Pakistan is focusing on attracting investment and encouraging better tax compliance. Below, KPMG in Pakistan highlights the tax incentives that are available to foreign investors in the country’s alternative energy sector. We also discuss developments in Pakistan’s efforts to recognize and reward tax compliance.
Pakistan has an abundance of natural resources that are yet to be tapped. With its growing population and rising demands for electricity, Pakistan currently faces a shortage in power supplies. As most electricity is produced from fossil fuels, the population bears high tariffs for the purchase of electricity.
Given these difficulties, Pakistan urgently needs investment in its alternate energy sector, including power from wind, hydro and solar sources. Pakistan’s location, abundant natural resources, and high electricity demands make the country a potential goldmine for investors in the sector. Further, Pakistan’s government has adopted numerous measures to attract foreign investors and protect them from risk.
Pakistan offers generous tax incentives to investors in the power sector:
For the first time, in February 2014, the government of Pakistan made public the names of the country’s top 100 taxpayers of the country in four categories: salaried individuals, non-salaried professionals, partnership firms and companies. Winners (including CEOs of the corporate entities) will be issued privilege and honor cards, and the move is expected to contribute to voluntary tax compliance.
In addition, the government increased the period of amnesty from audit, additional tax and penalties where tax returns were not filed for the preceding years. Taxpayers can take advantage of the amnesty by paying a certain amount of tax for each preceding year and filing a return by 30 April 2014.