1. Capital Gain Tax-CGT System
NCCPL
Presentation

2. Back Ground of CGT Regime

3. 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.

4. 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.

5. Overview and Procedures of the New CGT Regime

6. 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.

7. 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:
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

8. 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.

9. 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
Prevailing Closing Price of the Deposited Date.

10. 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.

11. 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.

12. 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.

13. 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.

14. 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.

15. 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.

16. 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.

17. Explanation and Treatment of Market and Non-Market Based Transactions

18. 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

19. 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.

20. 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 .

21. 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

22. 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

23. 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

24. 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

25. 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

26. 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

27. 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

28. 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.

29. 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.

30. 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.

31. CGT System Reports

32. 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

33. 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

36. 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

38. 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

39. CGT System Reports

40. 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

42. 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

44. 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

46. 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

48. Thank you !