The government's revenue authority slashed corporate tax sharply for local manufacturers of a number of products for a longer-term until June 30, 2032, as a measure for the manufacturing sector to flourish.
Manufacturers of refrigerators, complete freezers with spare parts, motorcycles, air-conditioners and their compressors will enjoy a 10-per cent concessionary tax rate on their incomes for the period after the date of commencing commercial production, according to the National Board of Revenue (NBR) notification.
The income-tax wing under the Internal Resources Division (IRD) issued a Statutory Regulatory Order (SRO) on October 21, 2021, to give effect to the cut-down corporate-tax rate.
Currently, the manufacturers of those products are required to pay corporate tax at regular rates, like other companies, ranging from 22.5 to 30 per cent on the basis of categories of companies.
However, the income-tax wing of the revenue board has tagged some conditions to availing the concessionary tax.
The company will have to invest at least 10 per cent of its tax-exempted income within the next three years in its industry or new industrial undertaking.
The 'investment' has been defined in the SRO as increasing own production capacity and purchase of machinery for constructing physical infrastructure.
"Manufacturing companies will have to be registered under the Company Act 1994, have capacities to manufacture mould and dices on their own, have own polyurethane foaming plant, power-coating plant and waste- management plant," the SRO says.
The existing manufacturing industry that has reconstructed businesses or classified as new businesses or industries formed through the transfer of machinery or building structure would not be entitled to the reduced rate of tax.
However, industries that have been enjoying a 5.0-per cent tax rate under an SRO issued in 2009 would continue to avail the facility until its tenure ends.
After the expiry of their tenure under the SRO, those industries would have to pay 10-per cent tax until June 30, 2032.