Tag: immovable properties

FBR monitors immovable property transactions to enforce fair market values

KARACHI: Federal Board of Revenue (FBR) is monitoring transactions of immovable properties to check sales and purchases on fair market value, sources told PkRevenue.com.

The sources said that the FBR had reduced the withholding tax rate to one percent from July 01, 2019 to be collected from purchaser of immovable properties. However, this rate should be two percent in case the buyer is not listed on the Active Taxpayers List (ATL).

The sources said that the tax offices had been asked to monitor the transaction of immovable properties under the new rates with true declaration of amount.

The sources said that the FBR was fully aware about the size of undeclared money invested in the real estate business. Therefore, the monitoring was started. However, comprehensive data of buyers and sellers will be provided by withholding agents to the FBR by January 31, 2020.

The sources said that the withholding agents for immovable transactions are those persons registering, recording or attesting or transfer including local authorities, housing authorities, Housing Society, Co-operative Society and registrar or properties.

They said that tax offices would start massive crackdown after receiving the data from withholding agents.

They said that people were not declaring true values of immovable properties at the time of registration or transfer, which was causing massive loss to national exchequer.

They further said that by concealing the true amount, buyers and sellers were also promoting black economy.

The sources said that withholding agents would provide details of buyers and sellers, including names, addresses, CNICs, declared value and amount of tax withheld.

The FBR sources the tax authorities would examine the mode of payment and compare the declared value with the prices prevailed in the open market.

They said that after conducting examination the tax authorities would ask buyers and sellers of immovable properties to file income tax returns, in case those persons were not in the tax net.

January 26, 2020
Sales tax rates for services rendered on immovable properties

The Sindh Revenue Board (SRB) has recently announced the sales tax rates applicable to services related to the sale and purchase of immovable properties within the province for the tax year 2020.
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January 15, 2020
Up to 75% capital gain tax exempt on immovable property sale

KARACHI: The government has exempted capital gain tax up to 75 percent in case an immovable property sold by government employees of army personnel after completion of three years.

According to BDO Audit Consultancy Firm, Clause (9A) of Part III of Second Schedule provides a 50 percent exemption on capital gain derived on first sale of immovable property acquired or allotted to ex-servicemen and serving personnel of Armed forces or ex-employees or serving personnel of Federal and Provincial Governments, being original allottees of immovable property.

The Tax Laws (Second Amendment) Ordinance, 2019 has further exempted capital gains up to 75 percent in case the property is sold after completion of three years from date of acquisition.

January 8, 2020
Valuation of concealed assets for income tax recovery

KARACHI: Federal Board of Revenue (FBR) shall conduct valuation for the purpose of income tax recovery on those assets which were identified as concealed.

According to Income Tax Rules, 2002, the valuation of concealed assets as under Section 111 of Income Tax Ordinance, 2001 would be taken as:

(1) The valuation of immovable property for the purposes of section 111 shall be taken to be-

(a) the fair market value of immovable property shall be the value notified by the Board under sub-section (4) of section 68 of the Income Tax Ordinance, 2001, in respect of area or areas specified in the said notifications;

(b) if the fair market value of any immovable property of any area or areas has not been determined by the Board in the notification referred to in sub-section (4) of section 68, the fair market value of such immovable property shall be deemed to be the value fixed by the District Officer (Revenue) or provincial or any other authority authorized in this behalf for the purposes of stamp duty; and

(c) in the case of agricultural land, the value shall be equal to the average sale price of the sales recorded in the revenue record of the estate in which the land is situated for the relevant period or time;

(d) if in a case sale price recorded in the instrument of sale of any property is higher than the fair market value as determined under clauses (a), (b) and (c), the applicable price shall be higher of the two; and

(e) in the case of sale price of any auctioned property or the fair market value as determined under clauses (a), (b) and (c), the higher price shall be applicable.

(2) For the purposes of section 111 and subject to sub-rule (2), the value of motor cars and jeeps shall be determined in the following manner, namely:-

(a) the value of the new imported car or jeep shall be the C.I.F. value of such car or the jeep, as the case may be, plus the amount of all charges, customs-duty, sales tax, levies, octroi fees and other duties and taxes leviable thereon and the costs incurred till its registration;

(b) the value of a new car or jeep purchased from the manufacturer or assembler or dealer in Pakistan, shall be the price paid by the purchaser, including the amount of all charges, customs-duty, sales tax and other taxes, levies, octroi, fees and all other duties and taxes leviable thereon and the costs incurred till its registration;

(c) the value of used car or jeep imported into Pakistan shall be the import price adopted by the customs authorities for the purposes of levy of customs-duty plus freight, insurance and all other charges, sales tax, levies octroi, fees and other duties and taxes leviable thereon and the costs incurred till its registration.

December 25, 2019
Immovable property purchase above Rs5 million not allowed other than banking channel

KARACHI: Any immovable property purchased through cash or bearer instruments will liable to penalty of five percent of the total value of immovable property, sources in Federal Board of Revenue (FBR) said on Saturday.

The sources said that a restriction had been imposed on the purchase of immovable property over Rs5 million through cash or bearer cheque.

They said that any person who purchases immovable property having fair market value greater than rupees five million through cash or bearer cheque then such person shall pay a penalty of five percent of the value of property determined by the FBR under sub-section (4) of section 68 or by the provincial authority for the purpose of stamp duty, whichever is higher.

The sources said that through Finance Act 2019 a Section 75A was inserted to Income Tax Ordinance, 2001, under which purchases of assets had been mandatory through banking channels.

According to the section, no person shall purchase:

(a) immovable property having fair market value greater than five million Rupees; or

(b) any other asset having fair market value more than one million Rupees,

otherwise than by a crossed cheque drawn on a bank or through crossed demand draft or crossed pay order or any other crossed banking instrument showing transfer of amount from one bank account to another bank account.

For the purposes of this section in case of immovable property, fair market value means value notified by the Board under sub-section (4) of section 68 or value fixed by the provincial authority for the purposes of stamp duty, whichever is higher.

In case the transaction is not undertaken:

(a) such asset shall not be eligible for any allowance under sections 22, 23, 24 and 25 of this Ordinance; and

(b) such amount shall not be treated as cost in terms of section 76 of this Ordinance for computation of any gain on sale of such asset.

December 7, 2019
FBR initiates action against concealed amounts in immovable property purchases

ISLAMABAD: Federal Board of Revenue (FBR) has initiated scrutiny of transactions of immovable properties, especially those where amnesty was availed, sources said.

The sources said that the FBR had initiated examination of transactions of sales and purchases of immovable properties during past years, in order to find out the quantum of amount concealed or not declared.

It is believed that huge amount of black money was parked in the real estate business. The buyers and sellers deliberately are not showing actual value of the properties in their agreements.

The sources said that the FBR obtained data under Section 236C, Section 236K and Section 236W of the Income Tax Ordinance, 2001.

They said that the investigation of property transactions would be of past five years.

The seller was required to pay advance tax under Section 236C. Similarly, buyer was required to pay withholding tax under Section 236K. Meanwhile, a buyer is allowed to pay 3 percent income tax to whiten money invested in property purchase. This amnesty was allowed to undisclosed amount that is invested to the extent of values notified by the FBR.

The sources said that the FBR headquarters had transferred thousands of cases of immovable properties to field formation of Inland Revenue.

The FBR collected information of buyers and sellers of immovable properties from property registrar offices of the provinces.

The field formations have been asked to identify those persons who had not filed their income tax returns and wealth statement.

The field formations would initially send those persons who made transactions but had not filed their returns.
Under Section 114 of the Income Tax Ordinance, 2001 the following owners of immovable properties are required to file income tax returns:
— owns immovable property with a land area of two hundred and fifty square yards or more or owns any flat located in areas falling within the municipal limits existing immediately before the commencement of Local Government laws in the provinces; or areas in a Cantonment; or the Islamabad Capital Territory;

— owns immoveable property with a land area of five hundred square yards or more located in a rating area;

— owns a flat having covered area of two thousand square feet or more located in a rating area.

The FBR has also asked the field formations to investigate the payments made for property transactions. The sources said that the FBR collected withholding tax on the notified valuation tables for immovable properties.

The notified values of the FBR were very low when compared with the open market values. Therefore, there was ample chance of concealment in property transactions.

The field formation will ask banks to provide details of identified persons, especially the transactions recorded by the banks for the payment of properties.

November 24, 2019
IR officers empowered to sell defaulters’ properties without attachment

KARACHI: Officers of Inland Revenue (IR) have been empowered to sell moveable or immovable properties of sales tax defaulters for recovery of arrears.

Section 48 of Sales Tax Act, 1990, which was updated up to June 30, 2019 by the Federal Board of Revenue (FBR) explained the powers of IR officers for recovery of arrears of tax.

Section 48: Recovery of arrears of tax

Where any amount of tax is due from any person, the officer of Inland Revenue may:-

(a) 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;

(b) require by a notice in writing any person who holds or may subsequently hold any money for or on account of the person from whom tax may be recoverable to pay to such officer the amount specified in the notice;

(a) 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;

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

(b) seal the business premises till such time the amount of tax is paid or- recovered in full;

(c) attach and sell or sell without attachment any movable or immovable property of the registered person from whom tax is due; and

(f) recover such amount by attachment and sale of any moveable or- immovable property of the guarantor, person, company, bank or financial institution, where a guarantor or any other person, company, bank or financial institution fails 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.

(1A) 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.

(2) For the purpose of recovery of tax, penalty or any other demand raised under this Act, 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.

November 22, 2019
Immovable property registrar requires to provide buyers, sellers information

KARACHI: A registrar is required to provide information of buyers and sellers of immovable property in withholding tax statement to the Federal Board of Revenue (FBR).
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November 3, 2019
FBR to conduct nation-wide survey of immovable properties to assess wealth parked in real estate sector

ISLAMABAD: Federal Board of Revenue (FBR) will conduct nation-wide survey of immovable properties to assess and tap colossal wealth parked in the real estate sector.

The decision has been taken and approved at a meeting under the chairmanship of the prime minister held last month.

According to minutes of the meeting it has been decided to conduct nation-wide survey of immovable property to assess and tap colossal wealth parked in the real-estate sector.

The survey would be conducted along with geo-tagging within next two years.

It has been considered that Chinese proposal for conducting digitized land survey (digital cartography) of entire country is pending for the last two years.

Proposal for proof of concept of digital survey of Islamabad industrial area (1-9) along with geo-tagging option is already under consideration with FBR.

Proposal of digital nation-wide survey has been approved in principal. Further the digital survey of Islamabad Industrial Area (1-9) with geo-tagging would be undertaken at priority.

It is also decided that nation-wide survey would be undertaken and completed over the next two years while taking Chinese proposal in consideration.

The meeting also considered proposal of nation-wide tax assessment and documentation drive to effectively check tax evasion and ensure documentation of economy.

The documentation drive needs to be undertaken over the next two to three years. The documentation drive will assist in ascertaining untapped segments including businesses, real-estate and industries.

Therefore, it is decided that a comprehensive proposal for nation-wide tax assessment and documentation drive (undertaken over two years) would be formulated.

It is also decided that tax reforms must not create choking effect for the economy. And correct taxation measures would be taken with prompt implementation instead of entanglement in extended impasses.

The meeting discussed the actualization of tax advisory board to alleviate trust deficit, preparation of objective tax policies and improve taxpayers’ awareness.

The tax advisory board (as amended in FBR Act, 2007) needs to be actualized at the ministry of finance (Revenue Division) as formal feedback mechanism for policy level advice on taxation issues.

This will effectively separate tax policy and tax administration functions whereby FBR to act as revenue collection agency only.

In this regard, it is decided that tax advisory board should be actualized immediately to discuss threadbare all taxation policies relieving FBR from additional burden of tax policy formulation.

November 3, 2019
Tax authorities to determine values of immovable properties, motor cars on discovery of concealment

ISLAMABAD: The tax authorities shall determine value of immovable properties and motor cars for tax purpose on discovery of concealment by a person or a company.

Officials in Federal Board of Revenue (FBR) said that under Section 111 of Income Tax Ordinance, 2001 any disclosed income or assets will be taken as concealed income and leviable to tax and prevailing fine and penalties.

Income Tax Rules, 2002 has outlined the determination of assets that are concealed by a person or a company.

(1) The valuation of immovable property for the purposes of section 111 shall be taken to be-

(a) the fair market value of immovable property shall be the value notified by the Board under sub-section (4) of section 68, in respect of area or areas specified in the said notifications;

(b) if the fair market value of any immovable property of any area or areas has not been determined by the Board in the notification referred to in sub-section (4) of section 68, the fair market value of such immovable property shall be deemed to be the value fixed by the District Officer (Revenue) or provincial or any other authority authorized in this behalf for the purposes of stamp duty; and

(c) in the case of agricultural land, the value shall be equal to the average sale price of the sales recorded in the revenue record of the estate in which the land is situated for the relevant period or time;

(d) if in a case sale price recorded in the instrument of sale of any property is higher than the fair market value as determined under clauses (a), (b) and (c), the applicable price shall be higher of the two; and

(e) in the case of sale price of any auctioned property or the fair market value as determined under clauses (a), (b) and (c), the higher price shall be applicable.

(2) For the purposes of section 111 and subject to sub-rule (2), the value of motor cars and jeeps shall be determined in the following manner, namely:-

(a) the value of the new imported car or jeep shall be the C.I.F. value of such car or the jeep, as the case may be, plus the amount of all charges, customs-duty, sales tax, levies, octroi fees and other duties and taxes leviable thereon and the costs incurred till its registration;

(b) the value of a new car or jeep purchased from the manufacturer or assembler or dealer in Pakistan, shall be the price paid by the purchaser, including the amount of all charges, customs-duty, sales tax and other taxes, levies, octroi, fees and all other duties and taxes leviable thereon and the costs incurred till its registration;

(c) the value of used car or jeep imported into Pakistan shall be the import price adopted by the customs authorities for the purposes of levy of customs-duty plus freight, insurance and all other charges, sales tax, levies octroi, fees and other duties and taxes leviable thereon and the costs incurred till its registration;

(d) the value of a car or jeep specified in clause (a), (b) and (c) at the time of its acquisition shall be the value computed in the manner specified in the clause (a), (b) or (c), as the case may be, as reduced by a sum equal to ten percent of the said clause for each successive year, upto a maximum of five years; or

(e) the value of a used car or jeep purchased by an assessee locally shall be taken to be the original cost of the car or the jeep determined in the manner specified in clause (a), (b) or (c), as the case may be, as reduced by an amount equal to ten percent for every year following the year in which it was imported or purchased from a manufacturer.

(3) In no case shall the value be determined at an amount less than fifty percent of the value determined in accordance with clause (a), (b) or (c) or the purchase price whichever is more.

(4) For the purposes of section 61, the value of any property donated to a non-profit organization shall be determined in the following manner, namely:-

(a) the value of articles or goods imported into Pakistan shall be the value determined for the purposes of levy of customs duty and the amount of such duty and sales tax, levies, fees, octroi and other duties, taxes or charges leviable thereon and paid by the donor;

(b) the value of articles and goods manufactured in Pakistan shall be the price as recorded in the purchase vouchers and the taxes, levies and charges leviable thereon and paid by the donor;

(c) the value of articles and goods which have been previously used in Pakistan and in respect of which depreciation has been allowed, the written down value, on the relevant date as determined by the Commissioner;

(d) the value of a motor vehicle shall be the value as determined in accordance with rule; and

(e) the value of articles or goods other than those specified above, shall be the fair market value as determined by the Commissioner.

November 2, 2019