ISLAMABAD, Apr 17 (APP):The Federal Cabinet, through amendments in the Income Tax Ordinance 2001 and Finance Act 1989, has approved an ordinance to provide tax incentives to the construction industry.
The approval of incentives package for construction industry through an Ordinance was aimed at promoting economic activities and generating employment opportunities in the country, affected by lockdown in the wake of COVID-19.
Following are highlights of the Ordinance released by the PM Media Office here on Friday:
AMENDMENTS IN INCOME TAX ORDINANCE, 2001
** Fixed Tax Regime for Builders and Developers:
Tax levied on per square feet / per square yard basis;
No withholding taxes on materials except for cement and steel;
No withholding taxes on services except those rendered by companies;
Builders and developers can take credit of income / profit from project up to ten times of tax paid;
For low cost housing projects by NAPHDA (Naya Pakistan Housing and Development Authority) / approved by NAPHDA, tax further reduced by 90%;
Applicable to new projects starting before 31st of December, 2020 and existing incomplete projects who opt for taxation under this scheme;
Both new and existing projects would have to get registered with FBR (Federal Board of Revenue) by filing a prescribed form on IRIS web portal;
Existing projects would self-declare the percentage of completion and shall pay fixed tax for the remaining project under the new fixed tax scheme;
Exemption of tax on dividends paid to shareholders by builders and developers opting for taxation under this scheme;
** Exemption from Section 111 (Unexplained Income Source):
Applicability of Section 111: The provisions of this section shall not apply to capital investment made in a new project in the form of money or land subject to conditions mentioned below:
In case of cash investment, money is deposited in a new bank account on or before the 31st December, 2020;
In case of investment in shape of land, individual to have ownership title of the land at the time of promulgation of this amendment;
Project must commence by 31st Dec, 2020 and get completed by 30th September, 2022;
Project shall be considered completed if:
In case of builder: Grey structure is completed by 30th Sep, 2022;
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:** In case of developer:
Landscaping completed and 50% of the roads laid up to sub-grade level by the September 30, 2022;
Fifty percent plots booked for sale and 40% proceeds received by September 30, 2022;
**Conditions for Exemption from Sec 111 for Investment through Companies or AOPs (Association of Persons):
Such company or AOP shall be a new single object (builder or developer) entity, registered before Dec 31, 2020;
In case capital investment is in the form of money, it has to be transferred to new AOP/company through a crossed banking instrument by December 31, 2020;
In case capital investment is in the form of land, such land shall be transferred to the new AOP/Company by December 31, 2020.
Conditions regarding the inception or completion of project by companies under this section, would be same as for individual, and have already been mentioned.
**Conditions for Exemption from Sec111 for first purchaser of buildings:
Buildings may be purchased from new projects or existing projects which get registered in this scheme through a crossed banking instrument by September 30, 2022;
**Conditions for Exemption from Sec 111 for purchaser of a plot for the purpose of construction;
The full payment is made through a crossed banking instrument by December 31, 2020;
Construction on such plot is commenced by December 31, 2020 and completed by September 30, 2020;
** Following shall not be exempted:
Public office-holder, his benamidar, spouse or dependents;
Listed public companies and real estate investment trusts (REITs);
Exemption not available to: Any criminal proceeds derived from money laundering, extortion and terror financing;
**One-time exemption from capital gains on personal accommodation:
Not exceeding 500 square yards in case of houses and 4,000 square feet in case of flats;
**Status of Industry to Construction Sector:
For the purpose of import of plant and machinery needed for construction or land development, the construction industry would get the same facilities as available to other industries;
Advance Tax on Auction of Property: Reduced to 5% from 10%
AMENDMENT IN FINANANCE ACT, 1989:
Exemption of CVT (Capital Value Tax) exempted in Islamabad Capital Territory (ICT) in line with recently announced exemptions in Punjab and KPK.