices and announced the tax amnesty for investment into industries, he said the new scheme would allow investors to fund new industries, and modernize existing ones, with no questions asked on the sources of their income.
Addressing a ceremony in Lahore, he said the tax amnesty for the industrial sector should have been the “first thing” his party did after it came into power. “No country can become great without a manufacturing base and industrial growth,” he said. “A country develops when there is wealth creation, without it they cannot move forward,” he said, adding that policies that run counter to profitability halt the development of industries and reduce investment opportunities. By contrast, he said, when industries profit, other investors are also attracted to reap the dividends.
Claiming that previous governments had enacted policies that didn’t support industrial growth, he said this had stalled the country’s export-oriented sector. “Pakistan never paid attention towards the export sector; whenever we faced a shortage of the U.S. dollar we approached the International Monetary Fund,” he said, adding that the incumbent government had a long-term plan to increase the country’s exports.
Summarizing the incentives being offers to industrialists, Khan said the package focused on growing small- and medium-industries. It also grants tax exemption to foreign investors for 5 years, he said, adding that their funding would help the country’s industries develop further. “Facilities will be given to overseas Pakistanis who face difficulties investing in the country,” he said.
The prime minister also praised the country’s I.T. sector, saying it had witnessed the most growth.
Salient features
According to the package unveiled by the government, incentives would be offered for industrial promotion. Additionally, investors would not be asked the sources of their income if they pay 5% tax on their investment in new industrial units and expansion and modernization of existing units. The minimum threshold for investment has been set at Rs. 50 million, with a requirement for all industrial units to be set-up as companies.
Investors who avail the amnesty must commence commercial production by June 30, 2024, while beneficiaries of amnesty schemes in 2018 and 2019 would not be eligible for this. Similarly, anyone who defaulted on bank loans in the past three years is not eligible.
There are additional incentives for the revival of “sick” units, which have been identified as any industries that have accumulated losses for three consecutive years. Under the scheme, acquiring companies would be allowed to adjust the losses of sick units against their income for up to three years, during which time the “sick” unit’s revival must be completed.
Incentives for foreign investors to the industrial sector would be eligible for Pakistanis who have been non-residents for five years, and resident Pakistani who have declared foreign assets. They can avail one-time tax credit equal to 100% of their remittance in 5 years. Foreign investors must also invest solely a new industrial unit, and would not be eligible to avail the modernization condition provided to local investors.
The cut-off date for filing of all tax exemption declarations, and availing the scheme, has been set at Dec. 31, 2022.