a. Tax Implications on dividends
Increased Tax Rates on Filers/ Non-Filers through the Finance Act, 2016, enhanced rate of withholding tax on dividend amount has been prescribed in the Income Tax Ordinance, 2001, (Ordinance). New tax rates are as under:
A ‘filer’ is a taxpayer, whose name appears in the Active Taxpayers List (ATL) issued by FBR, from time to time, whereas ‘non-filer’ is a person other than a ‘filer’. FBR has uploaded an ATL on its web-site, which can be accessed at http://fbr.gov.pk.
The Company will check each shareholder’s status on the latest ATL available at the first day of Book Closure and, if the shareholder’s name does not appear on the ATL, the increased rate of withholding tax at 20% would be applied. In case of ‘filer’, withholding tax rate of 12.5% will be applicable.
The corporate shareholders having CDC accounts are required to have their NTN updated with their respective participants, whereas corporate physical shareholders should send a copy of their NTN certificate to our Share Registrars, mentioning their Folio No. and the name of the Company.
b. Taxation for Joint Shareholders
The FBR has clarified that where the shares are held in joint accounts/ names, each account/ joint holder will be treated individually as either a filer or a non-filer and tax will be deducted according to his/her shareholding. The shareholders, who are having joint shareholding status, are requested to kindly intimate their joint shareholding proportions to the Share Registrar of the Company M/s Corplink (Private) Limited in the following format:
|Folio/ CDC Account No.||Name of Shareholder||CNIC||Shareholding||Total Shares||Principal/joint Shareholder|
If the shareholding proportion is not advised or determined, each joint shareholder will be assumed to hold equal proportion of shares and deduction of withholding tax will be made accordingly.
c. Requirement of Valid Tax Exemption Certificate for Claiming Exemption from Withholding Tax
As per FBR Circulars No. 1(29)WHT/2006 dated 30 June 2010 and C.No.1(43)DG(WHT)/2008-VoI. II-66417-R dated 12 May 2015, the valid exemption certificate is mandatory to claim exemption of withholding tax U/S 150 of the Income Tax Ordinance 2001 (tax on dividend amount) where the statutory exemption under Clause 47B of Part-IV of Second Schedule is available. The shareholders who fall in the category mentioned in above clause and want to avail exemption U/S 150 of the Ordinance, must provide valid Tax Exemption Certificate to our Share Registrars before book closure otherwise tax will be deducted on dividend as per applicable rates.