TAX NEWS - JUNE 2010

Pakistan Tax: Capital Gains Tax announced on short-term stocks

The government on Saturday announced to impose Capital Gains Tax (CGT) on stocks where shares are held for a period of less than 12 months by rationalising the taxation structure during fiscal year 2010-11.

While addressing the National Assembly, Dr Abdul Hafeez Sheikh, Minister for Finance announced that tax on short-term Capital Gains on stocks/shares would be charged at 10 percent where shares were held for a period of less than six months and at 7.5 percent where they were held for more than six months and less than 12 months. However, stocks held for over one year would not be subject to CGT. However, Umar Pasha, farmer Chairman of Islamabad Stock Exchange (ISE) while commenting on the Capital Gains Tax (CGT) said that for a long time Federal Government wanted to enforce it but had extended exemptions. Now it has announced to entail it that is good for stock exchange, he said adding that its impact is not good for short term yet it is beneficial for long term.

Similarly, Saleem Chamdia, farmer Chairman of Karachi Stock Exchange (KSE) was of the view that this decision to rationalise tax structure as a tax measure was by consensus. More, he said, this announcement would discourage the speculative investors but would definitely encourage the long-term investment. Further, he said, it would help to end the volatile situation that often emerged in the past due to short-term investments in stock exchanges of the country.