ISLAMABAD: The Federal Board of Revenue (FBR) has made it mandatory for developers and builders to get themselves registered with the FBR till December 31, 2020 for availing Prime Minister's amnesty scheme for construction sector and disallowed payment of fixed tax in installments, after expiry of deadline of Sep 30, 2022.
Senior tax officials of the FBR were responding to different queries during the "Webinar on registration process on FBR Portal for builders, developers and persons associated or interested in construction business/activity under the PM incentive Package for Construction Sector," held on Monday. The FBR has received over 200 questions during the webinar and decided to issue FAQs to clarify all issues of the construction industry. The one hour Webinar was extended for another 30 minutes on the request of the stakeholders.
Responding to a query of missing timelines for construction and project completion, FBR officials responded that the fresh injection of capital after expiry of the deadline is not allowed under the scheme. Last year, the FBR allowed payment of tax in installments to the persons who availed the amnesty scheme. Later, such persons approached FBR and expressed their inability to submit remaining installments due to Covid-19 situation and slowdown of businesses. Therefore, no such facility is now available under the Tax Laws (Amendment) Ordinance, 2020 for the construction industry.
"Only those will become eligible to get benefits who will get themselves registered with the FBR till the envisaged deadline of December 31, 2020 and deposit the amount into the bank account. The project completion deadline has been envisaged at September 30, 2022. After expiry of the deadline and in case of non-completion of declared project, the fixed scheme benefits will be disallowed," senior FBR officials said.
Chairman FBR Javed Ghani, Member IRS Operation Mohammad Ashfaque, Member IR Policy Muhammad Tarique and Dr Nauman briefed the representatives of builders/developers about PM's Amnesty Scheme for Construction Package during arranged online webinar here on Monday.
Tax authorities have informed the industry that up to 3000 square yard the per square yard tax rate will be charged and if the area of construction would exceed then the rate would be charged at Rs 125 per square yard. There will be no cap on the size of construction as it could be constructed from 2 marlas to any unlimited ceilings.
The FBR has also conveyed to developers and builders that the non-resident persons working in Pakistan as developers/builders have to file their income tax returns, registration with the FBR is compulsory for availing the incentive package, renovation business not covered under the amnesty scheme and facility of temporary registration with the FBR is available till submission of missing documents.
The exemption from the provisions of Section 111 shall also be available to the first purchaser of newly-constructed buildings of a project if the purchase is made on or before September 30, 2022, in the prescribed manner. Thus, extension in the said deadline is not possible. The deadlines mentioned in the scheme have to be followed and cannot be extended, the FBR officials said.
To a query Dr Nauman from FBR stated that the 90 percent reduction in taxes is available for low cost housing schemes of Naya Pakistan Housing Authority. The projects approved by the NPHA would have to pay only 10 percent of their tax liability under the construction package.
Responding to another question, FBR officials said that the developers and builders can obtain temporary registration with the FBR in case of submission of partial data with the FBR's online system. If all approved documents are not attached, the temporary registration would be issued. After submission of the missing documents, the FBR will issue final registration to the developer or builder. If any developer or builder intended to avail the scheme, the registration with the FBR is mandatory. However, the form once submitted to the FBR cannot be edited at a later stage. Before submission of the form, the applicant must ensure to submit accurate data and information to the FBR.
When asked whether multiple projects can be registered under the scheme, FBR officials responded that multiple projects can be registered with the FBR under the said construction package.
Answering to another question, the FBR clarified that the renovation of houses or renovation business is not covered under the scheme.
The FBR officials further informed that the immunity under the scheme is only available to the new projects. The provisions of Section 111 of the Income Tax Ordinance, 2001 shall not apply to any shareholder or partner of a builder or developer in respect of any amount invested as capital in a builder or developer or land possessed or acquired by the builder or developer, or its partner in case of a limited liability partnership or in association of persons, if the amount is invested as capital or the land is transferred on or before December 31, 2020 in the manner as prescribed and is utilised in a construction or development project in the specified manner.
When asked about the size of land allowed under the scheme, FBR officials clarified that the size of land is not the consideration under the scheme. There is no cap on the size of land or project under the scheme. There is no restriction that the size of the project is 2 Marla or 200 kanal, FBR official quoted an example.
Participants also asked about the FBR's mechanism or criteria for verification of the land documents, FBR responded that international tax jurisdictions have different methods for title verifications. The FBR will follow the registration deeds and would ensure to conduct random checking or sample checking for this purpose. As far as land valuation is concerned, the FBR has given an objective criteria for land valuation under the package.
To another question, FBR official said that you can build a single unit house under the scheme after fulfillment of all legal formalities specified under the package.
The FBR will also issue a clarification in cases where the buyers have made full payments under the projects of this construction package, but the sellers would be unable to timely complete the projects.
When asked whether past projects are covered under the scheme, FBR officials responded that the scheme would be available to projects initiated before December 31, 2020 and existing ongoing projects registered with the scheme. The new and ongoing projects would be required to be registered on the 'IRIS' portal of the FBR and the ongoing projects should tell about their completion ratio and need to pay taxes for the remaining work under the new fixed tax scheme.
Copyright Business Recorder, 2020
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