KARACHI: Pakistan Stock Exchange (PSX) has proposed tax exemption on transactions of immovable properties to Real Estate Investment Trusts (REITs) in order to promote documentation.
The PSX in its proposals for budget 2022/2023 submitted to the Federal Board of Revenue (FBR), said REITS are an ideal instrument to document and help develop the real estate sector, a priority for the government.
They also allow smaller investors to gain exposure to the real estate sector, an important step to reduce wealth inequality in Pakistan.
The PSX proposed exemption from advance tax on property transfer to/from a REIT Scheme u/s 236C and 236K of Income Tax Ordinance, 2001. It also suggested to remove sunset clause i.e. June 2023 for all categories of REIT. Besides, it is also suggested to reduce minimum tax rate applicable to REIT Management Companies (RMCs) u/s 153 in line with Asset Management Companies i.e. 3 per cent.
The PSX said that it will promote documented real-estate will attract more investments particularly by companies with disclosure of actual prices and income. Revenue impact will be positive as it will generate indirect and additional revenues from allied businesses.
Appropriate amendment to be made in the Income Tax Ordinance, 2001.
For proposal relating to sun-set clause, remove “June 30, 2023” from clause 99A of Part I of Second Schedule of the Income Tax Ordinance, 2001.
For proposal relating to Minimum Tax on RMCs, Clause (2)(i) of Division III of Part III of First Schedule of the Income Tax Ordinance, 2001 shall include “service rendered by RMCs.”