ISLAMABAD: Federal Board of Revenue (FBR) has postponed the implementation of new valuation of immovable properties for major cities of the country for calculation of tax.
(more…)Tag: immovable properties
-
Finance Act 2019: Capital gain tax on immovable properties exempted on holding period above 8 years
KARACHI: The government has exempted the capital gain tax on immovable property where holding period is above eight years. The amendment has been brought through Finance Act, 2019 as it was proposed 10 years through Finance Bill 2019.
According to commentary on Finance Act, 2019 by PwC A F Ferguson Chartered Accountants, prior to finance bill 2019, capital gains on disposal of immovable properties were taxable as a separate block of income at the rates specified in the First Schedule, determined on the basis of holding period of immovable property.
The bill proposed to completely revamp the taxation of capital gains on disposal of immovable properties. It was proposed to tax gain on disposal of open plots as well as constructed properties at normal rates, subject to reduction in the amount of gain on the basis of holding period exceeding the specified thresholds.
Through amended finance bill, the taxability of gain arising on disposal of immovable properties as separate block of income has been restored.
However, the slab rates specified for such taxation are now based on the amount of gain, which are specified as under:
1. Where the gain does not exceed Rs 5 million: 5 percent
2. Where the gain exceeds Rs 5 million but does not exceed Rs 10 million: 10 percent
3. Where the gain exceeds Rs 10 million but does not exceed Rs 15 million: 15 percent
4. Where the gain exceeds Rs 15 million: 20 percent
Further, the holding period of property for ascertaining capital gain has been reduced vis-à-vis that proposed in the finance bill as under:
(a) For open plot of land, the gain chargeable to tax will be reduced by 25 percent if the holding period exceeds one year but does not exceed 8 years (as against 10 years proposed in the FB). Further, where the holding period exceeds 8 years (as against 10 years proposed in the FB), gain will be taken as zero.
(b) For constructed properties, the gain chargeable to tax will be reduced by 25 percent if the holding period exceeds one year but does not exceed 4 years (as against 5 years proposed in the FB). Further, where the holding period exceeds 4 years (as against 5 years proposed in the FB), gain will be taken as zero.
-
FBR proposes phenomenal increase in valuation of Karachi immovable properties
ISLAMABAD: Federal Board of Revenue (FBR) has proposed to phenomenal increase in valuation for commercial and residential immovable properties in Karachi for the purpose of collection of income tax.
(more…) -
FBR proposes massive increase in valuations of Lahore immovable properties
ISLAMABAD: Federal Board of Revenue (FBR) has proposed massive increase in valuations of immovable properties in Lahore to be effective from July 01, 2019.
The FBR about two days back issued valuation tables of immovable properties in 18 cities of Pakistan. The FBR invited comments and suggestions on the proposal from the stakeholders before implementing those by July 01, 2019.
A cursory look on the proposed valuation of immovable properties in Lahore suggested that the FBR was planning to generate a sizeable revenue from sales and purchase of immovable properties during next fiscal year.
The increase in valuation is not uniform as it was done by the FBR by increase valuation by 20 percent through SROs issued in February 2019.
The FBR now proposed locality based increase in valuation and the increase may be over 100 percent increase on the existing valuations.
The comparative valuations of immovable properties in Lahore are given below so readers can measure the quantum of increase:
In the proposed valuation the FBR given separate valuation of commercial and residential immovable properties. Besides, a new concept of valuation of immovable properties has been introduced for properties up to five years and properties above five years old.
-
FBR to implement new valuations of immovable properties from July 01
ISLAMABAD: Federal Board of Revenue (FBR) has issued draft valuation of immovable properties for various cities, which will be applicable from July 01, 2019.
The FBR issued the draft valuation tables for various cities for views and comments and asked the stakeholders to submit their input / feedback by June 30, 2019.
The new revised rates are intended to be applicable from July 01, 2019.
-
Finance Bill 2019: CGT on immovable properties revamped
ISLAMABAD: The capital gain tax on the immovable properties has been revamped through Finance Bill 2019 in order to streamline taxation on gains at the time of sale of immovable properties.
According to commentary of EY Ford Rhodes Chartered Accountants on changes brought in Income Tax Ordinance, 2001 through Finance Bill 2019, the taxation of capital gains arising from disposal of capital assets is governed by Section 37 of the Ordinance.
After the introduction of Eighteenth Amendment in the Constitution of Pakistan, 1973, the Finance Act, 2012 introduced a significant amendment inserting Sub-section (1A) in Section 37 of the Ordinance providing for taxation of capital gains arising from disposal of immovable properties.
The rates of tax on such capital gains were applicable depending on the holding period of immovable properties ranging from 5 percent to 10 percent.
However, if the immovable property was disposed of after holding period of three years, the rate of tax is prescribed at zero percent.
“The Bill proposes to revamp the taxation of capital gains from disposal of immovable properties.”
Accordingly, it is proposed to omit Sub-section (1A) from Section 37 along with Division VIII of Part I of the First Schedule which contains rates of tax on such capital gains.
In its place, a new Sub-section (3A) is proposed to be inserted which contains separate mechanisms for computation of capital gain on disposal of (i) open plot, and (ii) constructed property.
The effect of the proposed amendment is that such capital gain (worked out by subtracting cost of the asset from the consideration received) will not be considered as a separate block of income liable to tax at reduced rates of 5 percent, 7.5 percent or 10 percent.
It will instead forms part of total income of the person and therefore, be taxed at the normal rates of tax applicable as per the First Schedule.
The capital gain will, however, be reduced by 25 percent depending on the holding period of the immovable property disposed of.
The reduction of 25 percent will apply if the holding period of open plot exceeds one year but does not exceed ten years and for constructed property from one year to five years.
Where the immovable property is disposed of after holding period of ten years and five years respectively, the capital gain will be taken to be zero.
An interesting outcome of this mode of taxation is that where the capital gain becomes zero depending upon the holding period as discussed above, super tax under Section 4B of the Ordinance will not apply for, there would not be any income recognizable for the purpose of computation of super tax.
The reduction of 50 percent of tax payable in respect of capital gains on disposal of immovable property on the 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 the immovable property, duly certified by the allotment authority remains intact as for this purpose Clause (9A) is also proposed to be inserted in Part III of the Second Schedule to the Ordinance.
-
No provision for non-filers to purchase immovable property, motor vehicle: FBR
ISLAMABAD: Federal Board of Revenue (FBR) has said that no such provision was proposed through Finance Bill 2019 to allow non-filers to purchase immovable property or motor vehicles.
In a statement on Wednesday, the FBR strongly refuted the news appearing in some sections of press which states that the new Finance Bill has allowed the non-filers to purchase immovable property or cars.
The actual position is that the whole system of recognizing a non filer as a legal entity has been done away with in the new Finance Bill.
FBR has explained that under Income Tax Ordinance, every person earning taxable income ought to file his Income Tax Returns.
In case of failure of filing of Returns by persons involved in significant monetary transactions, a complete mechanism has been provided in the newly inserted 10th Schedule.
such persons will not only have to pay 100 percent more tax at Withholding stage but will also be automatically assessed to tax and his imputable income will be treated as concealed income liable to penalties and prosecution.
-
Finance Bill 2019: Amnesty on immovable property purchase withdrawn
ISLAMABAD: The government has withdrawn a permanent amnesty for not explaining the source of investment in purchasing immovable properties.
The government has proposed to withdraw this provision through Finance Bill, 2019 as part of budget 2019/2020, presented on Tuesday.
The Federal Board of Revenue (FBR) in its income tax salient features said that 3 percent tax for not explaining the source of investment is being withdrawn.
Section 236W was introduced to Income Tax Ordinance, 2001 through Income Tax (Fourth Amendment) Act, 2016 dated December 02, 2016. This section was granted immunity from declaring source of investment for the purchase of immovable properties.
The FBR said that in Pakistan the Real Estate sector is one of the biggest sources of money laundering and is used as a parking lot for untaxed as well as ill-gotten money.
In view of this a wide range of steps have been taken to restructure the taxation of this sector.
The various steps being taken are as under:-
(i) At present, the Board has issued valuation tables of immovable properties in 21 major cities wherein such properties are valued at a value higher than the DC rates. The purchasers are also required to pay 3 percent tax on the difference between the DC value and FBR value of property to explain the source of investment to the extent of differential between FBR value and DC value. The rates notified by the Board are still considerably lower than actual market value. It is therefore intended that FBR rates of immovable properties would be taken closer to or about 85 percent of actual market value.
(ii) As the increase in FBR values of immovable property is going to increase the incidence of tax on genuine buyers and sellers, the rate of withholding tax on purchase of immovable property is being reduced from 2 percent to 1 percent.
(iii) At present, withholding tax on purchase of property is attracted only if the value of property is more than four million rupees. The threshold of four million rupees is being abolished and withholding tax on purchase is to be collected irrespective of the value of property.
(iv) At present, there is no withholding tax on sale of property if the property is held for a period of more than three years. Since capital gain is to be taxed under normal tax regime even beyond the period of three years, withholding tax on sale of property would be collected where the holding period is up to five years.
(v) Presently the law imposes restriction on registration or transfer of property having fair market value exceeding rupees five million in the name of a non-filer. The aforesaid restriction placed on purchase of immovable property is being withdrawn.
-
Black money invested in immovable properties allowed whitening at just 1.5 percent of tax
KARACHI: The government has allowed whitening of money investment in immovable properties at nominal income tax rate of 1.5 percent on declaration made by June 30, 2019.
(more…) -
FBR launches crackdown against high-valued undeclared immovable properties
KARACHI: Federal Board of Revenue (FBR) has launched drive against high-valued transactions of immovable properties in order to unearth quantum of black money used for the purpose.
FBR sources said that the Broadening of Tax Base (BTB) unit of Regional Tax Office (RTO) – II Karachi launched action against around 2,000 persons who had acquired high valued immovable properties.
Those persons either failed to declare their assets before the tax authorities or misdeclared the amount used for the transactions.
The FBR sources said that the transactions had been identified through third party sources including banking transactions, where buyers made pay orders or demand draft for payment.
The real estate sector is one of the biggest parking lot for black economy in Pakistan. This is because the declared values of immovable properties are much lower than transactions values.
The FBR sources said that the BTB has expanded its coverage all around the mega city and detected huge number of transactions, where misdeclarations were found.
The sources further said that the BTB is taking action against 2,000 high valued transactions in the first phase. This will be further expanded on the basis of withholding tax data obtained from registrar of properties.
The sources said that huge mismatch was found in the properties of DHA, Gulshan e Iqbal, North Nazimabad, F B Area, Clifton, etc.
The sources further said that the BTB had conducted independent survey to determine the open market value and the payment history of past transactions of immovable properties.
The FBR sources also made it clear that immunity available under Section 236W was available to amounts to the extent of FBR valuations.
Under Section 236W of Income Tax Ordinance, 2001, the FBR will not ask any person making payment of withholding tax under this section to the extent values available under FBR valuation table.