The worldwide demand for software services far exceeds the current supply of
skills. Pakistan with expanding expertise and
growing corps of computer hardware engineers and software programmers can easily
and efficiently meet the increasing
demands of the international market. To develop both the software and the hardware
sectors and to utilize the available labor
and the material resources in Pakistan, a highly attractive package of incentives
and facilities has been devised for the
electronics industry.
1.The Board of Investment are planning to develop Technology Parks at Karachi,
Lahore, and Islamabad where fully
developed PCD fabrication, die and mould making and high speed data communications
facilities will be made available
by the Government for small companies. These services will help the quick development
of new businesses at these
parks by private entrepreneurs.
2.A roster of professional skills available in the country will be developed
by the Pakistan Computer Bureau for use by
such industries who may need to hire computer related specialists.
The de regulation of ownership and operation of Very Small Aperture Terminals
(VSAT) for the private Telecommunications
industry will be considered after the privatization of Pakistan Telecommunication
Corporation.
The tariff on the import of components for the electronics industry will be
within a range of 10-15% of the value. The Ministry
of Science & Technology will work out the details for various components
groupings in consultation within the Central Board of
Revenue and Board of Investment.
The government will extent loans through Society Youth Investment Promotion
Society, Small Business Finance Corporation
and other financial institutions for the purchase of computers and electronic
equipment and components. In addition, equity
support will also be provided from an Equity Fund to be created by the Government.
Income tax exemption would be available for a period of 10 years on the income of this industry.
Export promotion of electronic hardware and software
In order to promote the export of electronic hardware and software, a Unit,
within the Export Promotion Bureau will be set up
to identify foreign business opportunities for Pakistani companies and to advise
on the appropriate marketing their products.
Optimum utilization of available facilities operated by Government departments
Government research, development, industrial and educational organizations,
which are usually well endowed with reseach,
testing development and production facilities will make their equipment available
on a lease or rental basis to individuals and
private companies involved in innovative technology based activities.
Treatment of R&D Expenditure
A certificate will be issued to eligible companies by the Ministry of Science
& Technology stating that a project is a R&D
project, then 20% of gross earnings will be allowed to be spent towards R&D
project..
Support from domestic buyers of electronic equipment
The Government Departments will draw up functional specifications for electronics
products to encourage their local
production. In addition, a price preference of 15% will be given to local electronic
products by these Departments.
The plant and machinery which are not manufactured locally and are imported
for the expansion of the existing units or to set up
new units are exempted from customs duty in excess of 15% ad-valorem and from
the whole of sales tax.
Plant and machinery, not manufactured locally, imported for the manufacture
of pharmaceutical raw materias for such chemicals
which are available in the international market without any franchise are exempted
from so much of the customs duty as is in
excess of 25% ad valorem and whole sales tax.
1.10% import duty and sales tax on import of plant, machinery & equipment
which is not produced locally and is required
for basic/semi basic manufacture of drugs.
2.Duty and tax free import of all raw materials and chemicals similar to what
has been notified for imported raw materials
used in formulating drugs.
3.Tariff protection for basically manufactured raw materials by deleting the
basic raw materials from the SRO meant for
duty free imports. This protection would be provided as and when production
starts.
4.Basic/semi basic pharmaceutical manufacturers will be exempted from sales
tax.
5.For the establishment of basic/semi basic manufacturing plants, loans would
be provided on the basis of debt equity ratio
of 70:30.
6.Adequate tariff protection will be given to the basic/semi basic manufacture
against import of finished drugs. In case of
general decline in import duty regime, the same level of protective duty shall
be maintained as before, both in respect of
import of raw materials and finished drugs.
Income of an industrial undertaking set up between 1st July 1981 and 30th June
1998, engaged exclusively in the exploration
and extraction of mineral deposits, other than petroleum, as may be specified
by the Federal Government, is exempted from
income tax for a period of five years beginning from the month in which commercial
production commences. The specified
mining-machinery and equipment imported by a mining industry, approved by the
Federal Government or provincial
government, is also exempted from customs duty in excess of 25% ad valorem and
whole of sales tax.
(Including recreation, amusement, aviation, adventure tourism, mountaineering, water sports, etc., both inland and island)
1.Hotels, Tour operators, tourism and recreation related projects/ facilities
will continue to enjoy the status of an industry,
as accorded in the Tourism Policy, 1990, and be considered as industrial undertakings.
2.Accelerated Depreciation Allowance (ADA) as available to industrial units
for income tax purposes, will also be
available as follows:
Description ADA (%)
Building 10
Furnitre, plant
& Equipment 25
3.LMM credit financing shall be available to hotel/tourism industry as well
as tour operators. The State Bank would issue
guidelines to Banks/DFIs in this regard.
4.The Development Authorities, while calling for the bids for land disposal
for hotels and tourism projects would first
pre-qualify the genuine investors and new comers who will also be required to
submit a feasibility study at the time of
pre-qualification. Final bidding would be held among these pre-qualified parties.
The cost of land would be payable in
easy instalments. Land developing authorities would earmark plots for hotel
and tourism projects in the master plan and if
the land is not developed within the specified time by their allottees, their
allotment shall stand cancelled. The state
owned land/property or the evacuee property will also be made available for
hotel and tourism projects on the same
basis.
5.The complimentary rooms are presently subject to central excise duty. SInce
the complimentary rooms are used for the
purpose of sales promotion, these will be exempted from the levy of central
excise duty only on a maximum of 5% of
total available rooms, for five/four Star hotels.
6.Industrial tariff would be applicable in case of electricity as is being done
by the Gas Companies.
7.The facilities/incentives for Deemed Export Status, as envisaged in the Tourism
Policy of 1990, will be implemented and
made available to hotel and tourism projects (including tour operators), as
follows:
1.The foreign exchange earnings of hotels, tour operators and other tourism
projects be entitled to same rebate in
income tax as available to exporter.
2.5% of the foreign exchange earnings shall be allowed to be spent on opening
of offices abroad.
3.They would be allowed to pay service charges to foreign travel agents and
marketing companies out of their own
foreign exchange earnings.
The following industries are reckoned as agro-food processing industries:
1.Agriculture
2.Horticulture
3.Cattle and sheep farming, the production and processing of meat, milk, and
related dairy products.
4.Processing, canning, packing, grading, and preservation of fruits and vegetables.
5.Inland farming and preservation of fish particularly in water logged and saline
areas.
6.Production and multiplication of high yielding seeds,
7.Edible oil extraction
8.Poultry farming, poultry processing and pultry feed
9.Cattle feed
10.Milk processing
The imported plant and equipment not manufactured locally, shall be subject
to custom duty of 10% with complete
exemption from sales tax.
Income tax structure of projects in agro-food industry will be entitled to debt-equit
ratio of 70:30. Projects will be
entitled to financing from all banks and development finance institutions.
The project shall enjoy 50% exemption from the central excise duty, on production,
for 5 years from the date of
commencement of commercial production.
Expatriate personnel of the units will be entitled to import their personal
effects, excluding motor vehicles, free of duty
and taxes in accordance with the personal baggage "Transfer of Residence
Rules". They will also be allowed to import
food items and other consumable without any duty/taxes up to US $600 per person
per year, and on payment of
duty/taxes up to US $2000 per person per year.
Import of breeding stock will be allowed subject to an import duty of 10%.
Locally manufactured machinery will be provided credits under the LMM credit
line.
The projects may be exempted from provincial, Municipal taxes for 5 years from
the date of commencement of
commercial production.
Parts and components up to 5% of initial C&F value of imported plant and
equipment shall be imported at 10% duty if
imported together with the plant.
Manufacture of Poly Vinyl Chloride (PVC)
1.Import duties on the import value of various intermediary products for the manufacturing of PVC will be fixed as:
Polyvinyl Chloride 30%
Vinyl Chloride Monomer (VCM) 20%
Ethylene 15%
2.Customs duties on the imported value of machinery for PVC shall be levied
at 10%. No sales tax will be levied on
locally fabricated or imported machinery.
3.Complete exemption from duty and sales tax on imported plant or machinery,
for the installation of units for the
manufacturing of PVC from indigenous raw material, provided letters of credit
are opened up to 30th June 1996 as
admissible for projects to be established in Special Industrial Zones (SIZs).
4.Exemption for sale tax on the purchase of locally manufactured machinery andequipment.
5.LMM credit would be available for the purchase of locally made machinery.
1.The tariff on the import of paraxyline be fixed at 5% for a period of 5
years till paraxyline manufacture locally, whichever
is earlier, after which the full duty of 10% will be payable with the duty on
PTA be 25%.
2.The import of machinery will be exempt from levy of sales tax instead of refunding
it in 24 monthly installations.
3.Projects will be allowed to import of water desalination plant duty free.
4.For petrochemical and key industries, the terminal year for the levy of 10%
import duty on machinery not produced in
the country be advanced to 30th June, 1996 instead of 30th June 1999.
5.The wood pulp imported for use in manufacture of filter tow for manufacture
of cigarettes be taxed at 10% of the value
and filter tow at 25% of the imported value, as envisaged in the tariff reforms
for the terminal year 1996, thus maintaing a
duty differential of 15% between its raw material and finished goods.
1.Current installed capacity of power generation is 12,530 MW (4,825 MW of
Hydel and 7,568 MW of Thermal).
2.Electricity is available to only 40% of the population.
3.Per-capita consumption per annum is 300 Kwh/year.
4.Average annual increase in demand is 8%.
5.Additional generation capacity of about 54,000 MW would be required up to
year 2018.
6.Minimum additional requirement for 1995 has been 900 MW. Increase to 1300
MW in the year 2000 and 5000 MW in
2018.
7.Energy generated by the private projects will be purchased in bulk by the
public sector utilities agencies like Water and
Development Authority/Karachi Electricity Supply Corporation. Concession period
up to 30 years is allowed for
projects being set up under Build Operate, own transfer/Build own transfer (BOOT/BOT)
arrangements;
purchase of power generated by private projects for the public sector utilities
agencies, will be guaranteed by the
government of Pakistan. The investors are, therefore, assured of a stable market;
8.Performance of public sector fuel supplies will also be similarly guaranteed
by the government;
9.bulk tariff for the sale of electricity will be worked out on the basis of
60% annual plant factor. A portion of the tariff
covering the fixed operating costs will be designated as the capacity charge,
and will be paid on monthly basis
irrespective of the amount of energy purchased. The balance of tariff will represent
the energy charge and will vary
according to the quantity of energy purchased;
10.suitable escalation will be provided for the basic price of energy, taking
into consideration the key inputs only, e.g., fuel,
labour and spare parts, etc.;
11.a special fund titled the Private Sector Energy Development Fund (PSEDF)
has been established with the assistance of
international donor agencies, which provides financing up to 40% of the capital
cost of the project. Loans from the funds
may have a maturity of up to 23 years, with grace period of up to 8 years. Currently
the applicable interest rate is 14%
per annum including exchange risk premium;
1.private sector power project companies are exempted from the corporate tax;
2.power projects are allowed to import capital equipment without payment of
customs duties;
3.repatriation of equity alongwith dividends is allowed freely; and
4.power projects can obtain exchange risk insurance on standard terms from the
State Bank of Pakistan on foreign loans.
The premium will be passed through the tariff.
5.Adequate institutional arrangements have been made to facilitate the handling
of private power proposals. A Private
Power and Infrastructure Board (PPIB) has been established in the Ministry of
Water and Power. Similar bodies have
also been created in the Water and Power Development Authority and in the National
Development Finance
Corporation.
1.Machinery and equipment, includind coal mining equipemnt, not manufactured
locally, is exempted from whole of custom
duty and sales tax if imported for setting up or for balancing, modernization,
and extension of power generation i.e., oil,
gas hydel, coal, wind and wave energy projects, including under construction
projects.
2.Raw materials and components, as are not produced or manufactured locally
and are imported for use in the
manufacture of machinery, equipment, intermediary or capital goods and specialised
vehicles (4 x 4 non-luxury i.e.
without airconditoner and other accessories) excluding passenger vehicles to
be supplied to electric power generation,
i.e., oil, gas, hydel, coal, wind and wave energy projects for their expansion
or modernization including under
construction projects exempt from customs duty and sales tax.
1.Machinery, equipemnt, materials, specialized vehicles, accesssories, spares,
chemicals and consumable (as are not
manufactured locally) can be imported free of customs duty and sales tax by
petroleum sector companies.
2.Raw materials and components for use in the manufacture of machinery, equipemnt,
materials, specialized vahicles,
accessories, spares, chemicals and consumables are exempted from whole of custom
duty and sales tax.
1.all plicantions for exploration licences are decided within 60 days, the
disputed or contested applications will be decided
with a maximum pariod of 120 days;
2.expeditious and equitable disposals of applications is ensured through a standing
committee in the Ministry of Petroleum
and Natural Resources on which all the concerned federal and provincial organisations
are represented;
3.the sharing in concession i.e., shouldering exploration cost and acquiring
share in development is done on the basis of
competitive bidding;
4.local companies are encouraged to invest with the foreign companies and OGDC
in exploration;
5.foreign exchange requirements of exploration companies which paid their share
of oil/gas in local currency are fully met
by the government;
6.the import of drilling rigs, logging trucks, siesmic equipment, well cementation
equipment, and snubbing units, all
equipments for exploration, development and production off-shore is duty free;
7.the equipment imported for enhanced oil recovery is also subject to the same
concessionary rate of duty. All other
machinery is subject to 5.25% duty. Moreover, the exploration companies are
entitled to all such benefits as are
admissible on its export for the use of locally manufactured machinery and equipment.
8.the price of non-associated gas is at par with the high sulphur fuel oil price
less such discounts as may be negotiated at
the time of signing the concession agreements;
9.the price of LPG is linked to its international price with appropriate discount
to encourage its local production;
10.the associated gas is priced at 75% of the fuel oil price less discounts
based on a declared formula provided there is no
flaring beyond the quantity authorized for reservoir study;
11.the oil price is related to the price of comparable Middle East crude less
a discount negotiated at the time of signing the
concession agreement keeping in view the prospects of the areas and size of
investment. There will be no discount on
off-shore production; the declaration of commercial viability could be accepted
even on the basis of one well;
12.the gas producing companies will be assured a market outlet within a reasonable
time (up to 4 years) of commercial
discovery. If indication of an outlet is not given by the government within
six months of the declaration of commercial
discovery the producer would be free to use it for power generation, fertilizer
production or any other industrial or
commercial purpose; and
13.to encourage off-shore, even the associated gas from such fields is priced
at par with high sulphur fuel oil.
1.Rates of withholding tax under section 50(4) have been made uniform for
resident and non-resident contractors i.e. three
per cent of gross contract payments in respect of construction, assembly or
the like project contracts as final discharge
of tax liability.
2.Non-resident income from dividend, interest on profits on bank deposits, bonds
and certificates is taxed @10% and
winning proceeds of prize bonds and raffles shall be charged at a rate of 7.5%.
3.Presumptive tax has been extended to exporters and the tax withheld by the
banks on foreign exchange proceeds
received by exporters (excluding manufacturers enjoying tax holiday) will be
treated as full and final discharge of tax
liability.
Category Tax rate
Exporters eligible for 75% income tax rebate. 0.5%
Exporters eligible for 50% income tax rebate. 0.75%
Other exporters including those eligible for
25% income tax rebate. 1%
1.5 year income tax holiday for industrial undertakings engaged in food processing
which are established between the 1st
July, 1994 and the 30th June, 1997.
2.5 year income tax holiday for industrial undertaking engaged in manufacture
of soft and stuffed toys which are established
between the 1st July, 1994 and the 30th June, 1997.
3.Contractors/sub-contarctors for designing, supply of plant and equipment and
construction of power project will be
subject to with-holding tax @ 4% of gross receipts which will be the final discharge
of income tax holiday.
4.Income tax on dividends on shares of a company set up for power generation
has been reduced from 15-20%
applicable to foreign companies to 7.5% of the amount of such dividend.
5.Flat rate of income tax for non-residents has been reduced from 30% to 20%.