The new tax regime had brought along many nuisances for the real estate sector along with a number of positive developments. The regime came into effect on July 1, 2016, after which many risk-averse and short-term investors have stopped trading in the property market.
While the real estate transaction volume dropped to an alarmingly low level, the national exchequer also suffered a blow in terms of a decreased amount of taxes collected from property transactions.
Amid all protests held against the implementation of the new tax regime, which literally crippled the property market, the government has finally devised an amnesty scheme to help the real estate sector regain its sheen.
According to a news source, a parliamentary subcommittee is considering to grant an amnesty scheme, allowing real estate investors to declare their income by paying a nominal 3% tax. Reportedly, this tax percentage will be charged on the difference between the DC Rate and the value of property declared by the Federal Board of Revenue (FBR).
Recommendations regarding the tax amnesty scheme were formalized by a subcommittee of the National Assembly Standing Committee after having some rounds of discussions with real estate stakeholders. Input from Finance Minister Ishaq Dar and Special Assistant to Prime Minister on Revenue Haroon Akhter Khan was also taken in this regard.
The new legislation bill will be presented in the parliament for approval. Mian Mannan, a member of the subcommittee, told reporters that, if required, a meeting of the National Assembly and Senate Standing Committees would also be called to expedite the approval process, so that the one-time amnesty scheme can be implemented within a month. He also said that the amnesty scheme would remain valid for two to three months.
Mannan claimed that out of the total $18 billion foreign remittances, half of the amount is invested in the real estate sector. He also said that all real estate transactions are not black-money transactions. Billions of rupees would be added to the national exchequer by the introduction of the one-time amnesty scheme, he added.
According to Saeed Ahmed Khan, another member of the subcommittee, the tax amnesty scheme will encourage the investors that had purchased properties before the implementation of the new tax regime on July 1, 2016 to sell their properties. However, no information was shared about the properties that were purchased after July 1, 2016.
Reportedly, the government has also agreed upon the formation of a committee to scrutinise anomalies in the property rates declared by the FBR.
The tax amnesty scheme will whiten the money invested in the real estate sector before July 1, 2016. This will provide a boost to the property sector for a short period of time. From what I see, those who have invested in the property sector after the implementation of the new tax mechanism will be required to declare the sources of their income, which means several short-term investors will still hesitate to invest in the market.
On the other hand, the decision to figure out anomalies in the FBR valuation tables is definitely a positive development, as FBR rates of properties in many areas are greater than market rates.
Do you think the amnesty scheme will prove to be promising for the real estate sector? Share your views in the comments section below.
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Amaal ka daaromdaar niyatoon per hey. Only good intentions will be fruitful.if the govt sick commission agents have received their enough share from th dubai bookies then they may have thinki g to give some benifits back to paki I vestors. other wise they will wait the new lifafas from dubei sheikh and will squeez more blood from the pakistanies to donate the dubei market.
Kalmey ki buniyaad pe banney walal pakistan kin ke hath charrh gia hey. jab tak in ke account full naheen ho jate kuchh naheen ho ga.
Ethically speaking, tax amnesty looks an unfair treatment with honest tax payers where tax dodgers are given a chance to come clean in the system. However, when we talk about this proposed amnesty, it has clear benefits to both GoP as well as to the investors.
Tax amnesty was introduced with stock exchange of Pakistan and we all have seen its positive results with a stellar return of 49% in year 2012 when amnesty awarded!
By paying 3% tax, investors will get their money ‘white’ which means that money/capital shall be available with them for future business/trade; in other words this money will come into ‘legal system’. Now capital gain tax rate is 10% comparing tax rates of other businesses which are on a higher side. This means people would like to invest in this sector once they have cleaned/white business money and shall be willing to pay just 10% gain tax in future.
GoP shall also be benefited with this 3% tax which is expected to be huge once transactions are opened as well as future taxes such as 10% capital gain tax etc.
Please do your homework and do analyze all aspects before making any investment decision.
One sentence needs correction i.e. “parliamentary subcommittee has decided to grant of an amnesty scheme” to “parliamentary subcommittee is considering to grant an amnesty scheme”
Amnesty is the not the answer as it only encourages future culprits to carry on their dirty ‘business as usual’.
Instead, property taxes should be loweredand simplified, while haramkhors parking black money in property should be brought to justice and punished for their crimes. Only then a clean, documented, stable and long-term market can be established.
Ns 1st blunder : Ceasing FCA accounts.
2nd : Damage to property BiZ
ON both oclasions they aaccepted that it was blunder
I think this will not be implemented. Govt once levy taxes, they don’t tend to withdraw.
Dirty people look at everyone with their own eyes. If they are dirty everyone is dirty. What a fallacy. it has been a disaster, as always, they trying to fix something that wasnt broken.
Zain,
Why zameen.com remove the like / dislike option for blog and comments.
Zain,
Why zameen.com removed the option of like/dislike of comments and blog ?
Rajab,
Sorry for inconvenience. We are in the process of making some changes to Zameen Blog. All options will reappear soon, InshaALLAH.
There are many overseas who saving by buying property in pakistan. They are stuck because of tax introduced. Not everyone invested black money.
I see there are some thoughts along the following lines:
That if amnesty were to be offered, sellers may not actually sell but simply cough up a manageable 3% penalty, and keep sitting pretty on their property until good times roll in again. The conclusion being that property prices would not fall.
Given my observation of this market & general events, things are unlikely to play out like this. Here are the reasons:
• Most ‘investors’ (actual or part timers) do not possess holding power that extends to even a year. Majority like to book quick profits within a matter of weeks or at most a few months. It’s a factor of what they like to do and also what their financial situation forces them to engage in.
• A significant chunk of high-end investors are either tax evaders or have become investors thanks to embezzlement & corruption in government departments, and also due to illegal private activities. Nowadays, with a society in process of positive evolution, these are not happy campers. Certainly, some of them possess infinite holding power but it’s not worth much now. Why? Primarily because they have to run and liquidate their properties to be able to transfer funds to foreign lands and/or other areas where scrutiny of source of funds is not that intense. So either run or they and their pals are dead meat. They’ve had a good run for years. But now their time is coming to an end.
Therefore, high end properties have no way to go but down …with or without amnesty. In the short term, real estate agents would try their best to keep a sinking ship afloat. However, they can’t roll back the positive changes society is going through.
In general, downward pressure on prices is building up. It is felt prices would eventually fall to level of some years ago. In essence, a smart buyer of high end property with white money could easily go ahead and offer a take-it-or-leave-it deal to a bunch of different sellers at a 30% to even 50% discount from quoted prices. And then wait it out to see which one falls first. They have nowhere else to run. All their other black money buddies are also in the same boat (that is fast filling up with water) and can’t help them as buyers. Game over.
It’s the same thing in a different manner if prices stay stagnant for say, several years into the future. Either way it’s a massive loss to investors who are predominantly (up to 80-90%) people with black, including tax evaded money.
Amnesty is not really going to help them. As bad as the situation is, yet what the corrupt should really be worried about are not amnesties or ways out in this world. Judgement Day before the Almighty and the explanations they would need to give then should really occupy their mind.
What about overseas Pakistanis, if an overseas Pakistani has invested, what would be his Status.
what about overseas Pakistanis. if an overseas Pakistani has invested in property, will he be given amnesty or he has to declare the source as well.
regards
what about overseas Pakistanis?? if an OP has invested in property, does he has to pay tax as remittences are free of tax.
regards
Remittance comes under permanent amnesty hence no tax is to be paid. However, you need to prove that you are non-resident Pakistani. A non-resident Pakistani is one who has stayed more than 183 days per year outside Pakistan. In some scenarios (like import of vehicles), You also need to prove that you are non-resident for 2 or more years.
When investing more than 40 lacs PKR in property, you might be asked by Commissioner to provide source of income. In your first Income Tax Return, You need to submit consolidated Wealth Statement for previous years. Commissioner has the right to ask for last 10 years of Income / Wealth Details.
Filling and Submitting Income Tax is fairly easy however you can also assign a Income Tax Consultant. They charge from PKR 3,000 per year to PKR 100,000 per year per individual depending on complexity of submission.
It is wise to come under tax net as more and more taxes are being applied on non-filers.
thanks for the info guys
YES EVERYONE HAS TO PAY TAX ON BUYING AND SELLING PROPERTY AS PER FBR RATES…
Incoming remittances are tax free. BUT, you will pay all Withholding & other taxes at the time of purchasing property like every other citizen. Then at year end you’ll file your taxes as per overseas Pakistani rules and ask for your money back.
Then good luck getting your tax-return from FBR, unless you pay rishwat to someone inside.
So its a double edged sword for overseas Pakistanis, damned if we do it or don’t!
While talks of submission of amnesty bill was in inception, a senator has already submitted a bill for further crack down on black money. If implemented, Rs 1000 and Rs 5000 notes will be withdrawn from circulation resulting in declaration or forfeit of black money.
A remarkable step by Government for crackdown on black money.
Moderate growth in property prices is a guarantee to a stable property sector. This has been missing from the Pakistan property market, where the short time investors have been jacking up the prices and earning massive windfall revenues.
With the property tax in place, these short timers will not have a chance to get windfall gains, rather would have to rely on the lower yet consistent value gains in the range of 10% to 20% per year.
A big investment was coming from abroad and that has been bold due to these stupid policies…
Sector specific tax amnesty for real estate sector would permenatly destroy the tax structure of Pakistan as according to Government over Rs 7 Trillion black money is invested in Real Estate.
If sector specific for real estate tax amnesty is approved, a honest tax paying citizen of Pakistan will be driven out from buying a shelter (House) as his money would have been taxed at 30% , whereas a black money holder whose money has not been taxed will get away by paying 3%.This will drive up the property prices beyond the reach of common law abiding and tax paying citizen of the country .Property speculators and rich property mafia will rule the property market.
No amnesty should be granted to real estate sector.Every one should pay tax according to law. What need to be done is FBR should be reformed so people are taxed properly
Real Estate Sector specific tax amnesty would permanently destroy the tax structure of Pakistan as according to Government over Rs 7 Trillion black money is invested in Real Estate.
If sector specific for real estate tax amnesty is approved, a honest tax paying citizen of Pakistan will be driven out from buying a shelter (House) as his money would have been taxed at 30% , whereas a black money holder whose money has not been taxed will get away by paying 3%.This will drive up the property prices beyond the reach of common law abiding and tax paying citizen of the country .Property speculators and rich property mafia will rule the property market.
No amnesty should be granted to real estate sector.Every one should pay tax according to law. What need to be done is FBR should be reformed so people are taxed properly