Merged BFIs to enjoy tax benefits from current FY
KATHMANDU, DEC 22 -
Banks and financial institutions (BFI) that have merged will get tax benefits from the current fiscal year as part of their incentive package. The Inland Revenue Department (IRD) said that BFIs would get the benefits as per the Finance Act 2011 which has provisioned a number of benefits for merged entities, shareholders and employees.
Income tax has been waived on the disposable income of the merged entity. Shareholders have been exempted from income tax on dividends and capital gains tax for two years. Similarly, employees have been exempted from income tax on 50 percent of the gratuity.
“Those who have merged after the Finance Act was introduced will get the promised tax benefits for their transactions of the year when they merged,” said Tanka Mani Sharma, director general of the IRD.
In the last fiscal year, eight merged financial entities were created after three finance companies merged with two commercial banks and six development banks were created with seven development banks and five finance companies coming together, according to the central bank. Those completing their merger in this fiscal year will get benefits on the transactions of this year, according to the IRD.
The act requires the merging BFIs to submit the letter of intent provided by the central bank to the IRD by mid-November to get the benefits provisioned by the act. It also states that only those BFIs completing the merger within mid-November 2013 will get such benefits. A total of 43 BFIs have applied to the IRD for the promised benefits so far whose merger will reduce their number to 19.
The IRD on May 5, 2012 had published a notice asking BFIs going for a merger to submit claims for tax benefits with the letter of intent issued by the central bank, a copy of the memorandum of understanding signed between the two merging entities, audit reports before the merger, details of their employees, shareholders and stake in their respective companies before mid-November this year.
However, those BFIs that have already merged, those that have got letters of intent from the central bank and those in the process of getting them have applied to the IRD for tax benefits promising to complete the merger within the set deadline.
However, IRD director general Sharma said that the tax benefits would only be available to those who have already received letters of intent before mid-November 2012 as per the Finance Act. “ BFIs not submitting the letter of intent before mid-November this year will not be entitled to get the benefits even if they complete the merger by mid-November 2013,” said Sharma. He added that the deadline for submission of letters of intent to the IRD could be extended if the new Finance Act is passed this year.
Source: The Kathmandu Post
