Tax Consultancy for CPEC Projects
Government of Pakistan approves attractive tax exemptions for Gwadar port operators which did not rule out the opportunity of tax consultancy for CPEC Projects.
CPEC has prioritized Gwadar Port from one of four major CPEC projects. These projects include Gwadar International Airport, Eastbay Expressway and the CPEC Free Zone.
Gwadar port will be developed by China Overseas Port Holding Company and afterwards it will also manage the port.
Brief Introduction to CPEC
China-Pakistan Economic Corridor (CPEC) is one of its kind pool of projects, these projects are mostly infrastructure projects. Originally CPEC projects are valued at 46 billion US Dollars which was revised later on at $62 billion.
CPEC will bring modernization in Pakistani infrastructure and surely strengthen Pakistan’s economy through construction of modern transportation systems, it also contain energy projects, and constitution of special economic zones.
Tax and CPEC Projects
Pakistan recently approved tax concessions for Chinese companies at Gwadar port and for the businesses that will operate / run business in Gwadar Free Zone.
This exemption has been extended for a period of 40 years and it makes Gwadar important in ‘One-Belt, One-Road’ strategic initiative.
The major projects in CPEC will enjoy exemptions from taxes such as income tax, excise, custom duties etc but on the same time establishments/ organizations will have to follow Income tax laws in Pakistan.
Tax Compliance in Pakistan
They may be exempt from income tax liability but they have to comply with and deduct/ collect taxes on payments they’ll make.
Simply speaking they will have to act as withholding agent and deduct/ collect withholding taxes as applicable in Pakistan.
Apart from deduction/ collection they will also have to report it to FBR (Federal Board of Revenue) through monthly withholding tax statements under section 165 and 149 of the Income Tax Ordinance, 2001.
The Economic Coordination Committee has also approved a 23 year tax holiday for Gwadar Port.
China Overseas Ports Holding Company Ltd (COHPCL) companies will enjoy the tax concession for 20 years and this will extend to contractors and subcontractors .
1% income tax is also exempted for China Overseas Ports Holding Company Ltd (COHPCL) and its operating companies has also been exempted.
Exemption from 12.5% tax on Dividend
There is complete exemption from 12.5 per cent tax on dividend income and withholding tax for the China Overseas Ports Holding Company Ltd (COHPCL), and its operating companies, including the China Overseas Ports Holding Company Pakistan Private Limited, Gwadar International Terminals Limited, Gwadar Marines Services Limited and Gwadar Free Zone Company Limited.
Pakistan has also granted tax exemption on profit on debt generated by those Chinese financial institutions that will lend money for construction and development purposes.
Sales Tax & Excise Duty
The China Overseas Ports Holding Company Ltd (COHPCL), its operating companies and contractors, are also exempt from, from sales tax and federal excise duty.
Exemption from sales tax and federal excise duty has also been granted for 23 years to businesses that will be established inside the Gwadar Free Zone.
However, if these businesses/ establishments make supplies and sales outside the Gwadar free zone, they will be subjected to taxation.
Pakistan approved customs duty exemption for the China Overseas Ports Holding Company Ltd (COHPCL), its operating companies, contractors and subcontractors for a period of 40 years on import of equipment, materials, plants, machinery, appliances and accessories for construction of Gwadar Port and the associated Free Zone.
The exemption has also been extended on import of ship bunker oils for supplying fuels and lubricants to ships used in the port and its terminals.
Choose from our tax advisory services for all kinds of businesses operating in Pakistan.