The General Department of Taxation has issued an Instruction on Tax Obligations for Share Premium. 

In accordance with Article 7 of the Law on Taxation, promulgated by Royal code No. NS/RKM/0523/004 dated May 16, 2023, and Paragraph 3 of Article 9 of ministry order [Prakas] No. 578MEF.PK dated September 19, 2024, regarding Income Tax, taxable income is defined as the difference between the net asset value at the beginning and at end of a period.

The results from that period are used as the basis for calculating tax, with capital contributions excluded and any withdrawals for personal use or prior deductions made by the enterprise owner added. Capital contributions, whether in cash or in kind, are not considered taxable income.

In the past, the General Department of Taxation of the Ministry of Economy and Finance noted that some enterprises expressed uncertainties in fulfilling their income tax obligations related to share premium, the amount received by an enterprise in excess of the par value of shares when it increases its capital through the issuance of new shares (Share Subscription).

To ensure clarity in the implementation of taxation laws and regulations in an efficient, transparent, and effective manner, the General Department of Taxation of the Ministry of Economy and Finance issues the following instructions:

1. Share premium is considered a capital addition or contribution by shareholders into the enterprise and is not subject to income tax.

2. The share capital and share premium from new shares must be fully paid into the enterprise and clearly recorded in the accounting records, accompanied by proper documentation. If the enterprise lacks proper documentation, any increase in the property owner’s capital account will be treated as taxable income in accordance with income tax provisions.

Click here: https://t.me/c/1377322939/1199