Real estate boost: special tax treatment given to builders in budget: experts

The government has given special tax treatment to builders in 2015-16 budget to facilitate real estate sector by suspending minimum tax on leviable goods for the business of construction and sale of residential and other buildings till June 30, 2018.
Tax experts told Business Recorder here on Friday that the government has not only suspended minimum tax on builders, but also given incentives to construction sector in last budget. In order to encourage the organised and corporatised sector to make investment in housing sector, certain incentives were announced for Real Estate Investment Trust (REIT) Development Schemes. Firstly, the Capital Gains of any person who sells a property to a REIT development scheme formed for the development of housing sector was exempted from Income Tax up to 30.6.2018. Secondly, if a development REIT Scheme for the development of housing sector is set up by 30.6.2018, for the first three years the rate of Income tax chargeable on dividend income of such REIT was reduced by 50 percent.
For construction sector, supply of bricks and crushed stone was exempted from Sales Tax for three years up to June 30, 2018. On import of Dump trucks, Super swinger truck conveyors, mobile canal lining equipment, transit miners, concrete placing trucks, Truck mounted cranes and Crane Lorries in used condition by the Construction Companies registered with Pakistan Engineering Council and SECP, the Customs Duty was reduced from 30 percent to 20 percent.
The builders and construction sector were given tax relief to encourage investment in real estate sector already subjected to multiple taxes including withholding tax, capital gains tax (CGT), Capital Value Tax (CVT) and provincial property tax. Some provinces have introduced special tax regimes for properties like Luxury Tax on immovable properties in Punjab above one kanal, they said.
Explaining the withholding tax on property, sources said that the purchaser of immovable property shall pay advance tax @ 1 percent of the value of the property if the purchaser is a filer, and 2 percent of the value of the property if the purchaser is a non-filer. However, there is no tax if the value of immovable property is less than or equal to Rs 3 million. The prescribed person for collecting this withholding tax shall be any person responsible for registering or attesting transfer of any immovable property and the tax shall be collected at the time of registration or at the time of attestation of transfer, whichever is earlier. The prescribed person/withholding agent under this section shall be required to file withholding statements under section 165.