Karachi, August 8, 2023 – The non-ATL buyers of immoveable property will face 250 percent higher tax during fiscal year 2023-24, according to the Federal Board of Revenue (FBR).
Under these amendments, individuals not appearing on the Active Taxpayers List (ATL) will be subject to a substantially higher income tax rate of 10.5 percent at the time of property acquisition.
The FBR has incorporated these changes through the Finance Act of 2023, which has brought about amendments to the Income Tax Ordinance of 2001. The updated withholding tax card for the tax year 2023-24 outlines the new rates and regulations governing the sale and purchase of immovable property.
As per the updated regulations, individuals registered on the ATL will be required to pay a withholding tax rate of 3 percent at the time of purchasing immovable property. However, those individuals who are not on the ATL will face a significantly higher rate of 10.5 percent. This substantial difference aims to incentivize taxpayers to join the ATL and contribute to the national tax pool.
In a broader context, these changes are aligned with the government’s ongoing efforts to boost tax revenues and curb tax evasion. The FBR has been actively working to modernize and streamline the tax collection process, ensuring that the burden of taxation is distributed fairly and equitably among all taxpayers.
The withholding tax mechanism for the sale of immovable property has also undergone revision. Under Section 236C of the Income Tax Ordinance, 2001, individuals registered on the ATL will be subject to a withholding tax rate of 3 percent on the gross amount of consideration received from the property sale. On the other hand, individuals not on the ATL will now face a higher tax rate of 6 percent.
The FBR has provided detailed explanations and guidelines for these new changes in withholding tax through its Income Tax Circular No. 2 dated July 26, 2023. This circular seeks to clarify the revised tax rates and procedures for taxpayers and withholding agents alike.
With these changes, any entity responsible for registering, recording, or attesting the transfer of immovable property will be required to collect the appropriate withholding tax percentage at the time of the transfer. The withholding agent will collect either 3 percent or 6 percent of the gross amount of consideration received, based on whether the seller is on the ATL or not.
Furthermore, the withholding agent will also be responsible for collecting withholding tax from property purchasers. Individuals registered on the ATL will face a 3 percent withholding tax rate, while non-ATL individuals will be subject to a significantly higher rate of 10.5 percent, calculated based on the fair market value of the property.
These amendments underscore the government’s determination to encourage tax compliance and widen the tax base, while ensuring that the tax burden is distributed fairly across all segments of society. As the fiscal year 2023-24 unfolds, these changes are poised to contribute significantly to government revenues, supporting various developmental initiatives and public welfare programs.
