Cabinet Approves Tax Exemptions for $1 Billion Panda Bond Issuance

The Federal Cabinet has approved tax exemptions to facilitate the $1 billion Panda Bond issuance of Pakistan in the Chinese capital markets.

The decision was taken under the Sovereign Panda Bond Issuance Programme, following a summary presented by the Finance Division.

Sources told ProPakistani that the approved measure would exempt all income related to the Panda Bonds, including payments of principal and interest, profit on debt, and capital gains, from applicable taxes and deductions.

These exemptions are intended to make Pakistan’s first Panda Bonds more attractive to foreign investors, helping to secure competitive pricing for the country.

Sources added that such exemptions are important because, without them, investors would demand higher returns to compensate for tax deductions, thus raising the country’s cost of borrowing.

The Finance Division informed the Cabinet that a similar exemption was granted in January 2021 for various instruments, including Panda Bonds. However, the Ministry of Law and Justice explained that the 2021 decision does not extend to the bonds to be issued in 2025, and fresh approval is therefore necessary.

The Cabinet granted the exemption under Clause (75) of Part I of the Second Schedule to the Income Tax Ordinance, 2001, which empowers the federal government to exempt income of any foreign government agency or non-resident investor on profit from debt instruments approved by the government.

The approval now clears the way for Pakistan to proceed with its much-anticipated Panda Bond issuance, a step seen as crucial for diversifying external financing sources and strengthening the country’s presence in international debt markets.

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The post Cabinet Approves Tax Exemptions for $1 Billion Panda Bond Issuance appeared first on ProPakistani.