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Tag: immovable properties

  • FBR’s new, old valuation tables for Karachi properties

    FBR’s new, old valuation tables for Karachi properties

    ISLAMABAD: The Federal Board of Revenue (FBR) has revised upward the valuation of immovable properties in Karachi for collection of withholding tax.

    The FBR issued SRO 1551(I)/2021 on Thursday to notify the revised valuation of immovable properties in Karachi effective from December 01, 2021.

    The FBR previously issued SRO 120(I)/2019 dated February 01, 2019 to revise the valuation of immovable properties in Karachi.

    In the latest valuation tables for the city, the FBR added amenity plots for the valuation purpose.

    Following are the new and old

    New revised Immovable Property Valuation Tables for Karachi

    Old immovable property valuation tables for Karachi.

    The FBR said:  

    (i) Values in the above Table are in rupees;

    (ii) Value is per square yard of the covered area of ground floor plus covered area for the additional floors;

    (iii) Commercial property built up value is per square yard of the covered area of the ground floor plus covered area of the additional floors, if any;

    (iv) built up industrial property value is per square yard of the plot area per square foot;

    (v) the value in respect of a residential building consisting of more than one storey shall be increased by 25% for each additional story i.e. value of each storey other than ground floor shall be calculated @25% of the value of the ground floor;

    (vi) a property which does not appear to fall in any of the categories shown in the Appendix below shall be deemed to fall I the adjacent lowest category of the Appendix;

    (vii) whether the land has been granted for more than one purpose. viz residential, commercial and industrial, the valuation in such a case shall be the mean/average prescribed rate;

    (viii) a flat means the covered residential tenement having separate property nit number/sub-property unit number;

    (ix) in a residential, multi-storey building, the additional storey shall be charged if it consists of bedroom and bathroom;

    (x) the rates for basements of built-in commercial property in categories I,II,II and IV shall be Rs. 13,500 per square yard; and

    (xi) High Rises at Serial Number No. 37 of Appendix means a building with Storeys above ground plus five.

    FBR issues new, revised tables of property valuation
  • FBR should continue revision in property valuation: SBP

    FBR should continue revision in property valuation: SBP

    KARACHI: The Federal Board of Revenue (FBR) should ensure continuity in the revision of immovable property valuation in order to remove disparity in property values and market rates.

    The State Bank of Pakistan (SBP) in its annual report 2020/2021 on State of Pakistan’s Economy released a day earlier said there was a need to expand revenue by aligning the property values with market prices.

    In this regard, FBR has revised the valuation of immovable property rates in July 2019 for various cities. “There is a need to ensure continuity in this exercise to remove the disparity between the property values and market rates,” the SBP said.

    The issues of widening fiscal imbalance and declining tax-to-GDP ratio Pakistan, the government has initiated tax policy reforms in past few years. These efforts were further streamlined under the IMF-Extended Fund Facility (EFF) program in 2019/2020.

    In overall terms, the ongoing tax policy reforms in the country, like the elimination of preferential general sales tax rates, phasing out income tax exemptions, using third party data sources, etc., are in line with the best practices identified in the literature. However, there is a need to widen the scope of these efforts to ensure a sustained increase in tax base,.

    Corporate incomes tax reforms. To improve the base for direct taxes, Pakistan introduced wide-ranging reforms in CIT in March 2021. These included: (i) withdrawal of tax exemptions on 36 categories; (ii) reversal of reduced tax rates to normal rates on various categories; and (iii) conversion of investment and income tax exemptions to tax credits, for instance, persons engaged in coal mining, start-ups certified by Pakistan Software Export Board, export of computer software or IT exports etc. These measures are likely to add around Rs 140 billion in the overall FBR taxes in 2021/2022. To give further support to revenues, excess profit taxes may be imposed on selected sectors on the basis of profitability.

    Personal income taxes: PITs in Pakistan are collected through progressive rates on various income slabs. The tax rates on salaried and non-salaried individuals were also increased in FY20 and were kept unchanged in 2020/2021. The revenue in this category may be propped up by increasing the tax rates on the highest slabs or by the introduction of a temporary surcharge.

    Consumption taxes: FBR has introduced various reforms aiming at Simplification of GST, and elimination of preferential rates including (i) replacing GST zero-rating regime on five export-oriented sectors (textile, leather, carpets, sports goods, and surgical goods) with normal tax rates in 2019/2020; (ii) eliminating preferential GST rates for sectors like sugar and steel in 2019/2020; (iii) extending GST to e-commerce sales transactions through Finance Act 2021. This step was taken after the surge in sales through e-commerce platforms during the lockdowns. Although currently, the contribution of this head in the total collection is negligible, this is expected to grow with expanding size of digital transactions. The tax base can be further enhanced by curtailing exemptions and improving tax design. Specifically, the tax incentives given during Covid can be gradually rolled back once the economic recovery takes hold.

    Capital income taxes: To minimize tax evasion, FBR has initiated the use of third-party data sources through Maloomat Tax-Ray from September 2020. This system collects third-party information (such as banks) for individuals’ assets and withholding deductions, which help in determining accurate tax liabilities. Moreover, it also facilitates the tax-payer in evaluating the accurate tax liability while filing the tax returns.

    SBP expects fiscal deficit up to 7.3% in FY22
  • Tax rates on immovable properties for 2021-2022

    Tax rates on immovable properties for 2021-2022

    The Federal Board of Revenue (FBR) has issued updated rates of withholding tax on sale and purchase of immovable properties.

    (more…)
  • Withholding tax rates on property income for 2021-2022

    Withholding tax rates on property income for 2021-2022

    The Federal Board of Revenue (FBR) has issued updated rates of withholding tax on income from the property for the year 2021-2022.

    The withholding tax shall be collected by every prescribed person from the recipients of rent of the immovable property.

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

    WITHHOLDING TAX CARD 2021/2022

    Following are the rates of withholding tax:

    Any payment made on account of rent of the immovable property

    (A) In case of individual or Association of Person (AOP):

    1. Where the gross amount of rent does not exceed Rs, 300,000: There shall be no tax.

    2. Where the gross amount of rent exceeds Rs, 300,000 but does not exceed Rs, 600,000: the tax rate shall be 5 per cent of the gross amount exceeding Rs, 300,000.

    3. Where the gross amount of rent exceeds Rs. 600,000 but does not exceed Rs. 2,000,000: The tax rate shall be Rs. 15,000 plus 10 per cent of the gross amount exceeding Rs. 600, 000.

    4. Where the gross amount of rent exceeds Rs. 2,000,000: the tax rate shall be Rs. 155,000 plus 25 per cent of the gross amount exceeding Rs. 2,000, 000.

    B) in case of the company: the tax rate shall be 15 per cent.

    The tax deducted under Section 155 of Income Tax Ordinance, 2001 is adjustable.

    Withholding tax rates on dividend payment for 2021-2022
  • Scope of withholding agents expanded for collection on immovable properties transactions

    Scope of withholding agents expanded for collection on immovable properties transactions

    ISLAMABAD: The Federal Board of Revenue (FBR) has said that certain persons/authorities have been brought in to the definition of withholding agents for collection of tax on immovable property transactions.

    In this regard the FBR said that changes have been made to Income Tax Ordinance, 2001 through Finance Act, 2021.

    The FBR said that all persons effecting sale and purchase of properties are required to collect tax under section 236C and 236K of the Ordinance.

    However, due to the lack of explicit provision certain persons like public and private real estate projects, joint ventures and private commercial concerns are not collecting these taxes which is giving rise to undue litigation.

    These have been added in the list of withholding agents in section 236C and 236K.

    Law provides mechanism for collection of tax on purchase of property in installments where payment for purchase of property is made in installments.

    Such taxpayers have to pay withholding tax again at the time of transfer. It has been made possible that such person may not be subjected to double withholding tax collection by amending explanation in section 236K .

  • Finance Bill 2021: tax treatment of capital gain on disposal of immovable properties

    Finance Bill 2021: tax treatment of capital gain on disposal of immovable properties

    KARACHI: The Finance Bill 2021 has proposed various changes to Income Tax Ordinance, 2021 to capital gain tax on disposal of immovable properties.

    In its commentary on budget 2021/2022, KPMG Taseer Hadi & Co. Chartered Accountants said that taxation of gain on disposal Gain on disposal of immovable property is currently taxable on separately provided slab rates by computing the such gain on the basis of holding period as envisaged under sub-sections (1A) read with (3A) of section 37.

    The Finance Bill 2021 proposes to provide for taxability of gain on disposal of immovable property where such gain exceeds Rs. 5 million as normal capital gain subject to tax under applicable tax rates provided under normal slab rates or corporate tax rates.

    However, benefit of holding period shall still be taken into account while computing the taxable capital gain.

    Amendment has also been proposed to tax this gain at 5 percent instead of existing slab rates varying from 2.5 percent to 10 percent. Thus, the gain below Rs. 5 million computed by taking benefit of holding period shall be subject to tax @ 5 percent.

    The Finance Bill also proposes to insert explanation in sub-section (1A) of section 37 that where a person purchases and sells immovable property in the ordinary course of business, such gain shall be taxable as business income and not as capital gain.

    This fiction has always remained subject matter of dispute though eventually decided by the court upholding the stance of tax authorities that such gain should be taxed as business income.

    Currently under section 37(4A) where a capital asset becomes the property of the person inter-alia through gift, the fair market value of the asset, on the date of its transferor acquisition by the person shall be treated to be the cost of the asset.

    This historically as bestowed two-pronged benefits i.e. exempting gain on such disposal from tax in the hands of transferor and simultaneously entitling the transferee to a revalued cost to be claimed as deduction on subsequent sale.

    The bill proposed that if the capital asset acquired through gift is disposed of within two years of its acquisition and the Commissioner is satisfied that this constitutes a tax avoidance scheme then the recipient of the gift shall be treated to have acquired the asset for a cost equal to the cost for the person disposing the asset i.e. the historical cost.

  • Capital gain on immovable properties above Rs5 million to be taxed at normal rate

    Capital gain on immovable properties above Rs5 million to be taxed at normal rate

    KARACHI: The government has taken taxation measures on capital gains from disposal of immovable properties and introduced normal tax regime on gains on immovable properties above Rs5 million.

    According to commentary on budget 2021/2022 and Finance Bill, 2021 released by PwC A. F. Ferguson & Co. Chartered Accountants, under the existing provisions, gains on disposal of immovable properties are taxed at special (reduced) slab rates along with reduction in gain based on holding period.

    Gains on disposal of immovable properties held for more than four years are effectively non-taxable.

    The proposed amendment at the outset seeks to clarify that this regime for immovable properties is not applicable on persons habitually engaged in transaction of sale and purchase of properties or where sale is adventure in the nature of trade or business.

    Income of such persons would be taxable under the head of business with consequential effect that no benefit of holding period and special rate of tax would apply.

    Furthermore, it is proposed that gains up to Rs 5 million will be taxed at a special rate of 5percent as against the existing rate of 2.5 percent.

    The gains exceeding Rs 5 million will be taxed at normal rate though the benefit of holding period in computation would continue to apply as per existing provisions given below:

    1. Where the holding period of an immovable property does not exceed one year: the calculation for tax shall be

    A = Consideration minus cost

    2. Where the holding period of an immovable property exceeds one year but does not exceed two years: the calculation shall be A x 3/4

    3. Where the holding period of an immovable property exceeds two years but does not exceed three years: the calculation shall be A x 1/2

    4. Where the holding period of an immovable property exceeds three years but does not exceed four years: the calculation shall be A x 1/4

    5. Where the holding period of an immovable property exceeds four years: the calculation shall be Zero

    In case of disposal of a depreciable immovable property at a consideration higher than its cost, the provisions of law deem consideration as cost of such property, thus, resulting into recoupment of tax deprecation only.

    The rationale for such provision was that the Federal Government did not have powers under the Constitution of Pakistan to tax gain on disposal of an immovable property.

    However, the 18th amendment to the Constitution was construed by the Federal Government to have given them jurisdiction to tax such gains.

    Consequently, specific provisions were introduced for taxation of gains on immovable properties, but no such amendment was made for depreciable immovable assets.

    An amendment is now proposed to tax the aforesaid ‘excess’ as capital gains under section 37. As a result, in case of depreciable immovable assets, the excess should be dealt in the same manner as applicable for other immovable properties particularly with the concept of holding period.

    The placement and language of the proposed amendment contradicts section 22(8) thus resulting in anomalous situation, which should be reconsidered.

  • FBR collects Rs24 billion on purchases of immovable properties

    FBR collects Rs24 billion on purchases of immovable properties

    ISLAMABAD: Federal Board of Revenue (FBR) has collected Rs24 billion as withholding tax on purchase of immovable properties during tax year 2020.

    According to collection statistics for tax year 2020 released by the FBR on Tuesday revealed the withholding tax collection on purchase of immovable properties increased to Rs24 billion as compared with Rs13.50 billion in the preceding fiscal year, showing an increase of 78 percent.

    The collection of withholding tax on purchase of immovable properties is made under Section 236K of the Income Tax Ordinance, 2001.

    Prior to Finance Act, 2019, the withholding tax rate was at zero percent where value of immovable property was up to Rs4 million. While, withholding tax at two percent for income tax return filer was to be collected where the value of immovable property is more than Rs4 million. However, at this value of immovable properties the withholding tax for non-filers was prescribed at 4 percent.

    However, through Finance Act, 2019 the withholding tax rate was amended to one percent on fair market value of the immovable properties purchased during tax year 2020 and onwards in case the purchase is on the Active Taxpayers List (ATL).

    The rate of withholding tax in case person is not on the ATL is 2 percent.

    The withholding tax was imposed on purchase of immovable properties under Section 236K was introduced through Finance Act, 2014 in order to encourage income tax return filing.

    According to the Section 236K of Income Tax Ordinance, 2001, any person responsible for registering, recording or attesting transfer of any immovable property shall collect withholding tax at the time of registering, recording or attesting the transfer shall collect from the purchaser or transferee.

    It further said 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 and registrar of properties.

  • Tax collected on immovable properties made final liability on payment through RDAs

    Tax collected on immovable properties made final liability on payment through RDAs

    ISLAMABAD: The collection of withholding tax on immovable properties has been made final liabilities in case payment made through Roshan Digital Accounts (RDAs).

    The changes have been brought through Tax Laws (Amendment) Ordinance, 2021. The Federal Board of Revenue (FBR) posted the ordinance on its website on Monday.

    An amendment has been made to Section 236C of the Income Tax Ordinance, 2001, which is related to deduction of withholding tax on sale of immovable properties.

    According to the amendment that if the seller or transferor is a non-resident individual holding Pakistan Origin Card (POC) or National ID Card for Overseas Pakistanis (NICOP) or Computerized National ID Card (CNIC) who had 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 (SBP), the tax collected under the section from such persons shall be final discharge of tax liability in lieu of capital gain taxable under Section 37 earned by the seller or transferor from the property so disposed of.

    Similar change has been made in Section 236K of the Income Tax Ordinance, 2001. This section is related to deduction of withholding tax on purchase of immovable property.

    According to the amendment that if the buyer or transferee is a non-resident individual holding 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 the authorized banks in Pakistan under the foreign exchange regulations issued by the SBP, the tax collected under this section from such persons shall be final discharge of tax liability for such buyer or transferee.

    According to the SBP, there are two types of accounts offered under Roshan Digital Accounts.

    These are:

    Foreign Currency Value Account (FCVA)

    NRP Rupee Value Account (NRV)

  • Sales tax recovery: movable, immovable property may be sold without attachment

    Sales tax recovery: movable, immovable property may be sold without attachment

    ISLAMABAD: Sales tax laws have given immense powers to officers of Inland Revenue and they can recover due sales tax by selling movable or immovable property without attachment.

    Sources in Federal Board of Revenue (FBR) told PkRevenue.com that under Section 48 of the Sales Tax Act, 1990 a mechanism for recovery of arrears of tax has been defined.

    For the purpose of recovery of tax, penalty or any other demand raised under this Sales Tax Act, 1990, the officer of Inland Revenue shall have the same powers which under the Code of Civil Procedure 1908 (V of 1908), a Civil Court has for the purpose of recovery of an amount due under a decree.

    They said that Section 48(1)(b)(c) clearly mentioned that tax officials may attach and sell or sell without attachment any movable or immovable property of the registered person from whom tax is due.

    The tax officers are also empowered to recover the sales tax amount from a person whose amount is stuck up with other tax authorities.

    “[The tax officers may] deduct the amount from any money owing to person from whom such amount is recoverable and which may be at the disposal or in the control of such officer or any officer of Income Tax, Customs or Central Excise Department,” according to the law.

    The officers of Inland Revenue can order any person who holds money of a person in default, besides the officers can also:

    “Stop removal of any goods from the business premises of such person till such time the amount of tax is paid or recovered in full;

    “require by a notice in writing any person to stop clearance of imported goods or manufactured goods or attach bank accounts;

    “seal the business premises till such time the amount of tax is paid or recovered in full;

    “recover such amount by attachment and sale of any movable or immovable property of the guarantor, person, company, bank or financial institution, where a guarantor or any other person, company, bank or financial institutions fail to make payment under such guarantee, bond or instrument.”

    Provided that the Commissioner Inland Revenue or any officer of Inland Revenue shall not issue notice under this section or the rules made thereunder for recovery of any tax due from a taxpayer if the said taxpayer has filed an appeal under section 45B in respect of the order under which the tax sought to be recovered has become payable and the appeal has not been decided by the Commissioner (Appeals), subject to the condition that ten per cent of the amount of tax due has been paid by the taxpayer.

    “If any arrears of tax, default surcharge, penalty or any other amount which is adjudged or payable by any person and which cannot be recovered in the manner prescribed above, the Board or any officer authorized by the Board, may, write off the arrears in the manner as may be prescribed by the Board, the FBR said.