Tag: immovable properties

FBR applies separates CGT rates on immovable properties

ISLAMABAD: The Federal Board of Revenue (FBR) has implemented capital gain tax on disposal of immovable properties as amended through Finance Act, 2022.

The FBR issued Income Tax Circular No. 15 of 2022-2023 to explain the important amendments introduced through the Finance Act, 2022 to the Income Tax Ordinance, 2001.

READ MORE: FBR explains tax on deemed income from immovable property

The FBR said that earlier, the gain arising on the disposal of immovable property after the holding period of 4 years was exempt from tax.

Now the holding period concession will separately apply which for open plots is six years, for constructed property is four years and for flats is two years.

Further, whole amount of gain on disposal of immovable property will be taxable at graduated rates provided in Division VIII of Part I of First Schedule of the Ordinance given as under:

READ MORE: Super tax to apply for Tax Year 2022 and onwards: FBR

01. Where the holding period does not exceed one year: the tax rate for open plots shall be 15 per cent; for constructed property at 15 per cent; and for flats 15 per cent.

02. Where the holding period exceeds one year but does not exceed two years: the tax rate for open plots shall be 12.50 per cent; for constructed property at 10 per cent; and for flats at 7.5 per cent.

03. Where the holding period exceeds two years but does not exceed three years: the tax rate for open plots shall be 10 per cent; for constructed property at 7.5 per cent; and zero per cent for flats.

READ MORE: Pakistan enhances income tax rates for banks

04. Where the holding period exceeds three years but does not exceed four years: the tax rate for open plots shall be 7.5 per cent; for constructed property at 5 per cent; and zero per cent for flats.

05. Where the holding period exceeds four years but does not exceed five years: the tax rate for open plots shall be 5 per cent; zero per cent for constructed property; and zero per cent for flats.

06. Where the holding period exceeds five years but does not exceed six years: the tax rate for open plot shall be 2.5 per cent; zero per cent for constructed property; and zero per cent for flats.

07. Where the holding period exceeds six years: the tax rate shall be zero for open plots, constructed property and flats.

READ MORE: Declaring beneficial owner made mandatory for companies, AOPs

The concessional taxation regime for capital gains has been made applicable only to disposal of immovable properties situated in Pakistan.

The benefit of holding period and concessional rate of tax is not available in respect of capital gains arising on disposal of immoveable property situated outside Pakistan.

Furthermore, to streamline capital gains taxation regime, the concessions earlier available under sub-sections (3) and (3A) of section 37 in terms of reduction in capital gain by certain percentages on disposal of capital assets held for more than one year has been withdrawn.

READ MORE: Pakistan reintroduces capital value tax on motor vehicles

Sub-section (4A) of section 37 has been omitted.

Accordingly, non-recognition provision of section 79 will apply to determine the cost of acquisition on transfer of capital asset under the circumstances contained therein.

July 23, 2022
FBR explains tax on deemed income from immovable property

ISLAMABAD: The Federal Board of Revenue (FBR) has explained the new introduced tax on deemed income through Finance Act, 2022.

The FBR issued Income Tax Circular No. 15 of 2022/2023 to explain important amendment brought through Finance Act, 2022 to the Income Tax Ordinance, 2001.

The FBR said that a new section 7E has been introduced through Finance Act, 2022 whereby for tax year 2022 and onwards, a resident person is treated to have derived income equal to five per cent of fair market value of the capital assets situated in Pakistan which will be chargeable to tax at the rate of 20 per cent under Division VIIIC of Part I of First Schedule of the Ordinance.

READ MORE: Super tax to apply for Tax Year 2022 and onwards: FBR

Following exclusions have been provided to which this section will not apply:

(i) One capital asset owned by the resident person;

(ii) Self-owned business premises from where the business is carried out by the persons appearing on the active taxpayer’s list at any time during the year;

READ MORE: Pakistan enhances income tax rates for banks

(iii) Self-owned agriculture land where agriculture activity is carried out by the person but excluding farmhouse and annexed land. Farmhouse has been defined in this section;

(iv) Capital asset allotted to —

(a) A Shaheed or dependents of a Shaheed belonging to Pakistan Armed Forces;

(b) A person or dependents of a person who dies while in the service of Pakistan armed forces or federal or provincial government;

READ MORE: Declaring beneficial owner made mandatory for companies, AOPs

(c) A war wounded person while in service of Pakistan armed forces or federal or provincial government;

(d) An ex-serviceman and serving personnel of armed forces or ex-employees or serving personnel of federal and provincial governments who are original allotees of the capital asset as duly certified by the allotment authority;

(v) Any property from which income is chargeable to tax under the Ordinance and tax leviable has been paid;

(vi) Capital asset in the first year of acquisition on which tax under section 236K has been paid;

READ MORE: Pakistan reintroduces capital value tax on motor vehicles

(vii) Where fair market value of the capital assets in aggregate excluding capital assets mentioned in serial nos. (i) to (vi) above does not exceed rupees twenty-five million;

(viii) Capital assets which are owned by a provincial government or local government;

(ix) Capital assets owned by local authority, a development authority, builders and developers for land development and construction subject to the condition that such persons are registered with Directorate General of Designated Non-Financial Businesses and Professions.

July 23, 2022
Capital gains tax revamped on disposal of immovable properties

KARACHI: The Finance Act, 2022 has revamped the taxation of capital gains on disposal of immovable properties.

Amendment has been incorporated in Section 37 of Income Tax Ordinance, 2001 through Finance Act, 2022.

READ MORE: Tax on deemed income arising from capital assets in Pakistan

Capital gains tax on disposal of immovable properties located in Pakistan shall be taxed at the following rates:

01. Where the holding period does not exceed one year: the tax rate for open plots shall be 15 per cent; for constructed property at 15 per cent; and for flats 15 per cent.

02. Where the holding period exceeds one year but does not exceed two years: the tax rate for open plots shall be 12.50 per cent; for constructed property at 10 per cent; and for flats at 7.5 per cent.

READ MORE: Pakistan imposes tax at 10% on money transfers to non-residents

03. Where the holding period exceeds two years but does not exceed three years: the tax rate for open plots shall be 10 per cent; for constructed property at 7.5 per cent; and zero per cent for flats.

04. Where the holding period exceeds three years but does not exceed four years: the tax rate for open plots shall be 7.5 per cent; for constructed property at 5 per cent; and zero per cent for flats.

05. Where the holding period exceeds four years but does not exceed five years: the tax rate for open plots shall be 5 per cent; zero per cent for constructed property; and zero per cent for flats.

READ MORE: Significant changes to sales tax laws through Finance Act 2022

06. Where the holding period exceeds five years but does not exceed six years: the tax rate for open plot shall be 2.5 per cent; zero per cent for constructed property; and zero per cent for flats.

07. Where the holding period exceeds six years: the tax rate shall be zero for open plots, constructed property and flats.

Tax experts at PwC A. F. Ferguson & Co. said consequently, capital gains relating to disposal of immovable properties situated outside Pakistan will be taxed at applicable rates irrespective of holding period.

READ MORE: Key changes to income tax laws through Finance Act 2022

July 8, 2022
Advance tax on immovable property purchase enhanced to 250% for non-filers

ISLAMABAD: Pakistan has announced a sharp increase in advance tax on purchase of immovable property to 250 per cent for persons not filing income tax returns.

The country presented budget 2022/2023 on June 10, 2022 and announced various taxation measures to boost revenue collection.

The Finance Bill, 2022 proposed the sharp increase in advance tax for persons not filing tax returns. The decision has been taken to further burden the persons not complying with the statutory requirements.

READ MORE: Pakistan massively increases taxation on motor vehicles

The bill proposed amendment in Section 236K of Income Tax Ordinance, 2001. According to the proposed amendment:

“Provided further that the tax required to be collected under section 236K shall be increased by two hundred and fifty percent of the rate specified in Division XVIII of Part IV of the First Schedule in case of persons not appearing in the active taxpayers.”

At present the buyer, in case of filer of income tax return, of immovable property is required to pay advance tax at 1 per cent of the value. However, in case of non-filer the rate shall be enhanced by 100 per cent or 2 per cent as envisaged under Tenth Schedule of the Income Tax Ordinance, 2001.

READ MORE: New rates of capital gain tax on disposal of securities

According to the Ordinance updated up to June 30, 2021, following is the text of Section 236K:

236K. Advance tax on purchase or transfer of immovable property.—(1) Any person responsible for registering, recording or attesting transfer of any immovable property shall at the time of registering, recording or attesting the transfer shall collect from the purchaser or transferee advance tax at the rate specified in Division XVIII of Part IV of the First Schedule.

Explanation,—For removal of doubt, it is clarified that the person responsible for registering, recording or attesting transfer includes person responsible for registering, recording or attesting transfer for local authority, housing authority, housing society, co-operative society, public and private real estate projects registered/governed under any law, joint ventures, private commercial concerns and registrar of properties.

(2) The advance tax collected under sub-section (1) shall be adjustable:

READ MORE: Pakistan slaps 45% corporate tax on banks

Provided that if the buyer or transferee is a non-resident individual holding a Pakistan Origin Card (POC) or National ID Card for Overseas Pakistanis (NICOP) or Computerized National ID Card (CNIC) who has acquired the said immovable property through a Foreign Currency Value Account (FCVA) or NRP Rupee Value Account (NRVA) maintained with authorized banks in Pakistan under the foreign exchange regulations issued by the State Bank of Pakistan, the tax collected under this section from such persons shall be final discharge of tax liability for such buyer or transferee.

(3) Any person responsible for collecting payments in installments for purchase or allotment of any immovable property where the transfer is to be effected after making payment of all installments, shall at the time of collecting installments collect from the allotee or transferee advance tax at the rate specified in Division XVIII of Part IV of the First Schedule:

READ MORE: Tax rates for business individuals, AOPs during TY2023

Provided that where tax has been collected along with installments, no further tax under this section shall be collected at the time of transfer of property in the name of buyer from whom tax has been collected in installments which is equal to the amount payable in this section.

(4) Nothing contained in this section shall apply to a scheme introduced by the Federal Government, or Provincial Government or an Authority established under a Federal or Provincial law for expatriate Pakistanis:

“Provided that the mode of payment by the expatriate Pakistanis in the said scheme or schemes shall be in the foreign exchange remitted from outside Pakistan through normal banking channels.”

READ MORE: Pakistan reintroduces advance tax on foreign payments

June 13, 2022
CGT up to 15% slapped on immovable properties

The federal government has implemented capital gains tax (CGT) ranging up to 15 percent on the disposal of immovable properties within one year of purchase.
(more…)

June 11, 2022
Tax imposed on deemed income from immovable properties

ISLAMABAD: A tax rate at 20 per cent has been imposed on deemed income from immovable properties through a new section introduced to Income Tax Ordinance, 2001.

The government announced federal budget 2022/2023 on June 10, 2022 and introduced new tax on a person having more than one immovable property.

A person having more than one immovable property which values above Rs25 million shall be treated as five per cent of rental income of fair market value.

READ MORE: Pakistan amends tax laws for foreign digital transfers

Through the Finance Bill, 2022 a new Section 7E has been introduced to Income Tax Ordinance, 2001 for the purpose.

Following is the tax of the proposed Section through the Finance Bill, 2022:

“7E. Tax on deemed income.– (1) Notwithstanding anything contained in the Ordinance, for tax year 2022 and onwards, a tax shall be imposed at the rates specified in Division VIIIC of Part-I of the First Schedule, on the income specified in this section.

READ MORE: Pakistan imposes tax on high net-worth individuals

(2) A resident person shall be treated to have received rent equal to five percent of the fair market value of an immoveable property situated in Pakistan whether such property has actually been rented out for any consideration or not.

(3) This section shall not apply to –

(a) one self-owned immovable property;

(b) self-owned business premises from which business is carried out;

(c) self-owned agriculture land where agriculture activity is carried out by person but does not include farmhouse and land annexed thereto;

(d) where the fair market value of the property or properties, in aggregate, excluding properties mentioned in clauses (a), (b) and (c) does not exceed twenty five million Rupees;

READ MORE: Finance Bill defines beneficial owner under tax laws

(e) a Provincial Government, a Local Government, a local authority or a development authority;

(f) land development and construction projects of builders and developers registered with Directorate General of Designated Non-Financial Businesses and Professions of Board;

(g) a property which is subject to tax under section 15 of the Ordinance and the tax chargeable is more than tax chargeable under this section:

Provided that if tax chargeable under section 15 is less than the tax chargeable under this section so much of the amount of tax which is in excess of tax chargeable under section 15 shall be paid under this section

(4) The Federal Government may include or exclude any person or property for the purpose of this section.”

According to the Finance Bill, 2022 the rate of tax under section 7E shall be 20 per cent.

READ MORE: Pakistan reduces salary tax slabs to 7 in budget 2022/23

June 11, 2022
Tax collection from property purchase climbs up 24%

ISLAMABAD: The collection of advance tax from purchase of immovable properties climbed up by 24 per cent during first half of the current fiscal year.

According to official data released by Federal Board of Revenue (FBR), the collection of advance tax on purchase / transfer of immovable property increased to Rs27.7 billion during first half (July – December) of fiscal year 2021/2022 as compared with Rs22.36 billion in the corresponding half of the last fiscal year.

READ MORE: FBR registration made mandatory for housing projects

The FBR collects advance income tax on purchase or transfer of immovable property under Section 236K of the Income Tax Ordinance, 2001. Under this Section any person responsible for registering, recording or attesting transfer of any immovable property shall at the time of registering, recording or attesting the transfer shall collect advance tax from purchaser or transferee at the rate of one per cent of the fair market value.

READ MORE: Advance tax on purchase of immovable property

The collection of withholding tax from income from property also recorded an increase of 12 per cent during the first half of the current fiscal year.

The FBR collected withholding tax amounting Rs14.90 billion on income from property during first half (July – December) of 2021/2022 as compared with Rs13.32 billion in the corresponding half of the last fiscal year.

The authorities collect withholding tax on income from property under Section 155 of the Income Tax Ordinance, 2001.

READ MORE: Income tax on rental immoveable property

March 8, 2022

FBR re-notifies valuation of immovable properties

ISLAMABAD: The Federal Board of Revenue (FBR) has re-notified fresh and revised valuation of immovable properties.

The FBR on March 02, 2022 issued re-notified the valuation tables of immovable properties for major cities of the country.

The FBR on December 01, 2021 issued fresh and updated valuation tables for around 40 major cities of the country. However, the FBR deferred the implementation of the new valuations of immovable properties till January 15, 2022 and further deferred till January 31, 2022. The FBR once again deferred the implementation on the valuation table till February 28, 2022.

The revenue body decision to defer the implementation came after several complaints received by the FBR those were pertaining to high valuation in the new tables.

The complaints were lodged by stakeholders including real estate agents and town developers, who pointed out extraordinary rise in property rates in the latest valuation tables.

The FBR issued detailed instructions to the tax offices on the procedure to be adopted to review the anomalies in the property rates and rationalize the same.

Accordingly, it has been decided to review and revisit the notified valuation tables wherever overvaluation or undervaluation is pointed out by a stakeholder.

The FBR asked all the Chief Commissioners Inland Revenue (CCIRs) to constitute Valuation Review Committees (VRCs), and notify them by December 10, 2021.

Any stakeholder having any reservations about valuations may lodge a representation before VRC by December 15, 2021. Chief Commissioners will undertake consultative process with the stakeholders and engage SBP’s approved valuers for determination of values, which could be either more or less than the lately notified valuations.

To issue the fresh and revised valuation tables, the FBR exercised its powers vested in the Income Tax Ordinance, 2001. The aim was to bring the FBR values at par with the fair market values.

However, certain objections from stakeholders highlighted anomalies and aberrations in the newly notified valuation tables. Although, the notified valuations have been arrived at by FBR Field Formations through a rigorous consultative process and wherefore have largely been well-received, yet the possibility of error cannot be ruled out, and the same cannot be taken as carved in stone.

Following are the valuation tables re-notified by the FBR:

FBR implements new property valuations on February 01

ISLAMABAD: The Federal Board of Revenue (FBR) will apply the new valuation tables for immovable properties in major cities of the country from February 01, 2022.

The FBR on December 01, 2021 issued fresh and updated valuation tables for around 40 major cities of the country. However, the FBR deferred the implementation of the new valuations of immovable properties till January 15, 2022 and further deferred till January 31, 2022.

The FBR on December 01, 2021 issued fresh and upward revised valuation tables for immovable properties located in 40 major cities of the country.

READ MORE: FBR issues new, revised tables of property valuation

The revenue body decision to defer the implementation came after several complaints received by the FBR those were pertaining to high valuation in the new tables.

The complaints were lodged by stakeholders including real estate agents and town developers, who pointed out extraordinary rise in property rates in the latest valuation tables.

The FBR issued detailed instructions to the tax offices on the procedure to be adopted to review the anomalies in the property rates and rationalize the same.

Accordingly, it has been decided to review and revisit the notified valuation tables wherever overvaluation or undervaluation is pointed out by a stakeholder.

READ MORE: FBR’s new, old valuation tables for Karachi properties

The FBR asked all the Chief Commissioners Inland Revenue (CCIRs) to constitute Valuation Review Committees (VRCs), and notify them by December 10, 2021.

Any stakeholder having any reservations about valuations may lodge a representation before VRC by December 15, 2021. Chief Commissioners will undertake consultative process with the stakeholders and engage SBP’s approved valuers for determination of values, which could be either more or less than the lately notified valuations.

To issue the fresh and revised valuation tables, the FBR exercised its powers vested in the Income Tax Ordinance, 2001. The aim was to bring the FBR values at par with the fair market values.

However, certain objections from stakeholders highlighted anomalies and aberrations in the newly notified valuation tables. Although, the notified valuations have been arrived at by FBR Field Formations through a rigorous consultative process and wherefore have largely been well-received, yet the possibility of error cannot be ruled out, and the same cannot be taken as carved in stone.

The VRCs shall decide upon the representations by January 10, 2022, and forward the same to FBR for notification. All recommendations made by VRCs vis-à-vis revaluations shall be re-notified on January 15, 2022, which shall come into force on January 16, 2022. In the meantime, SRO No.1534-1572(I)/2021 dated 01.12.2021 are held in abeyance to allow registration of the in-process transactions.

January 30, 2022
Tax collection from property transactions surges to Rs61 billion

ISLAMABAD: The annual collection of withholding tax from transactions of immovable properties has surged by 98 per cent to Rs61.06 billion during fiscal year 2020/2021.

According to official statistics made available to PkRevenue.com, the collection from sales and purchase of immovable properties was Rs30.77 billion during fiscal year 2019/2020.

Sources in the Federal Board of Revenue (FBR) attributed the increase in revenue collection to enhanced activities during the fiscal year due ease in restrictions related to coronavirus.

READ MORE: Advance tax on purchase of immovable property

They said that the first case of coronavirus was identified in February 2019, and then the government resorted to strict lockdown, which stalled the economic activities.

However, in the subsequent year the government decided to relax the corona restrictions and brought the economic activities to normal.

The FBR collects withholding tax under section 236C of the Income tax Ordinance, 2001 on sale and transfer of immovable properties.

READ MORE: Advance tax on sale or transfer of immovable property

Furthermore, the FBR collect withholding tax under Section 236K of the Income Tax Ordinance, 2001 on purchase of immovable properties.

The collection of withholding tax on sale or transfer of immovable properties registered a growth of 76 per cent to Rs7 billion during fiscal year 2020/2021 as compared with Rs12.2 billion in the preceding fiscal year.

The collection of withholding tax on purchase of immovable properties registered an unprecedented growth of 105 per cent to Rs49 billion during fiscal year 2020/2021 as compared with Rs24 billion in the preceding fiscal year.

READ MORE: FBR issues new, revised tables of property valuation

The FBR sources said that the collection during the fiscal year 2021/2022 would increase significantly due to change in valuation tables for the purpose of withholding tax collection from transactions of immovable properties.

The FBR on December 01, 2021 issued fresh and revised valuation of immovable properties for various cities of the country.

However, the implementation of the fresh valuation table will be applicable from January 16, 2021.

READ MORE: FBR postpones property valuation implementation

January 3, 2022