Economic Zones (EZs) investors will not enjoy reduced tax rates on their income if they relocate factories or install old machinery, the revenue board said.
In an order, the National Board of Revenue (NBR) said investors will have to keep details of transactions between two units inside and outside of the zones to avail tax exemptions from their new investments.
Income tax wing of the board imposed the new conditions for the investors by issuing a fresh Statutory Regulatory Order (SRO) on March 19, 2019.
The wing has scrapped the previous SRO issued in 2015 regarding tax benefit for zone investors after it found conditions were not imposed adequately considering the new investment aspects.
According to incentive scheme for the zones, new investors will enjoy full income tax exemption for the first three years of operations, 80 per cent for the fourth year, 70 per cent for the fifth year, 60 per cent for the sixth year, 50 per cent for the seventh year, 40 per cent for the eighth year, 30 per cent for the ninth year and 20 per cent for 10th year.
In the new SRO, the income tax authority has tagged four new conditions with availing the benefits along with previous two conditions, obtaining TIN (taxpayers' identification number) and record keeping and filing tax returns within the deadline.
Tax benefit will not be considered valid in case of relocation of factories from outside in the zone or for the use of old machinery that the industries previously used for production.
An investor will have to maintain separate commercial books of accounts and bank accounts for industrial units located inside and outside of economic zones, according to a condition.
Also, tax benefit will not be valid for the establishment of a new unit in zones if any investor shuts down the factory located outside the zones.
Investors will have to keep details of 'intra-unit transactions' so that tax authority can trace domestic transfer mispricing.
Intra-unit transactions mean dealings that take place between two industrial units, owned by a company, located inside and outside of the zones.
It has been alleged that some corporate taxpayers evade income tax through transferring their income of a unit having income tax at a higher rate to another unit of the same company enjoying tax exemption or having lower rate of tax.
In the income tax returns, the company will have to furnish details of intra-unit transactions to the Deputy Commissioner of Taxes (DCTs).
Officials said the NBR offered incentive packages for encouraging new investments in zones.
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