CDC launches Zakat Repository System to help increase Ease of Doing Business
In pursuance to Zakat and Ushr Ordinance, 1980 (the “Zakat Law”), Zakat is inter alia, payable on cash dividends declared by Companies. Under the Zakat Law, shareholders may claim exemption from compulsory deduction of Zakat from dividend payments by filing a copy of Zakat Declaration Form on a prescribed format (commonly known as “CZ-50”) duly attested by the notary public OR Solemn Affirmation Letter (the “Letter”) (in case of Non-Muslims) with the Zakat deducting agency (i.e. Issuer or its R/TA).
Ever since the launch of Central Depository System (CDS), those Individual Shareholders who opted for Zakat Status marked as “Muslim Zakat Non-Deductible or Not Applicable” at the time of CDS Account opening / updation are required to submit CZ-50 (in original or attested copy) or the Letter, as the case may be, to CDS Participants. All physical records of CZ-50 or the Letter are preserved by CDS Participants. Issuers/R/TAs may obtain copies of CZ-50 or the Letter from CDS Participants for Zakat Audit purposes in light of Circular dated April 06, 2001.
Since inception, CDC always strives to facilitate the capital market investors in their respective businesses. This strive has taken a faster pace with CDC’s initiatives to increase Ease of Doing Business in the Capital Market in the past few years. In line to this resolve, CDC took an initiative and proposed the concept of Zakat Declaration Repository to the relevant ministry of Government of Pakistan to convert physical forms into electronic form. This step was taken to address the following issues being faced by CDS Participants and Issuers / Share Registrars:
- Participants perform manual activity of locating the forms for every security within their record at the time of Zakat Audit and then provide the same as and when required by the Issuers or their Registrar.
- Issuers / R/TAs find it a hassle to obtain CZ-50 / the Letter (as applicable) from the CDS Participants and to undertake various follow-ups in order to retrieve the requisite format.
Through the Zakat Repository System / functionality, Zakat Forms (CZ-50) and Solemn Affirmation Letters of Sub-Account holders who have opted for “Muslim Zakat Non-Deductible” and “Not Applicable” status respectively, will be uploaded and maintained in electronic form by the CDS Participants and the same will be available to the respective Issuers / their Share Registrars.
Benefits of the Zakat Repository System:
- Reduced labor and hassle on the part of CDS Participants to locate CZ-50 / the Letter at the time of Zakat Audit.
- Electronic availability of record with easy access and search options.
- R/TA & Zakat Auditor will be able to access the forms directly from CDS and there will be no need to request the CDS Participants for the same.
- Increased transparency through proper maintenance of record.