Capital Gain Tax-CGT System

Slides:



Advertisements
Similar presentations
Central Registration Department
Advertisements

Chapter 13 Debt Restructuring. Debt Restructuring Sense: correction points way to resolve the debt: bankruptcy; restructuring. Debt restructuring, occurring.
What is Bonus Shares? When the additional shares are allotted to the existing shareholders without receiving any additional payment from them, it is known.
New Regime of Capital Gain Tax-CGT PresentationJuly 30, 2012 NCCPL 1.
1. Margin Trading System- MTS Legal Frame Work The operations of MTS are governed under the following:  Securities (Leveraged Market and Pledging) Rules,
ACCOUNTING FOR MERCHANDISING OPERATIONS
MERCHANDISING COMPANY
Investing 101. Types of Savings tools Savings Account: An interest-bearing account (passbook or statement) at a financial institution. Certificates of.
TAX ISSUES FOR INVESTORS & TRADERS Stacy A. Sand, CPA TAX (8829)
How to read a FINANCIAL REPORT
5/25/ Introduction  SLB is defined as the temporary exchange of securities with an obligation to redeliver the same securities in the same number.
13 Investments and Fair Value Accounting
National Clearing Company of Pakistan Limited 1. Back Ground The Securities and Exchange Commission of Pakistan (“SECP”) formed Consultative Group on.
Regime of Capital Gain Tax- CGT Presentation NCCPL 1.
©The McGraw-Hill Companies, Inc. 2008McGraw-Hill/Irwin McGraw-Hill Education Copyright © 2015 by the McGraw-Hill Education. This is proprietary material.
(AS 13) Accounting for Investments. Scope Scope This Statement does not deal with: This Statement does not deal with: (a) the bases for recognition of.
Recap Allotment of Shares Application for allotment of shares
National Clearing Company of Pakistan Limited 1. Back Ground The Securities and Exchange Commission of Pakistan (“SECP”) formed Consultative Group on.
New Regime of Capital Gain Tax-CGT PresentationJuly 30, 2012 NCCPL 1.
Needles Powers Principles of Financial Accounting 12e Accounting for Merchandising Operations 6 C H A P T E R ©human/iStockphoto.
10/22/2015NJ Training TY Capital Gains & Losses (Including Sale of Home) Pub 17 Chapters Pub 4012 Tab 2 Module NJ 1.10.
8 Current Liabilities © 2012 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution.
Financial Accounting, Seventh Edition
National Clearing Company of Pakistan Limited
Capital Gain Tax-CGT System Presentation NCCPL 1.
Introduction National Custodial Services (NCS) National Clearing Company of Pakistan Limited –NCCPL 1.
 The Business Environment  The Tax Environment  The Financial Environment.
Capital Gain Tax-CGT System Presentation NCCPL 1.
CENTRAL DEPOSITORY AND SETTLEMENT SYSTEMS Presented by Md. Saifur Rahman Executive Director, SEC Website:
McGraw-Hill/Irwin© 2008 The McGraw-Hill Companies, Inc. All rights reserved. 10 Additional Consolidation Reporting Issues.
SALARY: Taxation, Exemptions & Rebates Presented By: Asif Zafar 22 August 2016.
Chapter 3 Learning Objectives
Accounting for Income Taxes
Margin Trading System Based on Securities (Leveraged Markets and Pledging) Rules, 2011 and Concept Paper.
National Clearing Company of Pakistan Limited
Time and Value of Supply
Corporate Actions Glossary of Terms
Chapter 7 Investments.
Chapter 27 Further consolidation issues I: Accounting for inter-entity transactions and minority interests Copyright  2005 McGraw-Hill Australia Pty.
Chapter 3 Learning Objectives
Margin Financing Recording System Through
Understanding a Firm’s Financial Statements
ISSUES IN INDIAN COMMERCE
Mechanism to separate the Group
Companies make investments for three reasons.
Chapter 2 Measuring Income to Assess Performance.
Intercorporate Investments and Consolidations
Investment Management
Revised Features Securities Lending & Borrowing (“SLB”)
Margin Financing System (MFS)
A Accounting for Investments Principles of Accounting 12e APPENDIX
5 Accounting for Merchandising Operations
Chapter 7 Investments.
Chapter 13 Corporations: Organization and Share Capital Transactions
Chapter 36 Financing the Business
Kevin J. Collins, CPA/PFS, MST
Transfer of shares to Investor Education and Protection Fund
8 Current Liabilities.
The Statement Of Cash Flows
Chapter 7 Investments.
C H A P T E R 17 INVESTMENTS Intermediate Accounting 13th Edition
ICDS CA Subodh V. SHAH.
Long-Term Liabilities: Bonds and Notes
Bonds and Long-Term Notes
Investments and Fair Value Accounting
© 2015 Pearson Education, Limited.
Accounting for Assets Cash Flows.
Presentation transcript:

Capital Gain Tax-CGT System NCCPL Presentation

Back Ground of CGT Regime

Back Ground of CGT Regime The SECP, in order to strengthen the 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 CGT Regime CGT Rules have been revised though the promulgation of Finance (Amendment) Ordinance, 2012 effective from April 24, 2012. Section 100(B) has been inserted in the Income Tax Ordinance, 2001. For detailed treatment of CGT, Rules and Procedures have been mentioned as follows: 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 rules 13N to 13P 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; Foreign Institutional Investor, being a person registered with NCCPL as a foreign institutional investor; 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; A company, in respect of debt securities only; and any person or class of persons as notified by the FBR.

Overview and Procedures of 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. CGT Regime will NOT be applied on such Person/Investor who Opted-Out. CGT Rates: 2015-2016 Holding Period less than 12-Months 15% on Capital Gain Holding Period is 12-Months but Less than 24-Months 12.5% on Capital Gain Holding Period is 24-Months but Less than 48-Months 7.5% on Capital Gain Holding period more than 48-Months NIL

Overview and Procedures of the New CGT Regime Principles of Holding Period of Inventory Before the Promulgation of New CGT Regime S.NO. Holding Period Inventory Age Price 1. Securities Balance As-Of 23rd April 2011 More than One Year Closing Price of 23rd April 2011 2. Securities have been Acquired or Disposed off Between 24th April 2011 to 23rd April 2012. Determined as per the Actual Acquisition and Disposal Market-Based Transactions- Transaction Price   Non-Market-Based Transactions- Deal Price or Closing Price, as the case may be.

Overview and Procedures of the New CGT Regime Principles for Physical Securities Deposited into CDS S.NO. Deposit of Physical Securities Inventory Age Price 1. Physical Securities have been deposited in CDS Between 24th April 2011 to 23rd April 2012 The Date of Acquisition shall be Deemed as 23rd April 2011 Closing Price of 23rd April 2011 2. Physical Securities have been deposited in CDS on or after 24th April 2012 Actual Date of Acquisition as Communicated by CDS. But it should not be Earlier than 23rd April 2011. Prevailing Closing Price of the Deposited Date.

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 Exchange. 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 Exchange, Central Depository Company of Pakistan Limited, NCCPL and clearing members in case of Foreign Institutional Investors. 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 forward to a Subsequent Financial Year.

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 NCCPL’s 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.

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.

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 Alongwith 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 till the Recovery of Amount of CGT.

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. Brokerage Account of the Persons/Investors shall NOT be Closed Until and Unless such Persons/Investors Obtains a Clearance Certificate from NCCPL.

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.

Explanation and Treatment of Market and Non-Market Based Transactions

Explanation and Treatment of Market and Non-Market Based Transactions Type of Transactions Impact on Inventory Pricing Tax Treatment Purchase/Acquisition Sale/Disposal Sale & Purchase of Securities Through Trading Systems Inventory Taken Out/In on FIFO Basis on Settlement Date Average Purchase/ Acquisition Price Average Sale 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

Explanation and Treatment of Market and Non-Market Based Transactions Type of Transactions Impact on Inventory Pricing Tax Treatment Purchase/Acquisition Sale/Disposal Sale & Purchase through Negotiated Deal Market (NDM) Inventory Taken Out/In on FIFO Basis on Settlement Date 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.

Explanation and Treatment of Market and Non-Market Based Transactions Type of Transactions Impact on Inventory Pricing Tax Treatment Purchase/Acquisition Sale/Disposal Transfer Owing to Acquisition  Inventory Taken In/Out on FIFO Basis. Purchase / Acquisition Price Actual Selling Price, Negotiated or Quoted , whichever is higher 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 .

Explanation and Treatment of Market and Non-Market Based Transactions Type of Transactions Impact on Inventory Pricing Tax Treatment Purchase/Acquisition Sale/Disposal Portfolio Transfer – where all UINs are Matching No Impact on the Age of Inventory Age Original Purchase / Acquisition Price N/A Transfer / Transmission upon Death Shares are transferred to the Beneficiary /executor 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

Explanation and Treatment of Market and Non-Market Based Transactions Type of Transactions Impact on Inventory Pricing Tax Treatment Purchase/Acquisition Sale/Disposal Transfer for / against GDRs - GDRs are Converted into Shares Acquisition of Inventory Closing Price of the Date of Conversion N/A Deposits into Depository and Get GDRs Inventory Taken Out on FIFO Basis Purchase / Acquisition Price Closing Price of the Date of Transfer CGT Shall be Computed as per Rates in accordance with the Holding Period

Explanation and Treatment of Market and Non-Market Based Transactions Type of Transactions Impact on Inventory Pricing Tax Treatment Purchase/Acquisition Sale / Disposal Reversal of Erroneous Transfers Inventory Taken In / Out on FIFO Basis Closing Price of the Transaction Date N/A No CGT Gift Transactions Shares are Transferred to the Beneficiary with the same Date of Acquisition as was in the hands of Transferee Cost as was in the hands of Transferee

Explanation and Treatment of Market and Non-Market Based Transactions Type of Transactions Impact on Inventory Pricing Tax Treatment Purchase/Acquisition Sale/Disposal Pledge call Inventory shall be Taken out from the Defaulter’s 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. Inventory Taken Out on FIFO Basis From the Square-up Seller Average Purchase / Square-up Price

Explanation and Treatment of Market and Non-Market Based Transactions Type of Transactions Impact on Inventory Pricing Tax Treatment Purchase/Acquisition Sale/Disposal Right Issue Upon Exercise of Right, Inventory Recorded at the Credit Date Subscription Cost of the Right Shares N/A Bonus Shares Inventory Recorded at the Bonus Credit Date Ex-Bonus Price NA. Offer for Sale Securities are Credited on Acquisition Date Cost of Acquisition

Explanation and Treatment of Market and Non-Market Based Transactions Type of Transactions Impact on Inventory Pricing Tax Treatment Purchase/Acquisition Sale/Disposal De-Merger Existing Company’s Shareholding is Reduced with the Revised Shareholding. New Shareholding in the New Company With the Same Date of Acquisition of Existing Company Same Cost of Acquisition of the Existing Company N/A Merger No change In Ownership Extinguished Security Replaced with New Security with Merger Ratio Price Adjusted in Accordance with the Merger Ratio

Explanation and Treatment of Market and Non-Market Based Transactions Type of Transactions Impact on 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 N/A 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

Explanation and Treatment of Market and Non-Market Based Transactions Type of Transactions Impact on Inventory Pricing Tax Treatment Purchase/Acquisition Sale/Disposal Transfer under Tax-Neutral Court Orders Shares are Transferred to the Beneficiary with the same Date of Acquisition as was in the hands of Transferee Cost as was in the Hands of Transferee N/A Transfer under Taxable Court Orders Shares are Transferred to the Beneficiary with the Date of Transfer Closing Price of the Date of Transfer CGT will be Computed as per the Holding Period.

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 at applicable rates on Net Gain CGT will Not be Applied on the Income of the Lender.

Explanation and Treatment of Market and Non-Market Based Transactions Global Custodian Related Market Based Transactions and Transactions executed by Foreign Institutional Investors outside Pakistan Tax treatment Foreign institutional investor (FII) not only deal in shares for their own account but also on behalf of other investors through global custodians. CGT shall be charged to final settlement account of person settling the underlying trade. The clearing member should be responsible to collect and deposit with NCCPL, the CGT computed. In case of negotiated deal transaction executed by FII outside Pakistan, clearing member receiving the instructions from FII shall be responsible to report this transaction in negotiated deal market. Then CGT will be computed as per rules of Negotiated Deal Market Transaction.

CGT System Reports

CGT System Reports Following CGT Reports have been made available in CGT System: CGT Consolidated Summary CGT Summary Non Inventory Based CGT Gain/(Loss)Detail CGT Gain/(Loss) Summary CGT Inventory Slab wise Inventory Balance Report; Date wise Inventory Detail Report; and Inventory Balance Detail Report

CGT System Reports CGT Consolidated Summary Report (NET CGT OBLIGATION) This Report Contains ALL INFORMATION OF ENITRE CGT: Current Month CGT Position Previous Month CGT Position As of Reporting Month CGT Position Previous Month Non-Payment and Allocation Final As of Reporting Month CGT Position

CGT System Reports CGT Consolidated Summary Report Type CGT Gain/Loss Non Inventory This Report represents the Gain/Loss and CGT for Square-up Transactions of Various Market: Market-wise Capital Gain/(Loss) Total Gain/(Loss) Total CGT

CGT System Reports CGT Gain/(Loss)Detail Report This Report represents the following out-going information of Sales/Disposal with Number of Days: Symbol Taxable and Non-Taxable Quantity Capital Gain/(Loss) Number of Days CGT Slab CGT

CGT System Reports

CGT System Reports Symbol CGT Gain/(Loss) Summary (out-going) This Report represents the following Detailed Out-going information: Symbol Total Out-going Inventory (Taxable and Non-Taxable Quantity) Capital Gain/(Loss) Number of Days CGT Slab Percentage CGT

Slab wise Inventory Balance Report CGT System Reports CGT Inventory Report Report Type Slab wise Inventory Balance Report This Report represents the following Balance information of Purchase/Acquisition: Symbol Applicable Slab Rate of Inventory Total Volume

CGT System Reports CGT Inventory Report Report Type Date wise Inventory Detail Report This Report represents the following in-coming information of Purchase/Acquisition : Symbol Market Based Inventory Non-Market Based Inventory Total Volume Adjustment of Expenses Net Purchase Value and Price

CGT System Reports CGT Inventory Report Report Type Inventory Balance Detail Report This Report represents the following Date-wise Balance information of Purchase/Acquisition : Symbol Available Quantity in Inventory Price Shares Value

Thank you !