FBR Papers Rs350 Billion Real Estate Investment
KARACHI: During the past two and half years, the Federal Revenue Board (FBR) has documented 350 billion Rs from investment in the real estate sector under a tax amnesty system.
Sources indicate that between December 2016 and 2019, properties were whitened under the undeclared tax amnesty system invested in the real estate sector.
By inserting Section 236W in the Income Tax Ordinance of 2001, the Government by means of the Income Tax (Fourth Amendment) Act 2016, which date of 12 December 2016, allowed individuals to pay 3 per cent tax on the un-identified money invested in a property purchase. The scheme was subsequently retired by the Finance Act 2019, which came into force on 1 July 2019.
During December 2016 to June 2019, the total FBR tax collection amounted to Rs10.52 billion.
Official information reveals that Rs127 billion was reported in the last fiscal year of 2018/19, when the scheme was introduced. In 2019, the FBR collected Rs3.83 billion compared to the previous fiscal year's Rs4.35 billion collection indicating a 12 per cent decrease.
The statistics indicate that in 2017/18 individuals were engulfed by the system for Rs 145 billion. During the period from December 2016 to June 2017, the FBR gathered Rs2.34 billion for Rs78 billions of actual property investments.
The FBR stated that every individual responsible for the registering, recording or certifying transfer or any immovable property or property under section 236W and the related provisions of non-disclosed assets is required to charge tax at the rate of 3 percent of the difference between the FBR value of the property and the value recorded by the authority to record or certify a transfer where FBR value was greater than the recorded value.
“So, by paying three percent of the difference, the purchaser was not required to explain the source of difference of amount between FBR value and the recorded value,” the FBR said in a statement.
The FBR also indicated, by way of Finance Act 2019, that Section 236W and Subsection (4) of paragraph 111 were ignored.
“Consequently, the purchasers are now required to explain the source of investment of property up to the FBR’s value of property whereas previously such purchasers were required to explain the source of investment to extent the recorded value of property,” the FBR added.
FBR sources stated that Rs 39 billion was whitened as much as the tax office received Rs 1.17 billion in 2018/19 for income tax on property transactions under the head of the Regional Tax Office (RTO)-III.4ff
Followed was the RTO Lahore, which collected Rs687 million during the current fiscal year as the competence of the tax office was approximately Rs23 billion during the fiscal year.