Tax amnesty on money invested by builders, developers available till December 31

Tax amnesty on money invested by builders, developers available till December 31

ISLAMABAD – A tax amnesty providing relief on undeclared money to builders and developers for new housing projects is set to expire on December 31, 2020.

The Federal Board of Revenue (FBR) has specified the procedure for availing this amnesty under Section 100D of the Income Tax Ordinance, 2001.

Section 100D introduces special provisions related to builders and developers, applicable for the tax year 2020 and onwards. Under this section, the tax payable by a builder or developer opting to pay tax is computed and paid on a project-by-project basis, with the income, profits, and gains derived from the sale of buildings or plots. The two scenarios covered are the completion of a new project or the completion of an incomplete existing project by September 30, 2022.

The amendment also outlines conditions for capital investments made in new projects, specifying that such investments can be made in the form of money or land. The provisions include the submission of a prescribed form on the Iris web portal, the utilization of funds solely for the designated project, and certification of project completion.

For the first purchaser of a building or unit from the builder in a new project, or the purchaser of a plot intending to construct a building, certain exemptions apply. However, these exemptions come with conditions related to payment methods, project registration, and completion deadlines.

Where sub-sections (3) and (4) apply, the value or price of land or building is determined based on specific conditions, allowing flexibility for independent valuation or fair market value assessment.

Notably, the provisions of Section 111, which relate to tax on undistributed profits, do not apply to capital investments made in new projects, offering tax relief to builders and developers. Furthermore, divided income paid to a person by a builder or developer out of project profits is exempt from tax.

While the amendment introduces measures to facilitate the legal recovery of sales tax arrears directly from bank accounts, it is important to note that these provisions do not apply to specific individuals, entities, or proceeds derived from criminal activities.

It’s essential for builders and developers to adhere to the prescribed timelines and conditions to qualify for the tax amnesty. The provisions aim to incentivize compliance and transparency within the construction and development sector, ultimately contributing to the formalization of the economy and revenue collection.

As the deadline approaches, industry stakeholders are urged to take advantage of the tax amnesty to regularize their financial affairs and contribute to the government’s broader objectives of fostering economic growth and fiscal discipline. Failure to comply with the prescribed conditions may result in the voiding of returns or declarations made under this section, subject to the provisions of the Income Tax Ordinance, 2001.

The amendment to Section 100D introduces targeted measures to facilitate tax compliance and transparency within the construction and development sector. The tax amnesty, set to expire on December 31, 2020, presents a time-sensitive opportunity for builders and developers to avail themselves of the benefits and contribute to a more formalized and accountable economic landscape.