ISLAMABAD – The National Assembly on Wednesday approved a mega tax amnesty scheme for real estate sector that would approve whitening of black money invested in the sector by paying only three per cent tax.
The lower house of the parliament has given approval to Income Tax Amendment Bill 2016, which would whiten an estimated Rs7 trillion of black money invested in the sector.
Earlier, the Federal Board of Revenue (FBR) has opposed the bill during the National Assembly’s Standing Committee on Finance and Revenue.
It is pertinent to mention here that the government had introduced amendments in the Income Tax Ordinance to collect taxes on property transactions.
However, due to the resistance from the real estate sector, the government promulgated an ordinance with consensus of property dealers and introduced fair market value.
Realty sector backtracked from their agreement and refused to pay taxes on the rates they had already agreed.
They had asked the government to reduce the taxes and be given the opportunity to declare their hidden assets.
There would be 10 per cent capital gains tax (CGT) where holding period of immoveable property is up to one year as per Income Tax Amendment Bill 2016.
The CGT rate would be reduced to 7.5 per cent and five per cent where holding period of immoveable property is up to two and three years respectively.
However, there would be no CGT, if holding period of the immovable property is more than three years.
Meanwhile, the CGT would be five per cent for immovable property acquired before July 1, 2016 and holding of property for up to three years.
According to the bill, the CGT will not be applicable on the sale of plots given to personnel of the armed forces.
Meanwhile, the CGT will not be applicable on the first sale of plots given to the dependents of armed forces personnel who have been martyred in the line of duty.
Basic threshold of Rs3 million for application of withholding tax on purchase of immovable property was increased to Rs4 million.
“In order to bring undocumented part of transactions of immovable property into formal economy and to document transactions at fair market value, amendments were introduced in the Income Tax Ordinance, 2001 through Finance Act, 2016, whereby the powers of the commissioner were withdrawn and valuation was to be made by a panel of approved values of the State Bank of Pakistan. Similarly, the binding nature of the value determined by the provincial authorities for the purpose of collecting stamp duty has also been withdrawn,” the statement of objects and reasons of the Income Tax (Amendment) noted.
To resolve the concerns of the business community in general and realtor, real estate developer and property dealers associations in particular, regarding valuations to be made by the evaluators of the State Bank of Pakistan, the federal government intends to notify fair market valuation labels through the Federal Board of Revenue in order to remove ambiguity and to bring transparency with regard to the fair value of the property.
The objective is being pursued in such a way so as to promote documentation and to generate fair and due revenues for the state.
This news was published in The Nation newspaper. Read complete newspaper of 01-Dec-2016 here.