Daily Times

The Federal Board of Revenue (FBR) has been urged to restore tax exemption for inter-corporate dividend, which has been abolished through Tax Laws (Second Amendment) Ordinance, 2021. PwC AF Ferguson & Co Chartered Accountants in its commentary on the Tax Laws (Second Amendment) Ordinance, 2021, said that at present, inter-corporate dividends are exempt from tax under the following group structure: (i) Holding company and 100 percent owned subsidiaries entitled to group taxation and filing group return ; and (ii) Holding company and subsidiary companies eligible for group relief. Through the Amendment Ordinance, the exemption for inter corporate dividend stated in (ii) above has been withdrawn. The withdrawal of exemption needs reconsideration as it would affect the groups already formed following the Government’s policy of encouraging group / holding structure of which exemption for inter corporate dividend was an essential part.