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Thursday March 28, 2024

Withholding tax

By our correspondents
August 23, 2016

Overseas Pakistanis have been investing in Pakistan’s real-estate sector in order to realise their dream of owning a home in Pakistan. There exists an anomaly in the withholding tax regime which is more disturbing now for overseas Pakistanis because the rate of withholding tax has been (doubled) raised from two to four percent on the purchase of a property by non-filers in Budget 2016-17. Overseas Pakistanis are mostly non-filers because they are non-residents and all their overseas earned income is also exempt from any income tax in Pakistan. Overseas Pakistani are now querying the withholding tax regime which is discouraging for their investment in Pakistani property.

 

 A genuine question arises: when overseas Pakistanis are exempt under the law from filing an income tax return then why must they pay withholding tax equivalent to four percent of the value of property for being non-filers at the time of purchasing a property in Pakistan? I believe there has to be difference in the withholding tax regime between a non-filer overseas Pakistani and non-filer resident Pakistani because the income tax law completely exempts the former whereas the latter is not exempt. Can the Federal Board of Revenue take notice of this serious anomaly and take the necessary steps to address the query? Please don’t suggest that overseas Pakistanis first pay withholding tax at the time of buying property in Pakistan and later on claim refund. That is a very cumbersome and almost impossible task for overseas Pakistanis. It is a well known fact that there is a strong link between overseas Pakistanis and the real-estate business in Pakistan. I have noticed with great concern that home remittances have plunged by 20 percent year on year for the month of July 2016 because the real-estate business was closed for almost two months (June/July 2016) due to enhanced taxes on property sale/purchase in the budget 2016-17. I suggest that the FBR look into the matter of withholding tax on overseas Pakistanis and take the necessary steps to remove the above-mentioned anomaly to avoid any possibility of further decline in home remittances in coming months. We can’t afford further decline in our home remittances.

Ejaz Ahmad Magoon

Lahore