The government is examining the possibility of extending an amnesty scheme for the real estate sector, and revise excessive valuation of immovable properties. Sources told Business Recorder that the Federal Board of Revenue (FBR) however was not engaged in chalking out any general amnesty scheme covering all kinds of movable and immovable assets held domestically and aboard. However, incentives to the real estate sector may be announced under the package being finalised for the construction sector.
The government may not ask for the source of investment on legalisation of properties purchased during the last year or on fresh investment in properties.
Senior FBR officials, when contacted, did not confirm that any new amnesty scheme is likely to be launched but hinted at some incentives to be announced for the real estate sector under the government package for the construction industry.
According to well informed sources, the government has decided to provide special tax relief and incentives to businesses/industries related to construction sector in its effort to support low-cost housing projects. One of the major proposals is to reduce the excessive valuation of immovable properties in certain areas notified by the FBR.
Builders and developers have proposed to the government that overseas Pakistanis may be allowed to purchase built up properties in Pakistan on payment of 1-2 percent without asking about the source of investment. The government has finalised a simplified fixed tax scheme for developers and builders, offering a 90 percent reduction in tax for low-cost housing schemes.
The broad contours of the scheme, according to sources, include: (i) national (central) jurisdiction of developers and builders; (ii) simplified return form; (iii) income computation on “project-by-project" basis; (iv) dispute resolution committee; (v) no requirement for developers/builders to operate as withholding agent; (iv) tax rate of Rs 210 per square feet for commercial builders in Karachi, Lahore, Islamabad, Hyderabad, Sukkur, Multan, Faisalabad, Rawalpindi, Gujranwala, Sahiwal, Peshawar, Mardan, Abbottabad, Quetta, and other urban areas not specified; (vii) tax rates shall be reduced by 90 percent for low-cost housing schemes; and (viii) tax rate of Rs 210 per square feet for commercial developers (commercial plots) and requirement of independent certificate from the NESPAK.
According to the draft of the Builders and Developers Special Procedures Rules 2019, they shall apply to builders and developers, who may opt to pay income tax and furnish return under these rules. The income computed and tax payable thereon, shall be on “project-by-project" basis under the head of “Income from Business". Tax payable thereon on annual basis (till the year of project completion) shall be computed at the rates mentioned.
The rates would be applicable to compute tax liability for the project for the tax years, when the respective project was under construction. The annual tax liability on that basis shall be worked out as specified in the said rules.