SECP Issues Compliance Checklists and Enhances Grievance Redressal

The Securities and Exchange Commission of Pakistan (SECP) has issued compliance checklists for REIT Management Companies and Section 42 Companies, alongside enhanced grievance redressal mechanisms, a regulatory shift with significant tax compliance implications for businesses. Our tax law firm advises clients to align with Federal Board of Revenue (FBR) requirements amid these efficiency-driven changes.

The checklists, part of the Non-Banking Finance Companies (Establishment and Regulation) Rules, 2003, and the Real Estate Investment Trust Regulations, 2022, guide sponsors, promoters, and not-for-profit entities on licensing, governance, financial reporting, and disclosures under the Companies Act, 2017, aiming to streamline processes and reduce processing times. Enhanced grievance channels across Company Registration Offices (CROs) target stakeholder facilitation, reflecting SECP’s transparency drive, per web sources like Profit by Pakistan Today. However, REIT tax benefits and Section 42 exemptions may face FBR scrutiny as these reforms unfold.

From a tax law perspective, REITs must ensure income tax compliance under Section 5 of the Income Tax Ordinance, as rental income and dividend distributions could trigger withholding tax (WHT) adjustments at 15% or 10%, requiring reconciliation with input tax credits under Section 8B of the Sales Tax Act, 1990. Section 42 Companies, previously tax-exempt, may face new compliance burdens, impacting deductions under Section 29, with FBR audits likely to intensify on financial disclosures. Web context highlights SECP’s digitisation efforts, but posts on X from @SECP_Pakistan suggest implementation challenges.

Critically, the narrative of “ease of doing business” may oversimplify regulatory complexity—web reports note past delays in REIT approvals, and X sentiment reflects stakeholder frustration over unclear guidelines, potentially increasing audit risks. Clients should prepare for compliance shifts.

Our firm advises clients to review tax filings, ensure WHT compliance, and brace for FBR audits, navigating this evolving regulatory framework.