FBR to verify property value declared in returns forms

KARACHI: Federal Board of Revenue (FBR) decided to verify property values declared in returns forms to check untaxed money, officials said on Wednesday.

The officials said FBR planned to tighten noose around the black money invested in property business by selecting declarations made through annual returns for tax year 2017.

“The scrutiny process will be launched after the completion of annual returns filing in December this year,” a FBR official said.

The official said declaration made through income tax return for tax year 2017 would provide a ground for the Inland Revenue to examine the gap between the declared amount and transaction made on fair market value.

FBR collects withholding tax on sale and purchase of properties. The overall tax collected from property transactions under

withholding tax regime posted a substantial growth of 114 percent to Rs15 billion

during the first 11 months of the last fiscal 2016/17.

“Any transaction detected through third-party source beyond declared amount by a taxpayer will be selected for comprehensive audit and recovery purpose,” the official said.

FBR, under Finance Act 2016, introduced an amnesty scheme on property transactions in December 2016 under which a buyer is required to pay three percent on the transaction of a property and that would be considered his final tax liability.

The official said the amnesty is available on the differential amount between FBR valuation and rates defined by provincial authorities.

In August last year, FBR issued valuation table for properties for 20 major cities in order to document the real estate sector and increase revenue collection.

FBR collected Rs2.07 billion from 71,000 transactions between December 2016 and May 2017 under the amnesty scheme, indicating whitening of Rs69 billion – a difference between FBR and provincial rates.

Tax experts estimated money involved in the real estate sector at around seven trillion rupees.

Abid Shaban, member of Tax Reforms Implementation Committee in his presentation recently made at the Karachi Tax Bar Association, said the tax authorities incur around Rs336 billion in potential revenue loss under the scheme between December and March 2016/17.

Shaban, giving an example, said people sell property files in the vicinity of Bahria Town and DHA where tax rate, under an income tax law, is still zero. He criticised the amnesty scheme on property. “It is destroying the tax structure,” he said.