NAMAL close ended unit trust
With the government abolishing the dissuading taxes on unit trusts, National Asset Management Ltd. (NAMAL) which was to come out with their new unit trust product a year ago - finally launched it on Thursday.
NAMAL officials told The Sunday Times FT that the company moved to introduce NAMAL Flexi Income Fund, the country’s first close ended fund this year, because the taxes were lifted by 2006 budget.
“The 2005 budget had two deterring taxes – the stamp duty on the issue of units and a tax on the profit of sales on shares. These were lifted in the last budget and we decided to launch the new product this year,” S. Jeyavarman, CEO of NAMAL said.
He went on to explain that the 2005 budget had stipulated a 0.5 percent stamp duty on the investment value of the unit, but at the beginning of this year it was removed through a gazette notification. “There was also a concern about the tax issue on the sale of shares that was introduced in the 2005 budget,” he pointed out, explaining that the unit trusts were liable to for a 10 percent additional tax on the profit on the sale of shares. “When a shareholder sells his shares, he gets an exemption on the profit on sale of shares, because all the shareholders pay a shared transaction fee, but the unit trusts were also liable for a further tax on the profit of sale of the shares,” he said.
He said that the Inland Revenue Act was not amended to exempt unit trusts from tax, but this was addressed in the last budget.
“The tax on the sale of shares will be exempted from 1, April 2007, with the amendment to the Inland Revenue Act,” he added.
Jeyavarman said that the Flexi Income Fund will have a fixed maturity period and issue a limited number of units and its investments will be exclusively in fixed income securities and its flexibility it affords the managers, in allowing them to offer many investment schemes within the parameters of the Trust deed.