The recent tax chaos and its proposed implications created confusion among many people who have a direct or indirect stake in the real estate sector. Though some of the amendments made to the Income Tax Ordinance were rolled back after several rounds of negotiation between the officials concerned and representatives of the property sector, investors and other stakeholders are still awaiting a final decision in this regard. Needless to say, there are some positive developments, and one of them is the proposed tax amnesty scheme, which aims at bringing PKR 7 trillion untaxed money (currently stocked in the property sector) into the tax net.
The contours of this amnesty scheme were discussed between Finance Minister Ishaq Dar and real estate representatives in a meeting held on Friday and according to a news report, the scheme will be implemented either through a presidential ordinance or by introducing a bill in parliament. The ins and outs of the scheme will be determined once the representatives of the real estate sector share property rates of 18 main cities with the Federal Board of Revenue (FBR) officials.
Please note that the FBR hasn’t left the matter unattended, as it will also conduct a similar survey in the same 18 cities and compare their findings with those shared by realty sector’s representatives. A ‘consensus rate’ will then be decided among the two parties, and this rate will be used as a basis for giving amnesty on property transactions held in the past and determining tax percentage for future transactions.
This simply means that the government has allowed real estate stakeholders to play their part in determining the fair market value of real estate.
It has also been cleared up that the government will not investigate the source of money invested in real estate sector in the past. Will this money remain untaxed and face no penalty? That, my friends, might not happen!
Per a news report, the amnesty scheme may include certain conditions such as charging old property transactions with a fixed tax of 4% to 5% on the difference between the Deputy Commissioner (DC) rate and the new rate decided between the FBR officials and real estate representatives as the fair market value of property. The final decision, in this regard, will be taken in this week.
Let’s see how the future unfolds for the proposed amnesty scheme, which seems promising for the property sector. Share you views with me in the comments section below.
Related News
That’s a huge statement/claim regarding Amnesty. Not so sure about It.
Whatever happens, fact remains there is no more juice left in the real estate sector of Pakistan. Market moves on positive news, and nose dives on negative sentiments. As expected, big players got away with amnesty, small players will be snared by FBR. The reason why overseas Pakistanis invested is because of higher returns than other options. These higher returns were justified because of higher risks due to various reasons (qabza mafia, frauds, speculations, security risks, opaque rules) The government has taken away the opportunity of higher returns but has done nothing to reduce the risks. Don’t think any investment minded individual will play in real estate just to hold land for sentimental value, especially if capital gains do not beat the inflation and exchange rate values by a healthy margin. These factors will lead to capital flight overseas, were risk return/ratio is better, or will move to other sectors (stock market recently has been performing very well recently)
agree with Bilal view, He is looking for very short term benefits to his own account, but in long term its going to be very dangerous for the country, as the investment will go out of country.
Agree with IG view. This is money parking with no benefits to the country or public.
People protested against new property taxes only but black money should be traced and questioned by the officials. There is no connection between high tax and black money.
Dear Samra,
A lot of confusion still exists.
How many Taxes were brought in and how many of them have been rolled back? What about CGT, advance tax, and DC rates.
a lot of fuss.
there is no logic for retrospective charge of tax. were they sleeping in the past. whatever is to be done is to be implemented for future. that is the only way to get out of chaos.
Wrong information is continously being spread!! action should be taken.
Pls share correct information
I fully agree with these comments. Higher returns are not the courtesy of any government investment in the real estate sector. It is the courage against the odds which bring you the reward. They are only performing a role of a coward thief by barging into this sector. If one does not face risks, one would keep one’s money with the NSS, a lazy depressed risk-free investment zone the government has created as a face saving or, more so, utilizing the savings to settle its own budgetary gaps. I strongly condemn government for its cowardly act which is bound to ruin business in the real estate sector.
Government should implement the amendments as there is no justification to allow illegal money in the real estate. If the govt had taken thr right step, it should stand firm for the future of this country
Next prices of cars are going down, as property business is zero and so called investors will be forced to sell their cars
So if you own own extra car sell it now on good price or there will be no buyer in the market very soon.
what is the relationship between car and property… i think you want to buy car and spreading these things so prices may come down…. just like i wish to purchase home and want to comedown prices.
Nothing will happen in the developed market. prices will go up in the developed market.
juice will be in the non developed markets….where prices r quite less….
People in property business are mostly living beyond their means.
Their monthly expenses are huge and they need continuous income that is no where now.
Already property prices have gone down and sale/purchase is almost nil.
So cash deprived “investors” will sell their cars first to meet the daily expenses.
Its my analysis and not my wish. I don’t buy 2nd hand car. I have sympathy for the sufferers.
Dear dealer.
I don’t see any reduction in property prices. Owners are on ‘wait & see” policy.
They don’t need to see their property or car to feed daily expenses. They have a lot
of money.
Due to this black money in property sector, prices are out of reach of people.
I wish prices go down atleast 50%.
but prices for large unit has been decrease as large unit has low demand as compare with small unit of below 03 mrla homes.. where still asking price start from 6.5 (M) in developed renowned area like johar town. allama iqbal twn samanabad etc..
The question is Where will the tax money go?
What i find most amusing is that it is generally people who evade taxes who then are the most concerned about where tax money will go? We want roads, hospitals, schools, trains, planes, but no please don’t ask us to pay taxes.
There is no planning in any sector of Pakistan. Peoples r working without any line and length and mostly without thinking.
There is only sector of real estate which attract and receive investment mostly overseas.
Govt so called financial advisor introduces present mechanism for collection of taxes on real estate transaction but they fail to do this and receive strong resistance.
If govt wants more revenue it should be decided and discuss in parliament. All matters of public interest should be debated and deeply discussed in parliament for everlasting results
Actually, it was a law passed by Parliament.
That’s a million dollar question!
Amnesty for those who have illicit money is no solution.People who have no means of income from any other source have invested their savings in property and want to retire with accrued gain on selling it off during the twilight years of their life. All discussions and negotiations aside they must not be punished by Janab Ishaq Dar who and his fellows are not going to be affected by all this noise of FBR investigations as they have their assets in Dubai and elsewhere. Whereas many like me have retired peacefully and honestly after serving in private sector with no pensions and other benefits what so ever, except a house or similar property on which we depend and wait staying with their progeny away from home for a good price to get . What is wrong in it for which we are being scared ?
As a ultimate end home owner who is striving hard to buy shelter for his children is mashed between profiteers and pick-pocketeers. Who will suffer? Small fishes (people) like me as big fishes will remain “too big” to be netted.
Those, whose Laws we still follow in Pakistan, say …
“Taxation, without Representation, is Tyranny” !
Because, in modern times … ‘any’ Taxes, arbitrarily imposed by any government, on it’s citizens … without their fair ‘consent’ … under whatever pretext or rationale that be cited for any new Taxes … is virtually the same, as Rulers, asking people, to rise in Revolt against the government …
Furthermore … in presence of a Parliament … the Colonial practice of imposing any Practical measures … as Laws … via Ordinances, Word of mouth, or Statutory Regulatory Orders … SROs … is a direct slap on elected members… and by default, the same as slapping the face of those, who have elected them …
Therefore, those now sitting on Treasury benches in the Parliament, want to continue to occupy Treasury benches, they must ensure, that all their actions, vis a vis, Taxation and other matters of State … are in conformity with the spirit of Representation, laid down in the Constitution , that call for Peoples consent, in matters that concern them … and NOT via Amendments of Convenience made in the Law … by an unimaginative leadership !
I can’t understand this logic. How will the genuine buyer be affected by new tax scheme? If the taxes increase the property price will also get down to their reach.
i think noting happen in near future for rate of property ,after some time market will be back on their position because this govt does not do anything about new Tax & BC of land. other thing is may be they try to destruct the property sector like CNG Sector ,
I live in US and doing 6 figures salary job but can not even think to buy a small home in Pakistan. Greedy middleman has increased so much prices that honestly earned money cannot reach the prices we have in Pakistan. This exponentially rising price trend should be stop and this is only possible when only hard earning money will be used to buy the property.
Er, the law was passed by Parliament and did not come through an Ordinance.