KARACHI: Government has no intention to reintroduce a fixed tax regime for builders and developers during the current fiscal year, tax officials said on Thursday, quashing a hope of any exemption from disclosing an investment source.
“No such proposal is under consideration for granting fixed tax regime for builders and developers,” said an official at Large Taxpayers Unit (LTU-II) Karachi. The LTU-II Karachi has jurisdiction over all builders and developers operating in Sindh and Balochistan.
The official said the tax rates for builders and developers would remain applicable on the basis of existing law.
“However, proposals in this regard would likely be considered during the next fiscal year,” the official added.
In October last year, a proposal of fixed tax was floated in order to give relief to the builders and developers in paying their taxes.
The existing tax regime for such segment is complex in nature and creating conflict between taxpayers and tax authorities. At present, the builders and developers are required to pay income tax payment as per completion of plan/project in phases.
Sources said developers and builders had been enjoying the final tax regime for the past several years.
However, through Finance Act, 2017 the taxation of such segments of taxpayers was brought under the documented economy.
The sources said such taxpayers would now require filing of true declarations and also providing details of transactions made with their clients.
Sources in the Federal Board of Revenue (FBR) said under the proposed plan, builders and developers are seeking a fixed tax regime, payment of tax should be treated as final and they are not required to provide information of their investors.
The FBR recently established special circles to monitor transactions of builders and developers. LTU-II Karachi has been given cases of these taxpayers located in Sindh and Balochistan.
The purpose of establishing the circle is to monitor the transactions in the real estate business, especially the declared value compared with the fair market value and the valuations of immovable properties notified by the FBR.
The sources said the special circle was mandated to conduct detailed audit of such taxpayers in addition to obtain details of buyers.
Real estate sector is known for holding huge undocumented income. However, more than 50 ancillary industries including cement, steel, brick, timber and building material are associated with real estate sector and creating an enabling environment for it would facilitate the growth of all allied industries.
Tax Reform Commission (TRC), which was constituted by the previous government, advised elimination of fixed tax regime for builders and developers. This sector has immense revenue generation potential for the FBR, TRC said in a report in May 2015.