The Overseas Investors Chamber of Commerce and Industry (OICCI) has called upon the Federal Board of Revenue (FBR) to adopt a groundbreaking approach by linking the collection of withholding tax (WHT) with property tax revenues gathered by provincial authorities.
With a focus on expanding the tax base and bringing undocumented property owners into the tax net, the OICCI has presented its proposals for the budget of 2024-25.
In its recommendations, the OICCI highlights the need to categorize immovable properties into two main categories: agricultural and non-agricultural. To kickstart this process, the OICCI suggests that the FBR should obtain comprehensive details of both types of properties and cross-reference them with the wealth statements of taxpayers. This step aims to identify undeclared properties and ascertain the true ownership status of such assets.
One of the key elements of the proposal involves the collection of withholding tax on immovable property, including agricultural land, alongside property tax levied by provincial authorities. The proposed withholding tax rate is set at 0.5% of the Federal Board of Revenue (FBR) value of the property, collected annually. The tax collected would then be credited against the tax liability of the property owner, with provisions for income tax collected on agricultural land to offset agriculture income tax levied by provinces. Additionally, the proposal suggests excluding small properties from this scheme to alleviate the burden on low-income property owners.
Furthermore, the OICCI recommends revising the Capital Gain Tax (CGT) exemption on the sale of immovable property. Under the proposed framework, CGT exemption would only be granted to individuals who have declared the property upon acquisition. This exemption would be limited to one property every three years and would apply only to properties held for a duration of four to six years. These revisions aim to incentivize property owners to declare their assets transparently while discouraging speculative investments in real estate.
The OICCI’s proposals represent a significant step towards enhancing tax compliance and increasing revenue generation. By integrating the collection of withholding tax with property tax revenues, the OICCI seeks to promote fairness and equity in the taxation system while curbing tax evasion and promoting transparency among property owners.
As discussions on the budget for the fiscal year 2024-25 progress, the OICCI’s recommendations are expected to spark dialogue among policymakers and stakeholders, as they evaluate the potential impact and feasibility of this innovative approach to taxation.
