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Covid-19 – Summary of Measures Pakistan

Pakistan accountants news

Fiscal measures

Special incentive package for construction industry

Government of Pakistan has identified construction business as an economic activity that can help generate large scale employment for skilled and non-skilled workers as well as to revive the economy. Special incentive package for construction industry is summarized as follows:

  • Income tax payable shall be levied at fixed rate per square foot for builders and per square yard for developers and shall be payable over the life of the project as advance tax to be paid on quarterly basis.
  • Capital invested in a new project shall enjoy immunity from probe, if the funds are invested by a crossed banking instrument and certain other conditions are met.
  • The funds used for the first purchase of a building or unit of a building from a builder shall not be probed into, if the payment is made through crossed banking instrument to the builder.
  • Dividend paid to shareholders by a builder or developer being a limited company out of the profits from a project shall be exempt from tax.
  • Withholding tax shall be exempt on the payments made by builders or developers for purchase of building materials except steel and cement, and for services of plumbing, electrification, shuttering and other similar services.
  • To avail above benefits the new and incomplete existing projects will have to be registered the Federal Board of Revenue, by December 31, 2020 and must be completed by September 30, 2022.
  • In order to bring down cost of construction, sales tax and excise duties levied on construction material are reduced.
  • Sales tax on services is imposed by the provinces. The Government of Punjab Province has reduced sales tax on construction services to zero till June 30, 2020.
  • Low cost housing by NAPHDA/provincial housing authorities will be completely exempt from sales tax.

Other tax measures

  • Rate of advance tax on the import of different food items is reduced from 2% to 0%.
  • Withholding tax on supplies of basic food items to government owned departmental stores without a brand name by individuals and association of persons is reduced from 4.5% to 1.5%.
  • Additional Custom duty @2% on soya bean oil, canola oil, palm oil and sunflower oil ( also on oil seeds ) has been exempted.

MONETARY POLICY MEASURES

  • The Central bank reduced policy rate (KIBOR – Karachi Inter Bank Offer Rate) by 625 bps.
  • Banks are allowed to defer repayment of principal loans by their borrowers for one year, upon their request.
  • The Central bank has also announced a scheme to avoid layoff of workers. Under the scheme the businesses will be provided loan up to 3 months’ salary bill at very low interest rate, which will be payable in 2.5 years, on the condition that they will keep their employees for 3 months.
  • The Central bank relaxed DBR (Debt Burden Ratio) for consumer loans from 50% to 60%.
  • The regulatory limit on extension of credit to SMEs has been permanently increased from Rs,125 million to Rs.180 million.
  • The Central bank will refinance banks to provide financing at reduced end-user rate for 5 years for the purchase of equipment to detect, contain and treat COVID-19.

OTHER FINANCIAL MEASURES

Government of Pakistan has approved:

  • fiscal stimulus package of Rs.1.2 trillion and supplementary grant of Rs.100 bullion for the “Residual/Emergency Relief Fund”, in relation to the provision of funds for mitigating the effect of COVID-19 for the impacted population.
  • deferment of monthly and quarterly fuel adjustments in electricity bills for power consumers till June 2020.
  • Rs.200 billion cash assistance for the daily workers in the formal industrial sector and who had been laid off as result of COVID-10 outbreak.
  • Rs.50 billion for the Utility Stores Corporation to provide essential food items to the vulnerable section of the society at subsidized rates.
  • Supplementary grant of Rs.30 billion to Ministry of Commerce to payback duty drawbacks to textile exporters for the current financial year to improve their liquidity position.

If you have any questions regarding this or any of the other initiatives offered to those affected by the current disruption, please contact Saud Ansari at saud@clarksonhyde.pk.

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