Tax Overview and Recommendations

Bonus shares KPMG However, for Tax Year 2017, the rates increase where the seller of securities is a 'non-filer' meaning it has not filed its latest Pakistan income tax return and is therefore not borne on the active taxpayers list of the Board of Revenue. The increased rates in this case are as follows: Held <12 months Held 12-24 months Held 24-48 months 18% 16% 11% Where the security is held for more than four (04) years, the capital gains tax rate is 0 percent. The term "Securities" has been defined to mean 'share of a public company, voucher of Pakistan Telecommunication Corporation, Modaraba Certificate, an instrument of redeemable capital, debt securities and derivative products'. Capital gains on capital assets other than securities is taxable at corporate tax rate, unless the capital asset has been held for more than twelve months, in which case 75 percent of the gain will be taxable. Bonus shares issued by a company and received by a shareholder are to be treated as income and a tax rate of 5 percent is to be applied. In case of companies quoted on stock exchange, tax is to be applied on the value of the bonus shares determined on the basis of the day-end price on the first day of closure of the books, whereas in case of other companies, the value will be determined as per rules to be prescribed. Tax is to be collected at source by the company declaring the bonus shares and this shall also be considered as the final discharge of a person's tax liability on such income. © 2016 KPMG International Cooperative ("KPMG International"). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated. All rights reserved. 3

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