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Tag: tax amnesty

  • Salient features of amnesty scheme for housing, construction sector

    Salient features of amnesty scheme for housing, construction sector

    KARACHI: The government has announced an amnesty scheme for investors in order to boost housing/construction activities in the country at a faster pace.

    Under this package sources of investment made to a housing project may not be asked if the investment made through a valid bank account by December 31, 2020 and projected identified for the investment is completed by September 2022.

    According to official documents made available to PkRevenue.com following are the salient features of the scheme allowed under Section 100D of the Income Tax Ordinance, 2001:

    Fixed Tax Regime for builders and developers

    • Tax liability computed on the basis of square feet/yard, to be paid in quarterly installments
    • New projects as well as existing incomplete project can opt for the scheme up to December 12, 2020
    • Projects to be registered with Federal Board of Revenue (FBR) online through IRS portal
    • Existing incomplete projects have to self declare the percentage of completion of project on the relevant date
    • Projects must be completed by September 30, 2022.

    Exemptions/Benefits:

    • Exemption from requirement of withholding tax on purchase of building material except cement and steel
    • Exemption from requirement of withholding tax on acquisition of services relating to construction except those from companies
    • Permission to incorporate ten times of fixed tax paid as income in the books of accounts
    • 90 percent reduction in fixed tax liability for low cost housing
    • Dividend paid by builder or developer companies shall not be liable to tax and there shall be no withholding on the payment of these dividends

    Exemption from Section 111 of the Income Tax Ordinance, 2001 for individuals:

    • Money is deposited in a new bank account up to December 31, 2020; or
    • Having ownership/title of the land invested as on April 17, 2020.

    Exemption from Section 111 of the Income Tax Ordinance, 2001 for Company / Association of Persons (AOP):

    • By company/AOP if:
    • A single purpose company or AOP is registered between April 17, 2020 and December 31, 2020.
    • Money is invested through a crossed banking instrument up to December 31, 2020; or
    • Land owned by the partner/shareholder is transferred to the company / AOP up to December 12, 2020.
    • Money or land invested is utilized in the project
    • Project is completed by September 30, 2022
    • In case of builder, grey structure is completed (top roof as per plan is laid)
    • In case of a developer:
    • Landscape is completed and all roads are laid up to sub-grade level
    • At least 50 percent plots have been sold and at least 40 percent sale receipts have been received.

    Exemption from Section 111 on purchase of:

    • Plot, if:
    • Plot is purchased before December 31, 2020 (complete payment is made through banking channel before December 31, 2020)
    • Construction on such plot is started before December 31, 2020 and completed before September 30, 2022
    • Building, if:
    • Purchase is from a registered project and buyer is the first purchaser of the building
    • Purchase is made before September 30, 2022 (complete payment is made through banking channel)

    Exemption from Section 111 is not available for:

    • Public office holders
    • Public companies, REITs and companies whose income is exempt
    • Proceeds of crime.
  • Senate recommends extending tax amnesty to construction sector till June 2021

    Senate recommends extending tax amnesty to construction sector till June 2021

    ISLAMABAD: Senate of Pakistan has recommended that tax amnesty i.e. immunity from explaining source of income for builders and developers should be extended up to June 30, 2021.

    (more…)
  • Illicit money given amnesty through package to construction industry

    Illicit money given amnesty through package to construction industry

    ISLAMABAD: The government has given an amnesty to illicit money in case of investment made into to construction industry as no question of money to be asked under Income Tax Ordinance, 2001.

    Federal Board of Revenue (FBR) on Monday issued the Tax Laws (Amendment) Ordinance No.1 of 2020 after the approval from the president.

    The ordinance says that it was being promulgated, “whereas, the COVID-19 pandemic has created a worldwide crisis due to which industries, businesses, offices, service has been shut down in Pakistan and economic activity is at a standstill.”

    “And whereas, in order to protect and revive the economy of Pakistan, it is essential and critical to give incentives for revival of the construction industry with certain conditions as provided for in this ordinance.”

    Amendment has been made to Income Tax Ordinance, 2001 under which Section 111 shall not apply to the first purchaser of a building or a unit and capital investment made in a new project in the form of money or land.

    Section 111 of the Ordinance deals with concealed or undeclared money whereas harsh penalties under the ordinance have been outlined for undeclared money.

    According to the sub-Section 3 of Tax Laws (Amendment) Ordinance No.1 of 2020, the provisions of Section 111 shall not apply to capital investment made in a new project in the form of money or land, subject to following conditions, namely:

    (a) if the investment is made by a builder or developer being an individual –

    (i) in the form of money, such builder or developer shall open a new bank account and deposit such amount in it on or before the 31st day of December 2020; or

    (ii) in the form of land, such builder or developer shall have the ownership title of the land at the time of commencement of the Tax Laws (Amendment) Ordinance, 2020;

    (b) if the investment is made by a person in a project through a company or an association of persons;

    (i) such company or association of persons shall be single object (builder or developer) company or association of persons registered under the Companies Act, 2017 or the Partnership Act, 1932, as the case may be, after the date of commencement of the Tax Laws (Amendment) Ordinance, 2020 and on or before the 31st day of December, 2020; and

    (ii) the person shall be a member or shareholder of such association of persons or company, as the case may be;

    And if the capital investment is made,

    (i) in the form of money, such amount shall be invested through a crossed banking instrument deposited in the bank account of such association of persons or company, as the case may be, on o before the 31st day of December, 2020; or

    (ii) in the form of land, such land shall be transferred to such association of persons or company, as the case may be, on or before the 31st day of December 2020;

    Provided that the person shall have the ownership title of the land at the time of commencement of the Tax Laws (Amendment) Ordinance, 2020;

    (c) a person making an investment under the ordinance shall submit a prescribed form on IRIS web portal;

    (d) a person making an investment shall be wholly utilized in project; and

    (e) completion of the project shall be certified in the following manner, namely:

    (i) in case of a builder, the map approving authority or NESPAK shall certify that grey structure as per the approved map has been completed by the builder on or before the 30th day of September 2022; and

    (ii) in case of a developer

    (A) the map approving authority or NESPAK shall certify that landscaping has been completed on or before the 30th day of September 2022;

    (B) a firm of chartered accountants having an ICAP QCR rating of ‘satisfactory’, notified by the Board for this purpose, shall certify that at least 50 percent of the plots have been booked for sale and at least 40 percent of the sale proceeds have been received by the 30th day of September, 2020; and

    (C) at least 50 percent of the roads have been laid up to sub-grade level as certified by the approving authority or NESPAK.

    The sub-Section 4 of the latest ordinance said that the provisions of Section 111 shall also not apply to-

    (a) the first purchaser of a building or a unit of the building purchased from the builder in respect of purchase price of the building or unit of the building subject to the following conditions, namely:

    (i) full payment is made through a crossed banking instrument to the builder during a period starting from the date of registration of the project with the board under this section and ending on the 30th day of September 2022, in case the purchase is from a new project; and

    (ii) full or balance amount of payment is made through a crossed banking instrument to the builder during a period starting from the date of registration of the project with the board under this section and ending on the 30th day of September 2022, in case the purchase is from an existing incomplete project; and

    (b) the purchaser of a plot who intends to construct a building thereon, if

    (i) the purchase is made on or before the 31st day of December 2020;

    (ii) the full payment is made on or before the 31st day of December, 2020 through a crossed banking instrument;

    (iii) construction of such plot is commenced on or before the 31st day of December 2020.

    (iv) such construction is completed on or before the 30th day of September 2022; and

    (v) the person registers himself with the board on the online IRIS web portal.

    The sub-Section 5 of the latest ordinance said that sub-Section (3) or (4) apply, the value or price of land or building, as the case may be, shall be higher of clause (a) or (b) below:

    (a) 130 percent of the fair market value as determined by the board under sub-section (4) of Section 68; or

    (b) at the option of the person making investment, the lower of the values as determined by at least two independent valuers from the list of valuers approved by the State Bank of Pakistan.

    Sub-Section 6 of the ordinance stated that Sub-Section (3) and (4) shall not apply to –

    (a) holder of any public office as defined in the Voluntary Declaration of Domestic Assets Act, 2018 or his benamidar as defined in the Benami Transactions (Prohibition) Act, 2017 or his spouse or dependents;

    (b) a public listed company, a real estate investment trust or a company whose income is exempt under any provision of the ordinance; or

    (c) any proceeds derived from the commission of a criminal offence including the crimes of money laundering extortion or terror financing but excluding the offences under the ordinance.

  • Highlights of tax amnesty for construction sector

    Highlights of tax amnesty for construction sector

    KARACHI: Federal Board of Revenue (FBR) to offer many incents through amendment to income tax law in order to comply with the announcement of the prime minister to grant tax amnesty to construction sector.

    According to highlights released by Arif Habib Limited, the following incentives to be offered by the FBR:

    1. Special tax provisions for builders and developers

    2. Exemption from provisions of section 111 of the Income Tax Ordinance 2001, on construction activity

    3. Rationalization of the Capital Gains Tax (CGT)

    4. Valuation of Real Estate / Plots

    5. Rationalization / Reduction in Sales Tax on Construction Material

    6. Exemption of taxes on first house

    7. Establishment of special taxes.

    The analysts said that the domestic construction sector has faced enormous challenges in recent times due to changes in the regulatory environment (influenced by the ruling government, FATF etc.) including provision of money trail, assessment of income and increase in valuation of real estate.

    Moreover, regulations such as CNIC requirement, restriction on sale of construction material to non-registered clients of over PKR 10mn etc.) also hindered construction activity.

    The government has recognized the importance of the housing and construction sector and has addressed some of these concerns under the “Special Incentive Package for the Construction Industry” to revive the real estate sector.

    The Government intends to dilute the impact of Covid-19 outbreak on domestic employment and has therefore introduced this package to mitigate its impact to some extent.