KARACHI: The Federal Budget 2018-19 seeks to institute tax reforms in the real estate sector. Widespread tax reforms have been envisaged for streamlining the issues related to the real estate sector.
Property transactions shall be recorded at the value declared by the buyer and the seller. Property rates notified by Federal Board of Revenue (FBR) for the purpose of collection of taxes on sale purchase of property and DC rates are to be abolished.
At the federal level, a one percent adjustable advance tax from the purchaser on the declared value shall be collected and this tax shall replace the existing withholding tax on sellers and purchasers of property.
Non-filers shall not be permitted to purchase property having declared value exceeding 4.0 million rupees. Provinces shall be requested to abolish the provincial rates for the collection of stamp duty commonly known as DC rates and to collect a total of 1.0 percent tax under stamp duty and capital value tax on the value declared by the buyer and the seller of property.
In order to deter under-declaration and consequent loss of revenue, FBR shall have the right to purchase any property within six months of registration by paying a certain amount over and above the declared value which may be 100 percent in the fiscal year 2018-19, 75 percent in the fiscal year 2019-20 and 50 percent in the fiscal year 2020-21 and thereafter.
In order to implement the above measures, enabling provisions shall be incorporated in the Income Tax Ordinance, 2001. Detailed procedure and the date of coming into force of the above measures shall be notified later.