Valuation of immovable property; decision on July 27, 2016
KARACHI: The final decision regarding the formula regarding valuation of immovable properties is deferred for July 27, 2016. Finance Advisor Haroon Tareen has advised the FBR to resolve the issue in the meeting scheduled for July 27, 2016.
This was decided at a meeting between FBR authorities and the committee of 18 persons including representatives of real estate developers and builders on Thursday. The realty stakeholders would submit the valuation table at the said meeting chaired by Haroon Tareen. Senior FBR officers were also present on the occasion.
To bring an end to uncertainty in the real estate market, the Federal Board of Revenue (FBR) has agreed, in principle, with realty stakeholders on a formula to determine the value of property for the purpose of taxation.
As per the formula mutually agreed, 50pc of the difference between the collector/DC rate and market rate will be added to the existing collector rate. After addition to the collector rate, the new rate will be considered as fair value for the next two to four years for taxation purposes. The real estate associations had demanded a phase-wise approach for meeting the 100pc transaction value.
Internationally, tax is charged on transaction value, but in Pakistan the collector value is much lower than the actual transaction value.
In the provinces, the valuation table is notified by the collector of a district under Section 27-A of the Stamp Act, 1899. In the budget for 2016-17, the taxable period for capital gains on disposal of immovable property was extended up to five years. And a flat 10pc tax has been made applicable on the seller of the immovable property, if he sells it within five years of its purchase. But through an amendment to Section 68 of the Income Tax Ordinance, 2001, the task of determining fair market price of property has been given to professional valuers approved by the SBP.
Another tax official said the real estate associations wanted the FBR to come up with city-wise valuation tables instead of authorising the SBP to evaluate properties through its valuers