ISLAMABAD: Despite a National Assembly body’s recommendation for a Rs 7 trillion worth of amnesty scheme for real estate sector, the Federal Board of Revenue (FBR) has again refused to decrease the withholding tax on property transactions.
A meeting of the National Assembly Standing Committee on Finance is taking place on Tuesday (today) to give the go-ahead to the amnesty scheme.
The committee will take up a report prepared by its sub-committee to give final shape to the amnesty scheme, demanded by the realty sector and its sympathisers in the government.
The subcommittee of the National Assembly Standing Committee on Finance, under the chair of Mian Abdul Manan, discussed the proposed amnesty scheme with the officials of the FBR, ABAD (Association of Builders and Developers of Pakistan) and representatives of the real estate sector. The committee proposed that one should pay only four percent tax if he purchases a property from his undeclared money.
The committee also proposed that FBR should review the fair market value of the immovable property according to the real market situation time to time. Similarly, it proposed that old DC rate in property transactions would be effective in those cities where new Fair Market Value has not determined yet.
The committee also suggested that FBR should charge only one percent tax from those, who purchased the property on the real value. The subcommittee would present its proposals in the National Assembly Standing Committee on Finance for approval. The parliament would approve the ordinance within this week, said Manan.
During the meeting, representatives of the realty sector demanded that the government also reduce the withholding tax on property transactions in addition to the amnesty scheme for legalising the black money parked in the real estate sector.
Speaking during the sub-committee meeting, FBR Chairman Nisar Mohammad Khan said that the Board would oppose the call for reduction in the withholding tax on sale and purchase of immovable properties.
At present, the FBR is charging 1% to 2% withholding tax from the seller of property and 2% to 4% from the purchaser. In addition to this, it is collecting up to 10% capital gains tax.
The government doubled the tax on property transactions in the budget for fiscal year 2016-17 in addition to notifying new property valuation rates.
Nisar Khan said the proposal of lower withholding tax could only be reviewed in the next budget and stressed that discussions should remain focused on the property valuations. These valuations become the base for the collection of federal taxes.
At present, the taxes on property transactions are determined through the property values set by the district commissioner (DC) at the provincial level while federal taxes are paid on the basis of FBR-notified property rates.
However, the LHC has granted a stay order against the FBR-notified property valuations on the ground that the tax authorities do not have such powers. The court took the decision in the light of Supreme Court’s decision on the definition of federal government.
The government had enforced the FBR-notified valuations by promulgating a presidential ordinance on July 31, 2016. To give permanent legal cover to the ordinance, it has moved a bill in the National Assembly, which the standing committee on finance will take up for approval on Tuesday.
The FBR’s valuations were significantly higher than the DC rates. Still, the actual property rates are far higher, which has also been acknowledged by parliamentarians and representatives of the realty sector.
