Incomplete construction projects: FBR not to allow change of ownership for tax exemption

The Federal Board of Revenue (FBR) will not allow a shareholder or a partner of a builder or developer to change the ownership of an incomplete project for claiming exemption from Section 111 (source of investment) of the Income Tax Ordinance 2001.

The ordinance promulgated by the president for construction sector has imposed certain restrictions on developers and builders for availing immunity from disclosing source of investment in new projects.

According to Section 8 (Restriction on change in pattern of ownership of a builder or developer before completion of a project) of the ordinance signed by the president, where exemption from the provisions of Section 111 has been claimed under sub-section (3) of Section 100D, the following restrictions shall apply: A shareholder or a partner of a builder or developer shall not be allowed a change in ownership of an incomplete project except where at least 50 percent of the total project cost, as certified by a firm of chartered accountants having an ICAP OCR rating of "satisfactory", notified by the board for this purpose, has been incurred up to the date of change of ownership.

The ordinance stated that the succession to legal heirs in case of deceased shareholder or a partner shall be allowed.

The additional partners or shareholders in a builder or developer after December 31, 2020, may join but additional partners or shareholders shall not be eligible for exemption provided under sub-section 3 of Section 100D, the ordinance added.