Pakistan to grant PE tax exemption

Less than a month after the launch of Dubai-based Abraaj Capital’s Pakistan-focused buyout fund, the country’s Securities and Exchange Commission is reportedly proposing a 10-year tax exemption for private equity funds.

Private equity firms in Pakistan are expected to get a boost following a report that profits made by private equity funds will be exempt from taxation for up to ten years.
 
According to Pakistan’s Daily Times, the Securities and Exchange Commission of Pakistan (SECP) has put forward budget proposals to Pakistan’s Central Board of Revenue (CBR) that would grant all profits and gains from private equity funds and venture capital investments exemption from taxes, including withholding taxes, for up to ten years, depending on the life of a fund.
 
Earlier this year, the Daily Times reported that Pakistan’s prime minister Shaukat Aziz meet with James Cann of UK private equity firm Hamilton Bradshaw to discuss incentives for private equity firms, hedge funds and other capital providers operating in the country.
 
According to the report, Aziz said the government was carrying out numerous reforms to improve the investment climate in Pakistan, as well as corporate governance standards.
 
The move by the SECP follows last month’s launch of what is believed to be the largest buyout fund focused on Pakistan. At the end of May, Abraaj Capital partnered with Pakistan investor, BMA Capital Management, in which Abraaj holds a 50 percent stake, to raise $300 million (€237 million) for the Abraaj BMA Pakistan Buyout Fund.
 
Abraaj Capital said that, through the use of co-investments and leverage, the vehicle would be able to facilitate investments of up to $1 billion across a range of sectors.