Pakistan: Amnesty Scheme for Construction Sector in Pakistan

Scope 

This Ordinance shall apply on both to new project as well as existing project subject to the condition that project is completed on or before 30th day of September 2022. 

Important Definitions 

“new project” means a construction or development project, which – 

(i) is commenced during the period starting from the date of commencement of the Tax Laws (Amendment) Ordinance, 2020 and ending on the 31st day of December, 2020; and 

(ii) is completed on or before the 30th day of September, 2022 

“existing project” means a construction or development project, which –

(i) has commenced before the date of commencement of the Tax Laws (Amendment) Ordinance, 2020;

(ii) is incomplete;

(iii)is completed on or before the 30th day of September, 2022; and (iv)a declaration is provided in the registration form under Eleventh Schedule to the effect of percentage of the project completed up to the last day of the accounting period pertaining to tax year 2019; 

“unit” means a self-contained or independent building or part thereof including houses, apartments, shops, offices, etc. 

“commercial building” includes any building or part thereof which is to be used for commercial purposes in accordance with the relevant laws;

“Residential Building” means any building which is not a commercial building but does not include buildings used for industrial purposes. Relief 

Some of the relief measures are stated below: 

- There shall be no query about the source of investment for capital investment from the individual, partners or shareholders of new project if the amount is invested before 31st December 2020 and is utilized wholly in a construction or development project completed on or before September 30, 2022. 

- The immunity shall also be available to the first purchaser in a project if the purchase is made on or before the 30th day of September, 2022. However, no immunity shall be available to subsequent or substituted purchaser. 

- The builder and developer shall not be required to withhold taxes under section 153 and 150 of the Income Tax Ordinance, 2001 on; 

(i) Purchase of building materials except cement and steel 

(ii) services of plumbing, electrification, shuttering and other similar services other than those provided by companies. 

(iii) Distribution of dividend to its shareholders in case of a Company. 

- The Ordinance also provides exemption from Capital Value Tax on transfer of immovable property situated in Islamabad Capital Territory.

- Dividend income from companies has been declared as exempt. 

- No minimum tax or alternate cooperate tax under section 113 and 113C of the Income Tax Ordinance, 2001 shall be chargeable to companies paying fixed rate of tax under this Ordinance. 

- Ordinance also provides one time exemption from capital gain for individuals who derived income from sale of residential property used for personal accommodation not exceeding 500 square yard or 4000 square feet in case of a flat. 

- The rate of tax for collection of tax under section 236A of the Income Tax Ordinance, 2001 has been reduced to 5% on auction of immovable property. 

Conditions 

Some of the important conditions are stated below: 

- The income of the project shall be chargeable to tax on project by project basis at fixed rate on the basis of area of the project which shall be final tax liability. 

- Builders and developers intending to take benefit of this Ordinance shall be required to be registered with FBR on project by project basis through online portal of FBR. The registration shall be irrevocable and shall be made on or before 31st December, 2020. Further, the existing project shall also declare the percentage completed as of 30th June 2019 along with above prescribed registration form under this Ordinance. 

- The builder or developer availing benefit under this scheme shall furnish certificate to the board from approving authority or NESPAK as the case maybe, certifying total land area, covered area, saleable area and type of total saleable area or the total land area in the project. 

- Any person claiming immunity from explanation of source of investment shall make investment on or before 31st December 2020, 

- The value of property for the purpose investment shall be higher of 130% of fair market value as determined by FBR or the lower of the values as determined by at least two independent valuers from the list of valuers approved by the State Bank of Pakistan. 

- Advance tax liability shall be discharged in four equal installments in accordance with section 147. 

- The builder or developer shall be entitled to take credit of income in books of accounts to the extent of ten times the amount of tax only.

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