TAX NEWS - June 2010

Pakistan to Tax Capital Gains on Shares Sold After July 1

A Pakistani panel of lawmakers said a capital gains tax on shares introduced in the federal budget will be imposed on stocks sold after July 1, rejecting an appeal by stockbrokers that purchases before June 30 be exempted.

Any shares sold after July 1 will attract a levy of 10 percent if they were held for less than six months and 7.5 percent for those held for between six months and a year, Sohail Ahmed, the chairman of the Federal Board of Revenue said at a meeting of the panel of lawmakers in Islamabad today. According to the budget, there will be zero tax for equities held longer.

Finance Minister Abdul Hafeez Shaikh announced in his annual budget speech on June 5 that a capital gains tax would be imposed for the first time since 1976. Former finance minister Shaukat Tarin, Shaikh's predecessor, had agreed with the stock exchange the levy would be applied only on shares bought after July 1, according to Haroon Askari, operations manager at the exchange.

The panel also rejected a request by brokers' that overseas investors be taxed in their currencies, Ahmed said today. Brokers had asked capital gains be levied in foreign currency for overseas investors to minimize their currency conversion losses.

The benchmark Karachi Stock Exchange 100 index, rose 2 percent to 9,436.88 at the close today, before the panel's decision.