The Federal Board of Revenue (FBR) on 27 December 2016, published proposed criteria for listed Shari’ah-compliant companies to be eligible for a reduction of 2% of the income tax rate. These criteria provided in sub-clause (a) of clause (18B) of the Second Schedule to the Income Tax Ordinance 2001 (vide SRO 1173(I)/2016). The FBR proposes to introduce new Rule 231H reduced rate of tax for Shari’ah-compliant companies to the Income Tax Rules 2006.
The proposed criteria are as follows:
(i) the business of a company must be Halal;
(ii) Riba-free financing must be shown on a company’s balance sheet; however, the company may be leveraged through Islamic modes of financing obtained from licensed Islamic financial institutions;
(iii) all investments made by a company must be 100% Shari’ah compliant; and
(iv) at least 30% of a company’s issued shares must be publicly traded.
The draft proposal will be taken into consideration by the FBR after 7 days of its publication in the Official Gazette.
