Islamabad: President Arif Alvi recently promulgated the Tax Laws Ordinance 2020 for the country’s construction industry; wherein the government has introduced a number of tax amendments for local developers and builders, a news source reported.
Previously, the federal cabinet had provided its approval to
the said revisions, which include:
A fixed-tax regime where applicable dues will be calculated on per square feet/square yard bases
Exemption of construction services from withholding tax. These include plumbing, electrification, shuttering, and allied services other than those provided by companies
Exemption of building materials (except cement and steel) from withholding tax
90% reduction on taxes applicable on investments made in affordable housing schemes launched under the Naya Pakistan Housing Authority (NPHA). This condition applies to projects launched before December 31 of the going year as well as ongoing projects registered with the NPHA
10 times more profit-credit with respect to the taxes builders and developers pay
New and ongoing projects registered on the IRIS portal of the Federal Board of Revenue (FBR) will be able to avail tax cuts notified by the government
Ongoing projects will reveal completion ratio and pay taxes for the work remaining as per the new fixed tax regime
Dividends paid to shareholders by the companied will be exempt from taxes
No capital value tax (CVT) applicable within the jurisdiction of the federal capital – based on the model being followed by Punjab and Khyber Pakhtunkhwa (KP)
Advance tax on property sales reduced from 10% to 5%
Machinery imported for construction and land development purposes will have access to same facilities as other industries
Personal residences to have one-time exemption from capital gains tax – 500 square yards for house and 400 square metre for apartments
The Income Tax Ordinance 2001’s Section 111 will no longer apply to amount invested by shareholders and partners in limited liability partnership with builders’/developer’s/association of persons if the capital is invested or the land is transferred before or on December 31
The first purchaser of newly-constructed buildings of a project shall be exempt from the provisions of Section 111 if the purchase is carried out on or before September 30, 2022
The immunity will not apply to any public officer holders, their benamidar spouse, or dependents; and on investments derived from the commission of a criminal offence such as money laundering and terror financing
Listed public companies and real estate investment trusts cannot avail the immunity Section III offers
To avail Section III immunity, new companies and association of persons must register before December 31, 2020
Cash investment should be transferred to companies and association of persons by December 31 via cross-banking instrument
Money invested in projects under this schedule where explanation of source is not available with the person investing shall be put in a designated bank account of the person on or before December 31
Special provisions for developers and builders who opt for assessment based on income, profits, and gains from projects initiated between the date of this ordinance’s promulgation and December 31 and reach completion on or before September 30 of the going year
Individuals registered under this initiative will be required to submit their registration forms and the irrevocable option for assessment under the new schedule against each project to the IRIS portal on FBR’s website by December 31, 2020, or within 30 days of setting up the project – whichever is earlier
Builders/developers availing the new scheme shall electronically file their income returns and wealth statements
Income returns and wealth statements filed may be subject to revision without the approval of the commissioner within 60 days
