Update (Jan 25, 2021): The President of Pakistan has recently promulgated the Tax Amendment Ordinance 2021 to facilitate the construction sector of the country. Made effective from January 1st, 2021, this newly introduced ordinance has extended the deadline for availing the government’s special construction relief package from 31st December 2020 till 30th June 2021.
Now builders and developers can easily get their projects registered under this tax amnesty scheme, which provides them immunity from disclosing their sources of income as well as availing the fixed tax regime. The deadline for the completion of projects is now 30th September 2022, instead of 30th September 2023. Moreover, real estate investors can now enjoy the immunity to disclose their funding sources as well as the facility of fixed tax regime due to the extended deadline from 30th September 2022 till 31st March 2023.
Like all the other fields, the impact of the COVID-19 pandemic has also been deeply felt by the construction sector in Pakistan. In the first quarter of the year 2020, life came to a complete halt as soon as the pandemic hit the nation. Keeping in view the contagious nature of the coronavirus, strict lockdowns were imposed across the country by the authorities and there was also a complete ban on construction activities for almost a month.
The construction activities were finally resumed on April 14, 2020. In order to cover for the losses that investors and stakeholders have suffered during the coronavirus lockdown, the Prime Minister of Pakistan Imran Khan announced a comprehensive construction relief package. It’s basically an amnesty scheme for the construction sector, designed to sustain the economic growth of the industry.
As per the expectations, this incentive package played a very significant role in boosting construction activities across the country. The expiration date of PM’s construction relief package was due on December 31, 2020, but due to its phenomenal success, it has been extended till December 31, 2021. In fact, Prime Minister Imran Khan has introduced more incentives for the construction relief package in 2021.
So, let’s take a look at some of the key highlights in this regard and how these developments will benefit the economy and real estate market of Pakistan.
Tax Exemptions for Low-cost Housing Developers and Builders
It is often termed as the ‘historic’ relief package because it is the very first time in the history of Pakistan that such incentives were offered to the construction industry. The developers and builders of the low-cost housing projects across the country now enjoy a 90% tax exemption.
They have also been exempted from paying the withholding tax on the purchases made for different types of construction materials and other related services. These incentives also directly benefit the investors of the Naya Pakistan Housing Scheme, speeding up the development of the project. On a side note, if you want to get all the latest updates on Naya Pakistan Housing Programme (NPHP), read this blog.
No More Capital Gains Tax (CGT)
Previously, the government used to charge around 5% to 20% Capital Gains Tax (CGT) on the sale of houses and plots. After the introduction of this tax amnesty scheme for the construction sector, the practice of collecting CGT has been abandoned. This will allow people to easily sell their properties during this pandemic situation.
The concerned authorities have also halved the advance tax percentage from 10% to 5%, which is applicable to the sales of immovable properties across the country. Along with these extremely noteworthy and beneficial incentives, a significant reduction in the sales tax has also been made in collaboration with the provincial governments.
FBR and Construction Relief Package in 2021: Investors Continue to Enjoy Exemption from Disclosing Income Sources
Taking around 163 projects onboard worth PKR 136 billion and collaborating with the Federal Board of Revenue (FBR), the government announced the fixed tax scheme under the banner of the construction relief package. According to it, investors of the projects registered with FBR have been given exemption from disclosing their sources of income.
The two of the major projects of Zameen Developments including Zameen Aurum and Mall 35 have also significantly taken part in this tax amnesty scheme to benefit the investors. Such moves will evidently contribute to the progress of the property market of Pakistan in 2021, strengthening its position for many years to come. We have covered a detailed news story on this historic relief package for the construction industry that you may also like reading.
PM’s Newly Introduced Incentives in the Tax Amnesty Scheme for the Construction Sector
Announcing additional incentives for the relief package, Prime Minister Imran Khan called it a ‘New Year gift’ for the construction sector. Here are some of the most noteworthy highlights of this major development.
- The date for disclosures of income sources for investors has been extended till June 30, 2021, and buyers have time all the way till March 31, 2023, to do the same.
- The deadline for the completion of the projects onboard with the FBR tax amnesty scheme has also been extended by one year.
- In line with the recently introduced incentives and the directives of the State Bank of Pakistan (SBP), the commercial banks will continue offering loans worth PKR 378 billion up till December 2021 for housing finance. It will only be valid for the construction of houses targeting the homebuyers belonging to the low-income group.
- For the construction of low-cost houses, the government is also offering a subsidy with an allocated budget of PKR 30 billion. A maximum of 5% and 7% subsidised interest rates will be paid by people to construct 5-marla and 10-marla, respectively. The provided subsidy will cover the mark up on loan acquired for building low-cost houses. The government will also provide an additional grant of PKR 300,000 for each of the first 100,000 constructed houses.
This was all you needed to know about the impact of the construction relief package in 2021 and other related groundbreaking developments. All such initiatives hint towards the progress and prosperity of the property sector of Pakistan down the road.
So, what do you think about the construction relief package announced by the government of Pakistan and all the incentives introduced under its banner? Feel free to share your thoughts with us at blog@zameen.com. We’d love to hear from you.
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