Pakistan mulls providing tax-free zones to stimulate investment
In order to encourage foreign investment in Pakistan, the federal government has decided to provide facilities like Panama and Virgin Islands to foreign investors in Pakistan. According to documents available with Daily Times that government is going to introduce the companies’ bill 2016 in parliament soon according to which incumbent government will provide incentives of tax free zones to the companies who invest in Export Processing Zones(EPZs).
The government will allow them to make offshore companies in Export Processing Zones and these EPZs will be limited to the western routs of China Pakistan Economic Corridor (CPEC).” According to the proposed bill, the government will offer the tax holidays and companies will be exempted from calling of annual general meeting. Moreover, the companies established as FZCs would be exempted from filing of annual returns unless there was a change in membership or directorship, audit requirements, filing of financial statements, maintenance of registered office subject to providing correspondence address and conversion of shares into book-entry form.
Furthermore, Free Zone Company shall only be formed as a private limited company, whose name shall signify FZC at the end of its name”. Security Exchange Commission of Pakistan (SECP) has introduced a concept of “Free Zone Company” after evaluating the benefits and recognition given under the Export Processing Zones Authority Ordinance (IV of 1980).
The information of such companies as well as the companies in EPZs shall not be publicly available with the exception of tax authorities or order of the court or if any information or record is requirement to be provided under any international obligation or commitment to which the government is subjected. It is worth mentioning here that government is trying its best to enhance foreign investment in country, despite the trend going in the other direction. The federal government had failed to achieve the FDI target in fiscal year 2015-16.
According to economic experts, offshore companies are not legitimate whenever the owner of the company evades the tax in its country. FBR had already started its work to indentify owners of offshore companies in Pakistan. In this regard, the Parliamentary Secretary for Finance Rana Muhammad Afzal Khan informed the National Assembly that the Federal Board of Revenue (FBR) has identified 440 persons linked with different offshore companies and it was obtaining information and documentary evidence about the investment or income of the offshore companies of Pakistani residents.