Sharif ud din Khilji

Chief Executive
Khilji & Co. Chartered Accountants

TAX CREDITS FOR

SK TAX NOTES
COMPANIES

1
TAX CREDITS – Sec 61 to 64D
• Charitable donations – Section 61 -
• Investment in shares & life insurance – Section 62 – not for companies
• Tax credit on health insurance – section 62A – not for companies
• Pension scheme – Section 63 – not for companies
• Tax credit on employment generation – Section 64B

SK TAX NOTES
• Available to company as a manufacturer incorporated under CO 1984
• Company & manufacturing unit set up between July 2015 to June 30, 2019
• Set up date = date of trial or commercial production
• Credit equal to TWO (2) % of tax payable for every 50 employees registered
with EOBI or ESSI
• Maximum credit 10% of tax payable
• No splitting up, reconstitution or reconstruction of existing unit
• Subsequent discovery of wrong info – CIR to re-compute tax payable of
relevant year 2
 Tax Credit – Point of sale machine Section 64D
• (1) Any person who is required to integrate with Board’s
computerized system for real time reporting of sale or receipt, shall
be entitled to tax credit in respect of the amount invested in
purchase of point of sale machine.
• (2) The amount of tax credit allowed under sub-section (1) for a tax
year in which point of sale machine is installed, integrated and
configured with the Board’s computerized system shall be lesser of –

SK TAX NOTES
• (a) amount actually invested in purchase of point of sale machine;
or
• (b) Rs. 150,000 per machine.
• (3) For the purpose of this section, the term point of sale machine
means a machine meant for processing and recording the sale
transactions for goods or services, either in cash or through credit
and debit cards or online payments in an internet enabled
environment.” 3
Tax Credit – Section 65E
• Available to company set up in Pakistan before July 1, 2011
• invests in purchase and installation of P&M including corporate dairy
farming
• P&M to be installed between July 1, 2011-June 30, 2019
• Investments made through at least 75% new equity
• Tax credit allowed for a period 5 years from the date of setting up or

SK TAX NOTES
commencement of commercial production, whichever is later
• tax credit allowed against tax payable even against minimum & final
tax if separate accounts maintained for an expansion project or new
project as per formula A * B/C i.e. same as 65D
• Proportionate of new equity to total equity if accounts not
maintained separately
• Loans from banks/ NBFIs for working capital can be taken
4
• Where credit wrongly claimed or business discontinued within 5
years after credit allowed, tax payable recomputed by CIR
 Section 65G
Tax credit for specified industrial undertakings Section 65G
• Allow 25% tax credit for eligible capital investments by the
eligible taxpayers against tax payable including minimum and
final taxes.
• Carry forward allowed up to two succeeding years.
• Eligible investment means investment made in purchase and
installation of new machinery, buildings, equipment, hardware and
software, except self-created software and used capital goods.

5
 Section 65G cont..
Eligible person means;
(a) green field industrial undertaking (Section 2(27A)) engaged in
• manufacturing or ship building and incorporated between the 30-06-
2019 and 30-06-2024 but does not include
• Person formed by the splitting up or reconstitution of an
undertaking already in existence or by transfer of machinery,
plant or building from an undertaking established in Pakistan
prior to commencement of the new business and is part of an
expansion project;
(b) industrial undertaking set up by 30-06-2023 and engaged in the
manufacture of plant, machinery, equipment and items with dedicated
use (no multiple uses) for generation of renewable energy from sources
like solar and wind, for a period of five years beginning from the date
such industrial undertaking is set up.

6
 SME 1
 SME is a person
 who is engaged in manufacturing and
 its business turnover in a tax year does not exceed 250,000,000 rupees.
 In case annual business turnover of a SME exceeds two hundred and fifty
million rupees, it shall not qualify as SME in the tax year in which annual
turnover exceeds the limit or any subsequent tax year.

7
 SME 2
 Fourteenth Schedule Rules
 Registration: SME to register with FBR on Iris web portal
or Small and Medium Enterprises Development Authority
on its SME registration portal (SMERP).
• Categories and tax rates: SME are categorized into two
types for determining their tax liability;
a. Where annual business turnover does not exceed Rupees 100 million, the rate of
tax is 7.5% of taxable income; and
b. Where annual turnover exceeds Rupees 100 million but does not exceed Rupees
250 million, the rate of tax is 15% of taxable income.
•
8
 SME 3
Option for Final Tax Regime: SME may also opt to be taxed
under FTR with following categories:
• Category-1: Whose turnover is not more than 100 million
rupees may opt for 0.25% of gross turnover as FTR;
• Category-2: Whose turnover is more than 100 million
rupees but not more than 250 million rupees may opt for
0.50% of gross turnover as FTR.
• The above option may be exercised at the time of filing of
return and once exercised cannot be revoked for three years.
Further, provisions of section 177 and 214C shall not be
applicable for SME which opts for FTR. 9
 SME 4
Audit: SME opting for normal tax regime may be selected for
audit under 214C if its tax payable is below the fixed tax to be
paid by SME under FTR.

Exports: The tax rate on export will be the same as provided

Minimum Tax under section 113 & 153 is not applicable.

All other provisions of the Ordinance shall apply mutatis