The government has decided to provide special tax relief and incentives to businesses/industries related to construction sector and support low-cost housing projects such as Naya Pakistan Housing Project (NPHP). It is learnt that Federal Board of Revenue (FBR) Chairman Shabbar Zaidi briefed Prime Minister Imran Khan on the incentives including tax relief for the construction sector at a high-level meeting in Bani Gala on the restoration and promotion of the construction sector.
Tax authorities informed the PM that the government has finalized a simplified fixed tax scheme for developers and builders, offering a 90 percent reduction in tax for low-cost housing schemes, particularly the Naya Pakistan Housing Authority (NPHA).
The broad contours of the scheme, according to sources, include: (i) national (central) jurisdiction of developers and builders; (ii) simplified return form; (iii) income computation on 'project-by-project' basis; (iv) dispute resolution committee; (v) no requirement for developers/builders to operate as withholding agent; (iv) tax rate of Rs 210 per square feet for commercial builders in Karachi, Lahore, Islamabad, Hyderabad, Sukkur, Multan, Faisalabad, Rawalpindi, Gujranwala, Sahiwal, Peshawar, Mardan, Abbottabad, Quetta and other urban areas not specified; (vii) the tax rates shall be reduced by 90 percent for low-cost housing schemes; (viii) tax rate of Rs 210 per square feet for commercial developers (commercial plots) and requirement of independent certificate from NESPAK.
According to the draft of the Builders and Developers Special Procedures Rules 2019, they shall apply to builders and developers who may opt to pay income tax and furnish return under these rules. The income computed and tax payable thereon shall be on 'project-by-project' basis under the head of 'Income from Business.' Tax payable thereon on annual basis (till the year of project completion) shall be computed at the rates mentioned. The said rates would be applicable to compute tax liability for the project for the tax years when the respective project is under construction. The annual tax liability on that basis shall be worked out as specified in the said rules.
The rules say that a builder or developer who opts to be taxed under this scheme shall not be required to act as a withholding agent under any provision of the Ordinance. In case if a builder or developer is a company then the company shall withhold tax under section 153 of the ordinance on purchase of steel, cement and electrical equipments and on taxable salaries under Section 149 irrespective of the legal status.
Addressing the participants, the Prime Minister said that the development of the construction sector is essential to accelerate economic growth, as promotion of this sector is the government's top priority. He pointed out that about forty industries are associated with construction, which can grow and create job opportunities for the youth.
The meeting's participants discussed various suggestions on provision of loans for construction, uniform tax rates in provinces and enhancing public private partnership in the sector.
The Premier also constituted a committee to formulate applicable suggestions on various problems faced by the construction sector, including provincial and federal level taxes on loans.
The committee, headed by Naya Pakistan Housing Authority Chairman Anwar Ali Haider, will be comprised FBR chairman, SBP governor, the Punjab finance minister and provincial chief secretaries.
The committee has been directed to submit its recommendations to the Prime Minister in 24 hours regarding taxes, loans from banks and other solutions to the problems faced by the construction sector.
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