Islamabad: The Federal Board of Revenue (FBR) has through Finance Bill 2022 proposed Rs 153 billion taxes on immoveable property within the country as well as on the offshore assets of Pakistanis. The proposed tax on deemed income from an unused property above Rs 25 million including luxury farmhouses have been introduced. The federal revenue body has also enhanced the capital gain tax from 2 percent to 5 percent for non-filers and from 1 percent to 2 percent for filers. Similarly, The Capital Value Tax at a rate of one percent is imposed on foreign immovable properties of Pakistani residents and a one percent tax on the liquid foreign assets of Pakistanis is proposed. The FBR has also proposed a 2 percent tax on earners of above Rs 300 million annually. These proposed taxes that will come into effect from July 1 2022 has not gone down well with the real estate agents and builders who have termed them detrimental to the construction sector.
The budget 2022-23 presented by Miftah Ismail also revealed that the advance income tax on real estate transactions has been increased to 2 percent from the previous 2 percent for filers and 5 percent for nonfilers. Immoveable property worth beyond Rs25ml will be taxed at 1 % of the fair market value or 20% of the deemed rental income. The personal residence will however are exempted. The finance minister said that the tax system of Pakistan has created an artificial price hike in the real estate sector that has made the construction of houses almost impossible for a layman. He said, “We don’t want to discourage the real estate sector, but we want to steer this sector in a direction where it can become the engine of growth for cities. Our proposals aim at encouraging construction and vertical growth and discouraging speculative investment in open plots.”
The decision of the government is being criticized by the real estate and builders associations of Pakistan. The representatives of the real estate and builders are of the view that the imposition of these taxes would badly hamper the construction and real estate activities in the country. The former chairman of ABAD said, “We don’t want to discourage the real estate sector, but we want to steer this sector in a direction where it can become the engine of growth for cities. Our proposals aim at encouraging construction and vertical growth and discouraging speculative investment in open plots.” It is relevant to mention here that the previous government had given special incentives for investing in the real estate sector not only for providing necessary accommodation to the low segment of the society but also to boost economic activities in the country.