ISLAMABAD: Federal Board of Revenue (FBR) has said that the fixed tax scheme is available to those builders and developers, who opt for the scheme by registering their projects with the FBR.
Under the scheme, the term “builder” means a person who is registered as a builder with the FBR and is engaged in the construction and disposal of residential and commercial buildings.
The term “developer” means a person who is registered as a developer with the FBR and is engaged in the development of land in the form of plots of any kind either for itself or otherwise.
Builders and developers eligible for this fixed tax scheme include individuals, a company or an Association of Persons (AOP), the FBR said.
The fixed tax scheme encompasses a new project as well as an incomplete existing project subject to completion of such projects by 30th September, 2022, the FBR added.
A ‘new project’ means a construction or development project, which commences during the period starting from April 17, 2020 till December 31, 2020 and is completed on or before September 30, 2022.
An ‘existing project’ means an incomplete construction or development project, which has commenced before April 17, 2020, is completed on or before September 30, 2022 and a declaration is provided in the registration form with regard to the percentage of completion of the project up to the last day of the accounting period pertaining to Tax Year 2019.
The tax payable by builders and developers on their income, profits and gains emanating from the sale of buildings or plots shall be determined on a project by project basis on the basis of specified rates per square foot/per square yard for commercial and residential buildings and commercial, residential and industrial plots, the FBR said.
In the case of buildings having dual usage i.e. both commercial and residential the respective rates specified for each category shall apply.
Moreover, in case the development of plots and construction of buildings upon the same constitutes a single project, the respective rates for developers and builders shall both apply, the FBR added.
Fixed tax shall be reduced by 90 percent in the case of low cost housing developed or approved by the Naya Pakistan Housing and Development Authority or under the Ehsaas Programme.
Builders and developers opting for the proposed scheme are not required to withhold income tax on the purchase of building material except steel and cement. Moreover, they are not required to withhold tax on services of plumbing, electrification, shuttering and other similar services other than those provided by companies.