The Securities and Exchange Commission of Pakistan (SECP) has introduced new measures to improve the documentation of withholding tax and advance tax within the country’s insurance sector for the Federal Board of Revenue (FBR). These changes come in the form of amendments to the Insurance Accounting Regulations of 2017.
Under the updated regulations, when it comes to life insurance companies, the advance or withholding tax associated with the shareholder fund will now be recorded in the books of the respective shareholders’ fund. Similarly, the advance or withholding tax linked to a statutory fund of a life insurer will be documented in the books of the relevant statutory fund.
A noteworthy development is that shareholders’ funds within life insurance companies are permitted to purchase the entire amount of adjustable advance or withholding tax recorded in the statutory funds’ books using cash or cash equivalents. However, there is a mandatory requirement for the shareholders’ fund to purchase advance or withholding tax related to statutory funds that can be adjusted within one year, and this must be done in cash or cash equivalents, as per the revised regulations.
These changes are aimed at enhancing transparency and tax efficiency within Pakistan’s insurance sector, ensuring that taxation is appropriately recorded and managed. The SECP’s efforts reflect its commitment to improving the regulatory framework to align with evolving industry needs and tax compliance requirements.