The FBR has decided to constitute a 13-member committee comprising representatives of real estate builders and association for finalisation of the recommendations of the real estate associations for revision of the tax regime on real estate sector including valuation of immovable properties.
The first round of talks was held between the builders/ real estate associations and Special Assistant to the Prime Minister on Revenue Haroon Akhtar at the FBR House here on Monday. Abdul Rauf Alam President FPCCI, FBR Chairman Nisar Muhammad Khan and his team of tax managers were also present.
Abdul Rauf Alam President FPCCI informed media that the issues would be resolved through negotiations without creating any rift with the government. In case of traders, the government had already resolved their issues in the past. Similarly, the FBR has applied concessionary rate of withholding tax on banking transactions of non-filer traders. The issues of real estate sector are expected to be resolved through mutual consultation.
On conclusion of three hours meeting at FBR House, Chaudhry Abdul Rauf President Islamabad Estate Agents Association (IEAA) said that the FBR and sector's representative would jointly chalk out a strategy to deal with the taxation related issues of the real estate sector. Haroon Akhtar and FBR Chairman patiently heard the viewpoint of builders and real estate representatives from all cities of the country. After 2 days period, the industry's representatives and FBR will again meet and finalise the viable recommendations on the real estate sector.
He was confident that the government is seriously considering their viewpoint for expected amendments in the law or changes through income tax rules to be framed by the FBR.
Industry's representatives informed the FBR that it is not possible to immediately impose heavy taxation on real estate and suddenly change the entire assessment system for valuation of immovable properties.
They also informed the FBR that the appointment of valuers for valuation of immovable properties is not a feasible idea. The system is not practicable and cannot be enforced in the country.
They said that the government has the option to enhance the DC rates on immovable properties and improve existing system for assessment of market value of the properties. In the presence of globally accepted system of DC rates, there is no justification to appoint valuers for assessment of immovable properties.
Presently, the value of any property for the purpose of taxation, commercial or residential is quoted as its deputy collector rate. All types of taxes are applied on the deputy collector value of the property.
Industry further informed the FBR that there is no logic behind heavy taxation on real estate sector already subjected to multiple taxes including withholding tax, capital value tax, capital gains tax ad many provincial taxes.
The doubling of withholding tax on buying and selling of immovable properties has been done without taking into confidence the concerned sector.
The measure relating to capital gains tax would also hurt investments in real estate sector.
He said that the Finance Act 2016 has levied capital gain tax at the rate of 10% on sale of a property held for a period upto five years, whereas, capital gains on property sold after holding for a period of more than five years were exempted from tax. This measure would also have negative impact on buying and selling of properties. Across the globe, buying and selling of property is a profitable business. Different countries offer lucrative schemes to foreigners for investment in the real estate sector.
A government official informed this scribe that Federal Board of Revenue (FBR) has decided to constitute a committee on property tax on the directive of Finance Minister to develop concrete proposals for submission to him.
Sources said that Finance Minister has asked the official of FBR to involve him at the stage when there is something concert on the issue. This led to announcement from FBR for constitution of committee to engage with the stakeholders of real estate and builders association.
However, first round of the dialogue between tax authorities and builders association failed to produce any positive results and the next first formal meeting of the committee would be in couple of days to consider the recommendations of both sides on the property tax.
They were optimistic of some positive development in few sittings of the meeting and the issue would be amicable settled in consultation with the stakeholders, official added.