Karachi, December 1, 2023 – In a significant development, provincial building control authorities are now mandated to collect a five percent advance tax before approving building construction plans, as per the updated Income Tax Rules, 2002 for the tax year 2024, issued by the Federal Board of Revenue (FBR).
The Income Tax Rules, updated for the upcoming tax year, have clarified the mandatory requirement for the approval of building plans, fixing responsibilities on the building control authorities. The FBR, in a statement, outlined the key responsibilities of these authorities to ensure compliance with the new tax regulations.
According to the FBR, the building control authorities are now required to adhere to the following responsibilities:
Five Percent Advance Tax Collection: No approval plan shall be issued unless the building control authority collects five percent of the tax under Rule 3. This advance tax is a prerequisite for the approval of any building construction plan.
Quarterly Reporting to Chief Commissioner Inland Revenue: The authority must inform the Chief Commissioner Inland Revenue in writing about the approval of new land development and building construction plans on a quarterly basis. This reporting mechanism aims to enhance transparency and regulatory oversight.
Suspension or Cancellation Authority: The authority holds the power to suspend or cancel the building plan upon the written request of the Chief Commissioner in case of default in payment of installments under the new tax rules. Notably, the Chief Commissioner is required to consult with the Association of Builders and Developers (ABAD) before taking such actions.
Revocation of Suspension or Cancellation: The authority may revoke the suspension or cancellation under specific circumstances, following the written direction of the Chief Commissioner. This provision adds a layer of flexibility to the regulatory process.
Additionally, the Inspector General of Registration has been assigned responsibilities to enforce tax compliance in property transfers. The key points under this mandate include:
No Transfer without NOC: No transfer of buildings or built-up units to buyers shall be effected unless the builder furnishes a No Objection Certificate (NOC) from the Chief Commissioner for payment of tax dues. This measure ensures that tax obligations are met before property transactions take place.
Alternative Payment Provision: In case a builder pays 150 percent of the tax liability, computed in accordance with Division VIIIA of the First Schedule, the provisions of the NOC requirement may not apply.
Tax Collection by Inspector General of Registration: The Inspector General of Registration is responsible for collecting and depositing tax, and all provisions of Section 161 shall apply mutatis mutandis for this purpose.
This new tax mandate aims to streamline the taxation process within the construction and real estate sectors, ensuring that tax obligations are met at the planning and transactional stages. The FBR’s guidelines are expected to bring greater clarity and accountability to the tax collection process, fostering a more transparent and regulated environment for the construction and real estate industries.
