On 28 December 2019, the Federal Board of Revenue of Pakistan has published the Tax Laws (Second Amendment) Ordinance 2019 in the Official Gazette to amend the Income Tax Ordinance 2001 (ITO); the Sales Tax Act 1990; and the Customs Act 1969, the changes come into force immediately.
The law reduced minimum tax rate from 1.5% to 0.5% for traders with turnover up to PKR 100 million, although traders are obliged to pay tax equal to or more than the tax paid for the Tax Year 2018 for the Tax Years 2019 and 2020. A definition is added for the term “Green Field Industrial Undertaking” for the purpose of the 5 year tax exemption with effect from 1 July 2019.
Tax law amendments are made to encourage foreign investment in the local debt market and to simplify the tax regime for non-resident companies, which includes the introduction of a 10% final withholding tax on gains derived by non-residents from the disposal of debt instruments and government securities invested in through a Special Convertible Rupee Account maintained with a bank in Pakistan, as well as other simplifying measures for such investments.
