Foreign investors operating in EPZs: FBR “inadvertently” withdraws tax exemption

ISLAMABAD: The Federal Board of Revenue (FBR) has inadvertently withdrawn the sales tax exemption for foreign investors operating in the Export Processing Zone (EPZ), as they operate under a completely different universally accepted mechanism for the promotion exports.

In this regard, prominent Chartered Accountant and former FBR Chairman Shabbar Zaidi has approached Finance Minister Shaukat Tarin regarding sales tax on imports by EPZ investors under the 2021 Exports Act. finance (additional).

According to the top chartered accountant, the government has not changed the policy on levying duties and taxes on investors in the EPZ.

Investors operating in EPZs established under the Export Processing Zones Authority Ordinance 1980 are not subject to the tax and other laws of Pakistan.

These people operate in a completely different mechanism, which are universally acceptable principles for the operation of free zones for the promotion of exports. No foreign currency of Pakistan is involved in the imports made by these people.

He stated that goods imported from abroad and from the tariff zone are exempt from customs duties and sales taxes under SRO 88(I)/80 of August 23, 1980.

International Sukuk issue: FBR grants tax exemptions

A special procedure for this purpose was established in the 1981 Customs Rules on Export Processing Zones.

This SRO is practically applicable since its inception.

Entry 102 of Table 1 of the Sixth Schedule to the Sales Tax Act 1990 is a continuation of the same principle. It is considered that, by an inadvertent understanding, entry 102 of Table 1 of the Sixth Schedule to the Sales Tax Act 1990 has been deleted by the Finance (Supplementary) Act 2021. Accordingly, unnecessary problems are created for investors in the EPZ with respect to duties and sales tax at the import stage after the effective date of the aforementioned act which was January 14, 2022.

“We consider that we are correct in understanding that there is no change in policy on this subject by the Government of Pakistan with regard to levying duties and taxes on investors in the EPZ,” he said. he declared.

Zaidi said the action taken through the Finance (Supplementary) Act 2021 is seen as an involuntary deal as it is clear that the Pakistani government has no intention of withdrawing any concessions or privileges given to the foreign investors for operations in the EPZ. and the thing is clear.

It is therefore suggested that the necessary clarifications be made to the effect that investors in the EPZ are not subject to customs duties and sales tax at the import stage.

It should be noted that imports by EPZ are governed by a completely different regime specially provided for these people, he said.

Under Section 25 of the EPZs Ordinance 1980, the Federal Government has the right to exempt investors from the provision of any law applicable in Pakistan.

It is therefore suggested that appropriate steps be taken to restore the position as it existed before the (supplementary) finance law of 2021, Zaidi added.

Copyright Business Recorder, 2022

Comments are closed.