WHT on properties to be collected as per valuation table: FBR tells LTUs, RTOs

The Federal Board of Revenue (FBR) Tuesday conveyed to Large Taxpayer Units (LTUs) and Regional Tax Offices (RTOs) that the value of immovable properties determined by Provincial Revenue Authorities is no more binding on the tax department following issuance of the FBR''s own valuation tables for all major cities of the country. The FBR has issued instructions to all Chief Commissioners of LTUs/RTOs here on Tuesday.
According to the FBR, the section 236C (Advance Tax on Sales/transfer of Immoveable Property) & 236K (Advance Tax on purchase or transfer of Immovable Properties) are very important withholding sections. However, the recent introduction of Section 68 Fair Market Value has further increased the importance of these sections significantly. According to the new amendment the value of properties determined by Provincial Revenue Authorities is no more binding on the tax department. The FBR has issued its own valuation table which is available at the FBR''s website. After this amendment the valuation of properties for the calculation of withholding tax u/s 236-C&K shall be made on the FBR''s notified rates. In the previous financial year data of 421 withholding agents across the country liable to deduct tax u/s 236-C&K has been compiled and Free Tax Numbers (FTNs) were issued for the enforcement of withholding statements.
In the light of said facts, the LTUs/RTOs should initiate process of holding meetings with the property registration authorities falling in LTUs/RTOs jurisdiction for implementation of the new valuation of the properties so that withholding tax u/s 236C and K should be collected as per valuation table notified by the FBR. All Chief Commissioners are requested to personally monitor this exercise and send a fortnightly report to this effect, the FBR added.
Prior to Finance Act, 2016, fair market value for the purpose of probing the source of investment in acquisition of immoveable property was determined by the Commissioner. However, under the Income Tax Rules, fair market value was to be determined as value fixed for the purpose of collecting stamp duty by the Provincial Revenue Authorities and was binding upon the Commissioner Inland Revenue Similarly, the capital gain on the sale of immoveable property under Section 37 and collection of tax under Section 236-C and 236-K of the Income Tax Ordinance 2001 used to be computed on the value notified by the Provincial Revenue Authorities. Through Finance Act 2016 the powers of Commissioners under section 68 have been withdrawn and valuation is to be made by panel of approved valuers of State Bank of Pakistan. Similarly, the binding nature of the value determined by the Provincial Revenue Authorities for the purpose of collection of the stamp duty has been withdrawn, the FBR said.
The FBR said the business community and various associations of realtors, Federation of Pakistan Chamber of Commerce and Industries and Chambers of Commerce and Industries of all four provinces in their post budgetary review expressed serious concerns and have agitated against this new measure FBR held a number of meetings with them with a view to resolve their genuine problems. As a result of these deliberation it has been decided that instead of valuation to be made by approved valuers of State Bank of Pakistan the FBR will notify fair market valuation table itself in consultation with all the stakeholders for the purpose of section 37(IA), III, 236-C and 236-K. Consequently, amendments to Income Tax Ordinance 2001 were introduced through Income Tax (Amendment) Ordinance, 2016.
Pursuant to the issuance of this Ordinance, the withholding tax on sale and purchase of immoveable properties will be collected on FBR notified rates of immoveable properties. It has, therefore, been advised that meetings should be held with the Property Registration Authorities falling under RTOs jurisdiction for making co-ordinated efforts for the collection of withholding tax under Section 236-C and 236-K on the basis of valuation table notified by the FBR Chief Commissioners are requested to personally monitor the matter as it involves substantial revenue implications, the FBR added.