Tax credit on newly established industrial undertakings (Section 65D);

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This blog is in continuation to the series "Curtailing the Tax Liability (Part II) - Tax Credits".


Disclaimer: This blog will be updated over the period of time with practical examples, sample letters and relevant case laws and due to the volatility of tax statutes it is subject to unprecedented changes as and when required.


Tax credit on newly established industrial undertakings (Section 65D)


A company shall be eligible to tax credit if it establishes a new industrial undertaking [including dairy farming] between July 2011 – June 2021 with registered office in Pakistan on its taxable income from such industrial undertaking for a period of 5 years from its commencement. 


Computation:



The tax credit shall against following: 



- Normal Tax Payable 

- Minimum Tax 

- Final Tax 



Tax Credit = (A / B) X C 



A = Tax assessed before any tax credit 

B = Equity raised through issuance of shares for cash consideration 

C = Total amount invested 



Exceptions


- The company shall not be eligible for tax credit if such industrial undertaking is set up by splitting/reconstruction/reconstitution of already existing undertaking; 



- The company shall not be eligible for tax credit if plant and machinery is transferred from industrial undertaking established before July 2011; 



- The company shall not be eligible for tax credit if the equity raised through issuance of shares for cash consideration is less than 70% of total equity. Provided that short term loans and finances obtained from banking companies or non-banking financial institutions for the purposes of meeting working capital requirements shall not disqualify the taxpayer from claiming tax credit under this section;




NOTE: In addition to above please click here to read Miscellaneous Provision of Tax Credit (Section 65);




Index of Tax Credits

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