ISLAMABAD: The Association of Builders and Association (ABAD) suggested a fixed tax regime for upcoming budget 2017-18.
Documents available with Daily Times stated that ABAD has proposed the regime for project approved after July 1, 2016.
“Project approved earlier may be given an option either to opt for the prevailing system of assessment or prefers to go for fixed tax on their already ongoing projects. This may encourage the tax payers to opt for fixed Tax,” document added.
ABAD further proposed, “No question should be asked for the source of funding to anyone who buys his first unit in Pakistan, this encourage the Pakistani expatriate to contribute in Pakistan’s real estate sector.”
The incentive should be available for at least three years in the same way it was available for investment in share through stock exchange.
Document read that the exemption for withholding tax on low cost properties should be enhanced from the existing Rs 4 million to Rs 5 million. ?
About the real estate valuation and taxation, ABAD proposed to FBR that undervaluation and rationalisation of property valuation tables and transfer taxes at the provincial and federal level are a constant source of frustration and confusion for ABAD members and their eventual customers.
“We propose that the federal government and provincial government work together to create a single valuation table while simultaneously lower the federal and provincial taxes so that the property is transferred at actual value.”
ABAD suggests that the ICT administration, ABAD, FBR and other stakeholders develop a working group to finalise these modalities and implement this for the next budget.
ABAD recognises the quantum of revenue that federal and provincial taxation bring to the national kitty through property transfer charges.
ABAD has proposed in its budget proposals that areas where valuation has been wrongly done may be rectified or else the seller may be allowed to sell his property to FBR as per valuation table on payment within 60 days.
“We recommend that FBR meets with the stakeholders of all areas to rectify valuation distortions that have raised valuation beyond actual market values.”
The federal government may charge 1 percent in total for withholding tax, advance income tax and capital gain tax from buyers and sellers (0.5% each). Prevailing federal government taxes charged by FBR on property transactions are approximately 3% to 6% of FBR valuation table excluding capital gain tax. The federal government will charge 3% to 6% of FBR value as per today’s valuation or 1% of fair market value whichever (total taxes) is higher. This may result in increasing the revenue many folds.
The total provincial and local government taxes, stamp duty, registration charges, capital value tax and town tax must not exceed 1% of sale deed. The prevailing charges are 7.5% of sale deed amount as per DC rate which is inclusive of registration charges, capital value tax, town tax and will be brought down to 1% proportionally, ABAD stated.
