Immovable property deals: Boards of revenue told to collect enhanced WHT under Sec 236C

ISLAMABAD: The Federal Board of Revenue (FBR), on Monday, conveyed to the provincial Boards of Revenue that the enhanced withholding tax rates on the sale or transfer of immovable properties will be collected under Section 236C of the Income Tax Ordinance irrespective of the holding period.

The FBR has informed the provincial board of revenues that from July 1, 2022, the new rates of advance tax on sale/transfer and purchase of immovable properties would be applicable across the country.

In this connection, the FBR has issued a letter to all the provincial Board of Revenues and the Capital Development Authority (CDA), here on Monday for the implementation of the changes made in the Income Tax Ordinance, 2001, through the Finance Act, 2022.

According to the FBR’s instructions to all the provincial Board of Revenues, changes have been made with respect to Sections 236C and 236K of the Income Tax Ordinance, 2001 through the Finance Act, 2022.

The rate of advance tax on sale or transfer and on purchase or transfer of immovable property has been enhanced from one percent to two percent. Moreover, subsection (3) of section 236C has been omitted.

Now advance tax on the sale or transfer of immovable property will be collected under this section irrespective of the holding period. In the case of a purchaser of immovable property who is not appearing on the Active Taxpayers’ List, the rate of tax to be collected under section 236K will increase by 250 percent of the rate specified in Division XVIII of Part IV of the First Schedule. Necessary change has been incorporated in rule 1 of the Tenth Schedule to the Ordinance.

The Provincial Board of Revenues have been informed that the new rates shall apply to all transfers that are executed on or after July 1, 2022, which means that the official document issued by the transferring authority must certify the execution of the transfer on or after July 1, 2022.

The FBR has also explained the removal of the time limit for the collection of withholding tax under section 236C. The sub-section (3) of section 236C has now been omitted. Hence, withholding tax under section 236C shall now be collected from every seller irrespective of the holding period.

Further, as already in vogue, the tax rate for 236C shall be increased by 100 per cent in the case of non-filers as per the Rule-1 of Tenth Schedule of Income Tax Ordinance, 2001 as indicated in the rate table.

The FBR has also explained the increased withholding tax under section 236K for persons not appearing on the ATL. The tax rate for 236K shall be increased by 250 percent in the case of non-filers as per the amended Rule-1 of Tenth Schedule of Income Tax Ordinance, 2001 as indicated in the relevant table. This letter is issued with the approval of the FBR Policy Wing. Any explanation or clarification issued by any subordinated authority within the FBR field formations shall stand modified to the extent clarified above, the FBR said.

The Provincial Board of Revenues have been requested to ensure that the aforesaid changes are strictly followed by all property registration authorities under their control for correct collection and deposit of withholding taxes accordingly, the FBR added.

According to the FBR, some non-resident Pakistanis may not be required to file income tax return by virtue of applicable provisions of the Ordinance. Therefore, they do not appear on the Active Taxpayers’ List and hence, are likely to suffer the mischief of rule 1 of the Tenth Schedule of the Ordinance.

In order to facilitate non-resident Pakistanis holding Pakistan Origin Card (POC) or National ID Card for Overseas Pakistanis (NICOP), provisions of section 100BA and rule 1 of the Tenth Schedule will not apply to them in respect of transactions on which tax is collectible under sections 236C and 236K of the Ordinance that apply on the purchase or sale of an immoveable property.

Copyright Business Recorder, 2022