Share transfers: Foreign investors seeking clarity on FBR exemption certificates
ISLAMABAD: Foreign investors have strongly emphasised the need for a streamlined and time-bound exemption certificate process for foreign investors seeking registration of foreign-held shares acquisitions in Pakistan and cross-border share transactions involving Pakistani assets. The Federal Board of Revenue (FBR) should immediately issue necessary clarification to remove apprehensions of the…
Foreign investors have urged the Federal Board of Revenue (FBR) to expedite the issuance of exemption certificates, clarifying the process for foreign-held share acquisitions in Pakistan and cross-border transactions involving Pakistani assets. Rule 19H of the Income Tax Rules, introduced following amendments to section 37 of the Income Tax Ordinance, aimed to facilitate tax compliance on indirect and cross-border share transactions, but its implementation has created significant uncertainty and operational challenges for investors.
Under the current framework, withholding tax may be required when a non-resident acquires shares from another non-resident, and an exemption certificate is necessary if the seller is exempt from tax under domestic law or a treaty. Delays in obtaining these certificates have delayed SBP registration, undermining investors' ability to exercise their shareholder rights.
Stakeholders have asked the FBR not to apply Rule 19H retroactively to transactions already completed but awaiting SBP registration, but the lack of a clear response has further hindered progress.
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