FBR plans action against concealed property investment
Credit: The News International
KARACHI/ISLAMABAD: The Federal Board of Revenue (FBR) stepped up efforts to net undisclosed property investments as the newly-constituted authority to curb real estate tax evasion brought the amnesty for the sector to an end, sources said Saturday.
They said the amnesty to whiten undocumented money used for transactions of immovable properties ended with the notification issued by the FBR to establish a directorate of immovable properties to check tax evasion.
A day earlier, the FBR announced the directorate dedicated to monitor property transactional values to check tax evasion.
The directorate will lawfully be entitled to procure land from those who declare undervalued property to evade taxes.
Sources, however, said the directorate general immovable properties will, however, not be able to undertake any action without the availability of all the prerequisites, including uniformity in provincial and federal valuation, tribunal for redressal of complaints in consultation with ministry of law and creation of fund with seed money in consultation with the ministry of finance to procure land.
Officials said the FBR has placed an administrative mechanism to kick-start its homework to complete all the pre-requisites.
The unit was set up under a new section 230F introduced into the Income Tax Ordinance 2001 through the Finance Act 2018.
The tax authorities assigned jurisdictions to the relevant officials to perform vigilance.
The amnesty for whitening money in property transactions was introduced through Income Tax (Fourth Amendment) Act in December 2016 and a section 236W was inducted into the ordinance.
The tax amnesty allowed buyers to pay three percent of the property transaction value and no question would be asked about the source of invested fund. It, however, was restricted to the values notified by the Federal Board of Revenue.
Further, the undisclosed money used for immovable property was also protected from other laws applicable on concealed money.
The amnesty scheme has whitened around Rs223 billion worth of property transactions between December 2, 2016 and June 30, 2018. Yet, it expired as soon as the monitoring unit was established.
The sources said the valuation notified by the Federal Board of Revenue would not be applicable anymore.
In July 2016, the FBR issued valuation of immovable properties located in around 20 major cities of the country to enhance the declared value and generate sizeable revenue.
The Federal Board of Revenue failed to enhance the number of return filers due to prevalence of lower deputy collector rates in provinces.
The applicable rate of withholding tax on transactions of immovable properties is one percent by filer and two percent by non-filer in case of seller, while the rate is two percent on value of property above four million rupees for filer and four percent for non-filer in case of buyer.
The withholding tax applicable on seller of immoveable property was also withdrawn. Yet, the buyer will pay withholding tax.
The new directorate is tasked to monitor property transactions and compare them with the fair market and declared values. The unit will also ensure correct assessment of fair market value of the property for the purpose of raising tax demand.
The Federal Board of Revenue said the directorate, a new IR field formation, was raised under an amendment introduced into the Income Tax Ordinance 2001 through the Finance Act 2018.
The amendment provides definitions for all implied terms and expressions, the scope, operational mechanics and procedural parameters of the tax authority and above all contains clearly spelled grievance readdressal mechanism for the aggrieved taxpayers.