The Special Economic Zones Act 2012 (SEZ 2012, Amended 2016) was promulgated on September 13, 2012, and the SEZ Rules were notified in 2013 (SEZ Rules, 2013).
SEZ Act 2012 had to be amended on the recommendations of Board of Investments (BOI) when provincial governments and Chambers of Commerce and Industry (CCI) across Pakistan pointed out that in 2012 Act, SEZs were kept out of the customs law and were treated like the Export Processing Zones (EPZ).
It meant that while customs duty exemptions were available for plant and machinery at the import stage, it was not available on the products and services supplied to the domestic markets. This legal lacuna essentially reduced the attractiveness of the SEZs – and was thus corrected in the SEZ Act 2016.
The law provides SEZs to be set up by the Federal or Provincial Governments themselves or in collaboration with the private sector under different modes of public-private partnership or exclusively through the private sector.
The fiscal benefits under the SEZ law include a one-time exemption from custom duties and taxes for all capital goods imported into Pakistan for the development, operations and maintenance of an SEZ (both for the developer as well as for the zone enterprise) and exemption from all taxes on income for a period of ten years.
Currently, for the producers, the income tax exemption is five years, but it is expected that this too will be made 10 years. The provincial SEZ authorities, set up under the law, are required to move the applications received from developers to the Federal Board of Investment which is to act as the secretariat to the Board of Approval and the Approval Committee.