New Regime of Capital

Gain Tax-CGT
NCCPL
NCCPL
Presentation
1

Back Ground of New

CGT Regime

Back Ground of the New CGT Regime

The SECP as a part of its mandate to develop Capital Market

in Pakistan, forwarded a proposal to the Federal Board of
Revenue (FBR) for Revamping of CGT Regime.

This was Intended to Provide Ease of Calculation and

Documentation to Investors.

Accordingly, NCCPL shall be Responsible to Compute,

Determine, Collect and Deposit CGT to FBR.

Back Ground of the New CGT Regime

CGT Rules have been revised though the promulgation of Finance

(Amendment) Ordinance, 2012 effective from April 24, 2012.

New section 100(B) has been inserted in the Income Tax Ordinance, 2001.

For detailed treatment of CGT, following new Rules and Procedures have
been introduced in the Income Tax Ordinance, 2001:

Rules for the Computation of CGT on Listed Securities have been devised in
Eight Schedule under section 100(B) of the Income Tax Ordinance, 2001.

Special Procedures for Computation of Capital Gains and Collection of Tax under
the Eighth Schedule and Other Related Matters described in Section 13N of the
Part III of the Chapter II of the Income Tax Rules, 2002 .

Overview and
Procedures of the
New CGT Regime

Overview and Procedures of the New CGT

Regime

Following are the Persons/Investors to which new CGT Regime will be

applicable:

Individual Investors;
Brokers; and
Corporate Entities.
However, following Persons/Investors will NOT be covered under new CGT
Regime:
Mutual fund;
Banking Company;
Non-Banking Finance Company;
Insurance Company;
Modaraba; and
any person or class of persons as notified by the FBR.

Overview and Procedures of the New CGT

Regime

Any Person/Investor may Opt-Out from the new CGT Regime.

For Opting-Out, Person/Investor shall be required to file an

Irrevocable Option to NCCPL after obtaining prior approval of
the Income Tax Commissioner in the Prescribed Manner.

New CGT Regime will NOT

Person/Investor who Opted-Out.

be

applied

on

such

Overview and Procedures of the New CGT

Regime

Rates of CGT:
Year

Holding Period Less Holding Period is

than 12-Months
12-Months but Less
than 24-Months

2014-15

12.50%

10.00%

For Holding Period more than 24-Months no CGT will

be computed.

Overview and Procedures of the New CGT

Regime
Types of Transactions Covered under New CGT Regime:

Market Based Transactions

Sale and Purchase Transactions including Day-Trading Executed or to be Executed on the

Trading Platform of the Stock Exchanges.
Non-Market Transactions

Movement of Securities Through Free-Delivery (FD)

Mechanism of CDS.

Overview and Procedures of the New CGT

Regime
General Principles for the Determination and
Computation of CGT

CGT will be Determined and Computed on the Transactions and their

Values as Reported to or Provided to or Extracted from the Systems of
Stock Exchanges, Central Depository Company of Pakistan Limited and
NCCPL.

First In First Out (FIFO) Inventory Accounting Method will be used.

In Determination and Computation of CGT, First Priority shall be given to

the Market Based Transactions.

Capital Loss in any Financial Year Shall be Set Off against Capital Gain
of that Financial Year.

Capital Loss in any Financial Year Shall NOT be Carried to a Subsequent

Financial Year.
10

Overview and Procedures of the New CGT

Regime
General Principles for the Determination and
Computation of CGT

Fixed Cost of 0.50% on non-proprietary trades and 0.25% on

proprietary trades on Disposal or Acquisition of Securities, as the
case may be, in lieu of all Expenses will be Deducted or Added
while Determination and Computation of CGT.

However, such Fixed Cost shall only be allowed in respect of

Market Based Transactions.

Financing Cost Incurred through NCCPLs Leveraged Market

Products shall be Taken into Account while Computing Capital
Gains.

CGT shall be Collected on Monthly Basis for Transactions Settled in

a Month, after Adjustment of Losses or Refund of amount collected
of the Previous Month or Months of the Same Financial Year.
11

Overview and Procedures of the New CGT

Regime
General Principles for the Determination and
Computation of CGT

CGT shall be Collected From or Through the Respective

Clearing Members on Net Capital Gains of Persons/Investors.

Any Person/Investor, if Not Satisfied with the Computation of

Capital Gain or Tax thereon or both made by NCCPL, such
Person/Investor may Re-Compute the Capital Gain and Lodge
Claim of Refund, if any, with the Commissioner of FBR.

12

Overview and Procedures of the New CGT

Regime
General Principles for the Determination and
Computation of CGT

The Amount Collected by NCCPL, in respect of Capital Gains, on

behalf of the FBR, Shall be Deposited in a Separate Bank Account
with National Bank of Pakistan and such Amount Shall be Paid to
the FBR Along with Interest Accrued Thereon on Yearly Basis by
July 31.

In Case of Non-Recovery of CGT from any Person/Investor through

its Clearing Member, for any reason whatsoever, NCCPL Shall Refer
a Particular Case for Recovery of CGT to the FBR.

Defaulted Person/Investor may also be Restricted from Taking New

Positions in all Markets for a Period of Three Months and such
Restriction will be Continued till the Recovery of Amount of CGT.
13

Overview and Procedures of the New CGT

Regime
General Principles for the Determination and
Computation of CGT

The Short or Non-Collection of CGT in any Month During the

Financial Year shall Continue to Appear in the CGT Liability of
Coming Month or Months of the Same Financial Year.

Relevant Clearing Member shall also be Penalized in accordance

with NCCPL Regulations.

Brokerage Account of the Persons/Investors shall NOT be Closed

Until and Unless such Persons/Investors Obtains a Clearance
Certificate from NCCPL.

14

Overview and Procedures of the New CGT

Regime
General Principles for the Determination and
Computation of CGT

Following Certificate / Statement Shall be Issued and

Provided by NCCPL:

Annual Certificate Showing Computation of Capital Gains and Tax

thereon, if any, to each Eligible Person/Investor within Thirty Days
from the End of the Financial Year.

Quarterly Statement of Amount Collected from Eligible

Persons/Investors shall be Furnished to the FBR within Thirty Days
from the End of Each Quarter.

Every Person/Investor Shall also File the Annual Certificate,

as provided by NCCPL, Alongwith the Return of Income.

15

Explanation and
Treatment of Market
and Non-Market
Based Transactions
16

Explanation and Treatment of Market and Non-Market Based

Transactions

Type of
Transactions

Impact on
Inventory

Pricing

Sale &
Purchase of
Securities
Through
Trading
Systems

Inventory
Taken
Out/In on
FIFO
Basis on
Settlement
Date

Average Purchase/ Average Sale

Acquisition Price
Price of the
Security Sold

CGT Shall be
Computed as
per Rates in
accordance
with the
Holding Period

Squaring up
Transactions
in Ready,
Futures and
Derivatives
(Day-(Trading)

No Impact
on
Inventory

Average Purchase
Price

10% on the
Capital Gains,
if any.

Purchase/Acquisition

Tax Treatment

Sale/Disposal

Average Sale
Price of the
Security Sold

17

Explanation and Treatment of Market and Non-Market Based

Transactions

Type of
Impact on
Transactions Inventory

Pricing
Purchase/Acquisitio
n

Sale/Disposal

Tax Treatment

Sale &
Purchase
through
Negotiated
Deal Market
(NDM)

Inventory
Taken Out/In
on FIFO
Basis on
Settlement
Date

Average
Purchase/
Acquisition Price

Deal Price or
Closing Price
at Ready
Market
whichever is
Higher

CGT Shall be
Computed as
per Rates in
accordance
with the
Holding Period

Transfer of
Securities
Owing to
Privatization

Inventory
Move-in the
Buyers
Account and
Move-out
from
Privatization
Commission
s
(PC)Account.

Acquisition Price

Not Recorded
for PC.

No CGT for
Federal or
Provincial
Government
on Transfers.

18

Explanation and Treatment of Market and Non-Market Based

Transactions

Type of
Impact on
Transactions Inventory

Pricing

Tax Treatment

Purchase/Acquisition

Sale/Disposal

Transfer
Owing to
Acquisition

Inventory
Taken
In/Out on
FIFO Basis.

Purchase/Acquisition
Price

Actual
Selling or
Negotiated
or Quoted
Price as the
case may

CGT Shall be
Computed as
per Rates in
accordance
with the
Holding Period

Buy-back of
Shares

Inventory
Taken
In/Out on
FIFO Basis

Purchase/Acquisition
Price

Price Paid by
the Company
to Acquire
the Shares .

CGT Shall be
Computed as
per Rates in
accordance
with the
Holding Period

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Explanation and Treatment of Market and Non-Market Based

Transactions

Type of
Impact on
Transactions Inventory

Pricing

Tax Treatment

Purchase/Acquisition

Sale/Disposal

N/A

Portfolio
Transfer
where all
UINs are
Matching

No Impact
on the Age
of Inventory
Age

Original
Purchase/Acquisition
Price

Transfer /
Transmission
upon Death

Shares are
Transferred to
the Beneficiary
with the same
Date of
Acquisition as
was in the
hands of
Deceased
Person

Original
Purchase/Acquisition
Price as was in the
hands of Deceased
Person

N/A

N/A

N/A

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Explanation and Treatment of Market and Non-Market Based

Transactions

Type of
Impact on
Transactions Inventory
Transfer for /
against
GDRs -

GDRs are
Converted
into Shares
Transfer for /
against
GDRs Deposits into
Depository
and Get
GDRs

Pricing
Purchase/Acquisition

Tax Treatment
Sale/Disposal

Acquisition Closing Price of

of
the Date of
Inventory
Deposit

N/A

N/A

Inventory
Taken Out
on FIFO
Basis

Closing Price
of the Date of
Transfer

CGT Shall be
Computed as
per Rates in
accordance
with the
Holding Period

Purchase/Acquisition
Price

21

Explanation and Treatment of Market and Non-Market Based

Transactions

Type of
Impact on
Transactions Inventory

Purchase/Acquisition

Sale/Disposal

Reversal of
Erroneous
Transfers

Closing Price of
the Transaction
Date

N/A

No CGT

Cost as was in the N/A

hands of
Transferee

No CGT

Inventory
Taken In/
Out on
FIFO Basis

Shares are
Gift
Transactions Transferred

to the
Beneficiary
with the same
Date of
Acquisition as
was in the
hands of
Transferee

Pricing

Tax Treatment

22

Explanation and Treatment of Market and Non-Market Based

Transactions

Type of
Impact on
Transactions Inventory

Pricing

Tax Treatment

Purchase/Acquisition

Sale/Disposal

Pledge call

Inventory
shall be
Taken out
from the
Defaulters
Account

Average
Purchase/
Acquisition Price

Closing
Price of the
Date of the
Pledge Call

CGT will be
Computed as per
the Holding
Period.

Default in
Delivery by
Seller and
Subsequent
Squaring-up
by NCCPL

No Impact
on Delivery
Defaulter.

Average
Purchase/
Acquisition Price

Square-up
Price

CGT Shall be
Computed as
per Rates in
accordance
with the
Holding Period

Inventory
Taken Out
on FIFO
Basis From
the Squareup Seller

23

Explanation and Treatment of Market and Non-Market Based

Transactions

Type of
Impact on
Transactions Inventory

Pricing

Tax Treatment

Purchase/Acquisition

Sale/Disposal

Right Issue

Upon
Exercise of
Right or
Purchase,
Inventory
Recorded at
the Credit
Date

Subscription Cost
of the Right Shares

N/A

N/A (However,
LoR trading
shall be
subject to CGT
@ 10%)

Bonus
Shares

Inventory
Recorded at
the Bonus
Credit Date

Ex-Price

N/A

NA.

24

Explanation and Treatment of Market and Non-Market Based

Transactions

Type of
Impact on
Transactions Inventory

De-Merger

Existing
Companys
Shareholding is
Reduced with the
Revised
Shareholding.

Pricing

Tax Treatment

Purchase/Acquisition

Sale/Disposal

Same Cost of
Acquisition of the
Existing Company

N/A

N/A

Price Adjusted in
Accordance with
the Merger Ratio

N/A

N/A

New
Shareholding in
the New
Company With
the Same Date of
Acquisition of
Existing
Company

Merger

No change
In Ownership
Extinguished
Security
Replaced with
New Security
with Merger
Ratio

25

Explanation and Treatment of Market and Non-Market Based

Transactions

Type of
Impact on
Transactions Inventory

Pricing

Tax Treatment

Purchase/Acquisition

Sale/Disposal

Specie
Dividend

Shares will be
Added in the
Share Holders
Account at the
Date on which
Shares are
Credited.

Zero Price

Deal Price on
Issuing
Company

CGT Shall be
Computed for
Issuing
Company as
per Rates in
accordance
with the Holding
Period .

Capital
Reduction /
Splitting of
Shares /
Conversion

Inventory
Replaced and
Adjusted as
per Ratio or
Division.

Cost of Acquisition
of New Shares will
Remain Same, as it
was for Existing
Shares

N/A

N/A

26

Explanation and Treatment of Market and Non-Market Based

Transactions

Type of
Impact on
Transactions Inventory

Pricing

Tax Treatment

Purchase/Acquisition

Sale/Disposal

Transfer
under TaxNeutral
Court
Orders

Shares are
Transferred to
the Beneficiary
with the same
Date of
Acquisition as
was in the
hands of
Transferee

Shares are
Transfer
under Taxable Transferred to
Court Orders the Beneficiary

with the Date of

Transfer

Cost as was in
the Hands of
Transferee

N/A

N/A

Closing Price of
the Date of
Transfer

Closing Price
of the Date of
Transfer

CGT will be
Computed as per
the Holding
Period.

27

Explanation and Treatment of Market and Non-Market Based

Transactions

Type of
Impact on
Transactions Inventory

Pricing

Tax Treatment

Purchase/Acquisition

Sale/Disposal

Offer for
Sale

Securities are
Credited on
Acquisition
Date

Cost of
Acquisition

N/A

N/A

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Explanation and Treatment of Market and Non-Market Based

Transactions

Securities Lending and Borrowing (SLB)

Tax treatment

The Net Difference in the Hands of the Borrower resulting in completing the
whole transaction. (Difference of the Price of the Sale and Re-Purchase).

Financial Charges incurred on Borrowing the Securities Shall be Taken into

Account while Computing CGT.

Tax to be collected @ 10% on Net Gain

CGT will Not be Applied on the Income of the Lender.

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Thank
you !
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