new regime of capital gain tax-cgt
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New Regime of Capital Gain Tax-CGT. NCCPL. PresentationJuly 30, 2012. Back Ground of New CGT Regime. Back Ground of the New CGT Regime. - PowerPoint PPT PresentationTRANSCRIPT
New Regime of Capital Gain Tax-CGT
Presentation July 30, 2012
NCCPL NCCPL
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Back Ground of New Back Ground of New CGT Regime CGT Regime
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The SECP as a part of its mandate to develop Capital Market in Pakistan, forwarded a proposal to the Federal Board of Revenue (“FBR”) for Revamping of CGT Regime.
This was Intended to Provide Ease of Calculation and Documentation to Investors.
Accordingly, NCCPL shall be Responsible to Compute, Determine, Collect and Deposit CGT to FBR.
Back Ground of the New CGT RegimeBack Ground of the New CGT Regime
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CGT Rules have been revised though the promulgation of Finance (Amendment) Ordinance, 2012 effective from April 24, 2012.
New section 100(B) has been inserted in the Income Tax Ordinance, 2001.
For detailed treatment of CGT, following new Rules and Procedures have been introduced in the Income Tax Ordinance, 2001:
Rules for the Computation of CGT on Listed Securities have been devised in
Eight Schedule under section 100(B) of the Income Tax Ordinance, 2001.
Special Procedures for Computation of Capital Gains and Collection of Tax under the Eighth Schedule and Other Related Matters described in Section 13N of the Part III of the Chapter II of the Income Tax Rules, 2002.
Back Ground of the New CGT RegimeBack Ground of the New CGT Regime
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Overview and Overview and Procedures of the Procedures of the New CGT RegimeNew CGT Regime
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Following are the Persons/Investors to which new CGT Regime will be applicable:
Individual Investors; Brokers; and Corporate Entities.
However, following Persons/Investors will NOT be covered under new CGT Regime:
• Mutual fund;
• Banking Company;
• Non-Banking Finance Company;
• Insurance Company;
• Modaraba;
• ‘Foreign Institutional Investor’ being a person registered with NCCPL as a foreign institutional investor; and
• any person or class of persons as notified by the FBR.
Overview and Procedures of the New CGT Overview and Procedures of the New CGT RegimeRegime
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Any Person/Investor may Opt-Out from the new CGT Regime.
For Opting-Out, Person/Investor shall be required to file an Irrevocable Option to NCCPL after obtaining prior approval of the Income Tax Commissioner in the Prescribed Manner.
New CGT Regime will NOT be applied on such Person/Investor who Opted-Out.
Overview and Procedures of the New CGT Overview and Procedures of the New CGT RegimeRegime
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Rates of CGT:
For Holding Period more than 12-Months no CGT will be computed.
Overview and Procedures of the New CGT Overview and Procedures of the New CGT RegimeRegime
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Year Holding Period Less than 6-Months
Holding Period is 6-Months but Less than 12-Months
2011 10% 7.5%
2012 10% 8.00%
2013 10% 8.00%
2014 10% 8.00%
2015 17.5% 9.5%
2016 - 10%
Principles of Holding Period of Inventory Before the Promulgationof New CGT Regime
Overview and Procedures of the New CGT Overview and Procedures of the New CGT RegimeRegime
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S.NO. Holding Period Inventory Age Price
1. Securities Balance As-Of 23rd April 2011
More than One Year Closing Price of 23rd April 2011
2. Securities have been Acquired or Disposed off Between 24th April 2011 to 23rd April 2012.
Determined as per the Actual Acquisition and Disposal
Market-Based Transactions- Transaction Price Non-Market-Based Transactions- Deal Price or Closing Price, as the case may be.
Principles for Physical Securities Deposited into CDS
Overview and Procedures of the New CGT Overview and Procedures of the New CGT RegimeRegime
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S.NO. Deposit of Physical Securities
Inventory Age Price
1. Physical Securities have been deposited in CDS Between 24th April 2011 to 23rd April 2012
The Date of Acquisition shall be Deemed as 23rd April 2011
Closing Price of 23rd April 2011
2. Physical Securities have been deposited in CDS on or after 24th April 2012
Actual Date of Acquisition as Communicated by CDS. But it should not be Earlier than 23rd April 2011.
Prevailing Closing Price of the Deposited Date.
Types of Transactions Covered under New CGT Regime:
Market Based Transactions
Sale and Purchase Transactions including Day-Trading Executed or to be Executed on the Trading Platform of the Stock Exchanges.
Non-Market Transactions
Movement of Securities Through Free-Delivery (FD) Mechanism of CDS.
Overview and Procedures of the New CGT Overview and Procedures of the New CGT RegimeRegime
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General Principles for the Determination andComputation of CGT
CGT will be Determined and Computed on the Transactions and their Values as Reported to or Provided to or Extracted from the Systems of Stock Exchanges, Central Depository Company of Pakistan Limited and NCCPL.
First In First Out (FIFO) Inventory Accounting Method will be used.
In Determination and Computation of CGT, First Priority shall be given to the Market Based Transactions.
Capital Loss in any Financial Year Shall be Set Off against Capital Gain of that Financial Year.
Capital Loss in any Financial Year Shall NOT be Carried to a Subsequent Financial Year.
Overview and Procedures of the New CGT Overview and Procedures of the New CGT RegimeRegime
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General Principles for the Determination andComputation of CGT
Fixed Cost of 0.50% on non-proprietary trades and 0.25% on proprietary trades on Disposal or Acquisition of Securities, as the case may be, in lieu of all Expenses will be Deducted or Added while Determination and Computation of CGT.
However, such Fixed Cost shall only be allowed in respect of Market Based Transactions.
Financing Cost Incurred through NCCPL’s Leveraged Market Products shall be Taken into Account while Computing Capital Gains.
CGT shall be Collected on Monthly Basis for Transactions Settled in a Month, after Adjustment of Losses or Refund of amount collected of the Previous Month or Months of the Same Financial Year.
Overview and Procedures of the New CGT Overview and Procedures of the New CGT RegimeRegime
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General Principles for the Determination andComputation of CGT
CGT shall be Collected From or Through the Respective Clearing Members on Net Capital Gains of Persons/Investors.
Any Person/Investor, if Not Satisfied with the Computation of Capital Gain or Tax thereon or both made by NCCPL, such Person/Investor may Re-Compute the Capital Gain and Lodge Claim of Refund, if any, with the Commissioner of FBR.
Persons/Investors (covered under new CGT Regime) Shall NOT be Required to Maintain Records and Accounts w.r.t CGT.
Wash Sales, Cross Trades and Tax Swap Sales Shall not be Taken into Account by NCCPL while computing Capital Gains.
Overview and Procedures of the New CGT Overview and Procedures of the New CGT RegimeRegime
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General Principles for the Determination andComputation of CGT
The Amount Collected by NCCPL, in respect of Capital Gains, on behalf of the FBR, Shall be Deposited in a Separate Bank Account with National Bank of Pakistan and such Amount Shall be Paid to the FBR Alongwith Interest Accrued Thereon on Yearly Basis by July 31.
In Case of Non-Recovery of CGT from any Person/Investor through its Clearing Member, for any reason whatsoever, NCCPL Shall Refer a Particular Case for Recovery of CGT to the FBR.
Defaulted Person/Investor may also be Restricted from Taking New Positions in all Markets for a Period of Three Months and such Restriction will be Continued till the Recovery of Amount of CGT.
Overview and Procedures of the New CGT Overview and Procedures of the New CGT RegimeRegime
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General Principles for the Determination andComputation of CGT
The Short or Non-Collection of CGT in any Month During the Financial Year shall Continue to Appear in the CGT Liability of Coming Month or Months of the Same Financial Year.
Relevant Clearing Member shall also be Penalized in accordance with NCCPL Regulations.
Brokerage Account of the Persons/Investors shall NOT be Closed Until and Unless such Persons/Investors Obtains a Clearance Certificate from NCCPL.
Overview and Procedures of the New CGT Overview and Procedures of the New CGT RegimeRegime
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General Principles for the Determination andComputation of CGT
Following Certificate / Statement Shall be Issued and Provided by NCCPL:
Annual Certificate Showing Computation of Capital Gains and Tax thereon, if any, to each Eligible Person/Investor within Thirty Days from the End of the Financial Year.
Quarterly Statement of Amount Collected from Eligible Persons/Investors shall be Furnished to the FBR within Thirty Days from the End of Each Quarter.
Every Person/Investor Shall also File the Annual Certificate, as provided by NCCPL, Alongwith the Return of Income.
Overview and Procedures of the New CGT Overview and Procedures of the New CGT RegimeRegime
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Holding Period of Holding Period of Investment Investment
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Investment Has Been Classified in Two BroadInvestment Has Been Classified in Two Broad
Categories:Categories:
Investment Made in Listed Securities Prior to the Promulgation of the Finance (Amendment) Ordinance, 2012 effective from April 24,2012.
Investment in Listed Securities from the Date of the Promulgation of the Finance (Amendment) Ordinance, 2012 effective from April 24, 2012.
Holding Period of InvestmentHolding Period of Investment
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Holding Period of InvestmentHolding Period of Investment
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Investment Category Determination of Investment
Requirement to for Holding Period
Investment Made in Listed Securities Prior to the Promulgation of the Finance (Amendment) Ordinance, 2012 effective from April 24,2012
A. The amount of investment shall be netted off with the market value of net open sale position in Futures and Derivative Contract .
B. The Investment shall be the Time Weighted Average of the Invested Amounts
The Amount of Investment Shall be Required to Remain Invested for the Period or Periods in Aggregate of 45-Days till June 30, 2012.
Investment in Listed Securities From the Date of the Promulgation of the Finance (Amendment) Ordinance, 2012 effective from April 24, 2012
The Amount of Investment Shall be Required to Remain Invested for the Period or Periods in Aggregate of 120-Days till June 30, 2014.
Explanation and Explanation and Treatment of Market Treatment of Market
and Non-Market and Non-Market Based TransactionsBased Transactions
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Explanation and Treatment of Market and Non-Market Based Explanation and Treatment of Market and Non-Market Based TransactionsTransactions
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Type of Transactions
Impact on Inventory
Pricing Tax Treatment Purchase/Acquisition Sale/Disposal
Sale & Purchase of Securities Through Trading Systems
Inventory Taken Out/In on FIFO Basis on Settlement Date
Average Purchase/Acquisition Price
Average Sale Price of the Security Sold
CGT Shall be Computed as per Rates in accordance with the Holding Period
Squaring upTransactionsin Ready,Futures andDerivatives (Day-(Trading)
No Impact on Inventory
Average Purchase Price
Average Sale Price of the Security Sold
10% on the Capital Gains, if any.
Explanation and Treatment of Market and Non-Market Based Explanation and Treatment of Market and Non-Market Based TransactionsTransactions
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Type of Transactions
Impact on Inventory
Pricing Tax Treatment
Purchase/Acquisition
Sale/Disposal
Sale & Purchase through Negotiated Deal Market (NDM)
Inventory Taken Out/In on FIFO Basis on Settlement Date
Average Purchase/Acquisition Price
Deal Price or Closing Price at Ready Market whichever is Higher
CGT Shall be Computed as per Rates in accordance with the Holding Period
Transfer of Securities Owing to Privatization
Inventory Move-in the Buyers’ Account and Move-out from Privatization Commission’s (PC)Account.
Acquisition Price Not Recorded for PC.
No CGT for Federal or Provincial Government on Transfers.
Explanation and Treatment of Market and Non-Market Based Explanation and Treatment of Market and Non-Market Based TransactionsTransactions
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Type of Transactions
Impact on Inventory
Pricing Tax Treatment Purchase/Acquisition Sale/Disposal
TransferOwing toAcquisition
Inventory Taken In/Out on FIFO Basis.
Purchase/Acquisition Price
Actual Selling or Negotiated or Quoted Price as the case may
CGT Shall be Computed as per Rates in accordance with the Holding Period
Buy-back of Shares
Inventory Taken In/Out on FIFO Basis
Purchase/Acquisition Price
Price Paid by the Company to Acquire the Shares .
CGT Shall be Computed as per Rates in accordance with the Holding Period
Explanation and Treatment of Market and Non-Market Based Explanation and Treatment of Market and Non-Market Based TransactionsTransactions
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Type of Transactions
Impact on Inventory
Pricing Tax Treatment
Purchase/Acquisition Sale/Disposal
Portfolio Transfer – where all UINs are Matching
No Impact on the Age of Inventory Age
Original Purchase/Acquisition Price
N/A N/A
Transfer / Transmission upon Death
Shares are Transferred to the Beneficiary with the same Date of Acquisition as was in the hands of Deceased Person
Original Purchase/Acquisition Price as was in the hands of Deceased Person
N/A N/A
Explanation and Treatment of Market and Non-Market Based Explanation and Treatment of Market and Non-Market Based TransactionsTransactions
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Type of Transactions
Impact on Inventory
Pricing Tax Treatment Purchase/Acquisition Sale/Disposal
Transfer for / against GDRs - GDRs are Converted into Shares
Acquisition of Inventory
Closing Price of the Date of Deposit
N/A N/A
Transfer for / against GDRs - Deposits into Depository and Get GDRs
Inventory Taken Out on FIFO Basis
Purchase/Acquisition Price
Closing Price of the Date of Transfer
CGT Shall be Computed as per Rates in accordance with the Holding Period
Explanation and Treatment of Market and Non-Market Based Explanation and Treatment of Market and Non-Market Based TransactionsTransactions
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Type of Transactions
Impact on Inventory
Pricing Tax Treatment Purchase/Acquisition Sale/Disposal
Reversal of Erroneous Transfers
Inventory Taken In/ Out on FIFO Basis
Closing Price of the Transaction Date
N/A No CGT
Gift Transactions
Shares are Transferred to the Beneficiary with the same Date of Acquisition as was in the hands of Transferee
Cost as was in the hands of Transferee
N/A No CGT
Explanation and Treatment of Market and Non-Market Based Explanation and Treatment of Market and Non-Market Based TransactionsTransactions
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Type of Transactions
Impact on Inventory
Pricing Tax Treatment Purchase/Acquisition Sale/Disposal
Pledge call Inventory shall be Taken out from the Defaulter’s Account
Average Purchase/Acquisition Price
Closing Price of the Date of the Pledge Call
CGT will be Computed as per the Holding Period.
Default in Delivery by Seller and Subsequent Squaring-up by NCCPL
• No Impact on Delivery Defaulter.
• Inventory Taken Out on FIFO Basis From the Square-up Seller
Average Purchase/Acquisition Price
Square-up Price
CGT Shall be Computed as per Rates in accordance with the Holding Period
Explanation and Treatment of Market and Non-Market Based Explanation and Treatment of Market and Non-Market Based TransactionsTransactions
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Type of Transactions
Impact on Inventory
Pricing Tax Treatment Purchase/Acquisition Sale/Disposal
Right Issue Upon Exercise of Right or Purchase, Inventory Recorded at the Credit Date
Subscription Cost of the Right Shares
N/A N/A (However,
LoR trading shall be subject to CGT @ 10%)
Bonus Shares
InventoryRecorded atthe BonusCredit Date
Zero-Price (Different Treatment provided in Draft Rules)
N/A NA.
Explanation and Treatment of Market and Non-Market Based Explanation and Treatment of Market and Non-Market Based TransactionsTransactions
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Type of Transactions
Impact on Inventory
Pricing Tax Treatment Purchase/Acquisition Sale/Disposal
De-Merger Existing Company’s Shareholding is Reduced with the Revised Shareholding. New Shareholding in the New Company With the Same Date of Acquisition of Existing Company
Same Cost of Acquisition of the Existing Company
N/A N/A
Merger No changeIn Ownership
ExtinguishedSecurityReplaced withNew Securitywith MergerRatio
Price Adjusted in Accordance with the Merger Ratio
N/A N/A
Explanation and Treatment of Market and Non-Market Based Explanation and Treatment of Market and Non-Market Based TransactionsTransactions
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Type of Transactions
Impact on Inventory
Pricing Tax Treatment Purchase/Acquisition
Sale/Disposal
Specie Dividend
Shares will be Added in the Share Holders’ Account at the Date on which Shares are Credited.
Zero Price (Different Treatment provided in Draft Rules)
Deal Price on Issuing Company
CGT Shall be Computed for Issuing Company as per Rates in accordance with the Holding Period .
Capital Reduction / Splitting of Shares / Conversion
Inventory Replaced and Adjusted as per Ratio or Division.
Cost of Acquisition of New Shares will Remain Same, as it was for Existing Shares
N/A N/A
Explanation and Treatment of Market and Non-Market Based Explanation and Treatment of Market and Non-Market Based TransactionsTransactions
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Type of Transactions
Impact on Inventory
Pricing Tax Treatment Purchase/Acquisition
Sale/Disposal
Transfer under Tax-Neutral Court Orders
Shares are Transferred to the Beneficiary with the same Date of Acquisition as was in the hands of Transferee
Cost as was in the Hands of Transferee
N/A N/A
Transfer under Taxable Court Orders
Shares are Transferred to the Beneficiary with the Date of Transfer
Closing Price of the Date of Transfer
Closing Price of the Date of Transfer
CGT will be Computed as per the Holding Period.
Explanation and Treatment of Market and Non-Market Based Explanation and Treatment of Market and Non-Market Based TransactionsTransactions
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Type of Transactions
Impact on Inventory
Pricing Tax Treatment
Purchase/Acquisition Sale/Disposal
Offer for Sale
Securities are Credited on Acquisition
Date
Cost of Acquisition
N/A N/A
Securities Lending and Borrowing (SLB)
Tax treatment
The Net Difference in the Hands of the Borrower resulting in completing the whole transaction. (Difference of the Price of the Sale and Re-Purchase).
Financial Charges incurred on Borrowing the Securities Shall be Taken into Account while Computing CGT.
Tax to be collected @ 10% on Net Gain
CGT will Not be Applied on the Income of the Lender.
Explanation and Treatment of Market and Non-Market Based Explanation and Treatment of Market and Non-Market Based TransactionsTransactions
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Thank Thank youyou !
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