PIA Sukuk Firm to Purchase Aircraft Worth Rs 2 Billion
ISLAMABAD: Pakistan International Airlines (PIA) First Sukuk Company Limited is likely to purchase two aircraft worth Rs 2 billion by issuing Sukuk Certificates in the market, a senior government official told Daily Times on Thursday.
These two aircraft would be leased out to PIA at an interest rate of 6 months KIBOR average plus 12.5 percent basis, a formula to be agreed upon. This arrangement is being undertaken to improve the financial health of the national carrier.
According to the official, Pakistan International Airlines Corporation (PIAC) has proposed to sell two aircraft at a market value of Rs 2 billion to a company, which is incorporated under the Companies Act, 1984 on June 20, 2007 namely, PIA First Sukuk Company Limited. The company has now been declared by the Securities and Exchange Commission of Pakistan (SECP) as a financial institution. This institution has been given task to undertake one time leasing transaction of purchase.
The official was of the view that, although the Memorandum and Article of Association does not specify the object of the financial institution yet by exercise of powers conferred under section 15 (1) (c) of section two of the Companies Act, 1984 read with clause (c) of section 43 of the SECP Act 1997, the status of financial institution has been assigned to the PIA First Sukuk Company Limited.
According to arrangement, First Sukuk Company Limited would borrow from the market through interest bearing Sukuk certificates and out of the financial arrangement so two aircraft would be purchased at market price of Rs 2 billion.
The leased amount will be on the expense of PIA and income of the Sukuk Company. The interest paid to the Sukuk Certificate holders will be on the expense of the Sukuk Company, resulting into no profit no loss. After three years these aircraft would be bought back by PIA at the same price of Rs.2 billion.
The official further explained that various transactions involved in this event demonstrate taxable events. Sale by PIA to Sukuk company would attract tax deduction, gain on sale of aircraft over the written down value is taxable income. Lease rental through Sukuk Company now covered under section 28 of the Income Tax Ordinance, 2001.
PIA during the period of lease would not be entitled to depreciation. PIA may claim depreciation on repurchase value of the aircraft sale by Sukuk Company.
At present PIA is facing per month Rs 1 billion losses and it expected that these losses would continue to be there in next 6 to12 months.***
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By: Sajid Chaudhry
Source: http://www.dailytimes.com.pk
ISLAMABAD: Pakistan International Airlines (PIA) First Sukuk Company Limited is likely to purchase two aircraft worth Rs 2 billion by issuing Sukuk Certificates in the market, a senior government official told Daily Times on Thursday.
These two aircraft would be leased out to PIA at an interest rate of 6 months KIBOR average plus 12.5 percent basis, a formula to be agreed upon. This arrangement is being undertaken to improve the financial health of the national carrier.
According to the official, Pakistan International Airlines Corporation (PIAC) has proposed to sell two aircraft at a market value of Rs 2 billion to a company, which is incorporated under the Companies Act, 1984 on June 20, 2007 namely, PIA First Sukuk Company Limited. The company has now been declared by the Securities and Exchange Commission of Pakistan (SECP) as a financial institution. This institution has been given task to undertake one time leasing transaction of purchase.
The official was of the view that, although the Memorandum and Article of Association does not specify the object of the financial institution yet by exercise of powers conferred under section 15 (1) (c) of section two of the Companies Act, 1984 read with clause (c) of section 43 of the SECP Act 1997, the status of financial institution has been assigned to the PIA First Sukuk Company Limited.
According to arrangement, First Sukuk Company Limited would borrow from the market through interest bearing Sukuk certificates and out of the financial arrangement so two aircraft would be purchased at market price of Rs 2 billion.
The leased amount will be on the expense of PIA and income of the Sukuk Company. The interest paid to the Sukuk Certificate holders will be on the expense of the Sukuk Company, resulting into no profit no loss. After three years these aircraft would be bought back by PIA at the same price of Rs.2 billion.
The official further explained that various transactions involved in this event demonstrate taxable events. Sale by PIA to Sukuk company would attract tax deduction, gain on sale of aircraft over the written down value is taxable income. Lease rental through Sukuk Company now covered under section 28 of the Income Tax Ordinance, 2001.
PIA during the period of lease would not be entitled to depreciation. PIA may claim depreciation on repurchase value of the aircraft sale by Sukuk Company.
At present PIA is facing per month Rs 1 billion losses and it expected that these losses would continue to be there in next 6 to12 months.***
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By: Sajid Chaudhry
Source: http://www.dailytimes.com.pk
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