The government has decided to announce third amnesty scheme – the Promotion Package for Industry – by offering to whiten the black money at a 5 percent rate by investing in the manufacturing sector.
The amnesty will have three strands including the incentives for investment in new and present industrial units, incentives for the revival of sick units, and the incentive for investment in the manufacturing sector by overseas Pakistani and residents Pakistanis who have declared foreign assets.
This big decision may cause the displeasure of the International Monetary Fund with reference to the revised $6 billion programme as IMF is not in favor of giving further tax relief. The ministry of finance had circulated a summary among the federal cabinet members yesterday for their approval of the amnesty scheme through Income Tax Amendment Ordinance 2022.
Under this scheme, 5 percent across-the-board tax rate will immune the investors from asking the sources of investment as provided under section 111 of ITO 2001. The investor will establish a new industrial undertaking through the creation of a new company. The existing industrial unit can get the facility for up-gradation and modernization. The last date for filing the declaration will be the last day of the ongoing calendar year.
Through section 59C of ITO 2001, the amnesty provides that those companies returning a net loss during the last three years will be eligible to be acquired through acquisition (not amalgamation) by a healthy profitable company which will be incentivized to adjust the sick company’s tax losses for the next three years.
If overseas Pakistanis and resident Pakistanis repatriate their declared foreign assets into Pakistan for investment into industry, they would be entitled to 100 percent credit for the next five years.
The scheme says that overseas Pakistanis who have been living abroad for more than five years or residents of Pakistanis who have declared foreign assets by December 31, 2021, will be eligible for this amnesty scheme. Before this, the two amnesty schemes were announced in May 2019 and in April 2020.