The Federal Board of Revenue (FBR) is actively working on an enforcement plan to verify collection of capital value tax (CVT) on property transactions with the help of data maintained by provincial registrars. Sources told Business Recorder on Saturday that the purpose of the exercise is to verify collection of CVT on big property transactions.
Secondly, it would be verified whether the buyers and sellers, engaged in property transactions, where CVT was paid, had filed returns or not. The income tax return having property information might lead to the source of investment. It is the responsibility of both the buyers and the sellers of property to file returns for avoiding legal complications.
The provincial registrars of properties have to compile a report and regularly submit the same to the tax department on CVT paid during property transactions. In certain cases, the procedure has not been followed by provincial registrars and timely reporting of CVT has not been done.
The FBR has provided facility for the registration authorities to electronically submit monthly statement of property in cases where CVT has been levied. The big housing societies engaged in real estate business are equipped to electronically file such statements.
The board is also actively co-ordinating with the provinces to ascertain whether the provincial governments have reviewed existing valuation rates of the immovable property on the basis of fair market value. The board had fixed a target of Rs 3 billion during current fiscal year through revision of valuation rates of the immovable property by provincial governments.
The tax authorities had also asked provincial governments to standardise the procedure for collection and payment of the CVT on property transactions in districts across the country.
According to FBR estimates, there is need of doubling the existing valuation rates of the immovable property by the provinces to generate an additional amount of Rs 3 billion during the current fiscal year. As capital value tax collection has to be done on the basis of reviewed valuation of immovable property from July 1 2009, the Board wants to get revised values from provincial governments.
Details showed that the capital value tax (CVT) is payable on acquisition of immovable property and is levied on its value as recorded in mutation deed, registered deed, or power of attorney. The recorded value is mainly based on the valuation rates fixed by provincial governments for the purpose of collection of stamp duty. These rates are reviewed periodically, yet the same do not commensurate with the fair market value of immovable property which is not only affecting collection of stamp duty but capital value tax as well.
Therefore, the federal government had asked the provinces to review and rationalise the existing rates and bring it close to the fair market value. The provincial governments were simultaneously asked to undertake similar exercise and revise the valuation rates in the same manner, sources added.
The FBR had repeatedly requested the Chief Secretaries of all the four provinces to review the existing valuation rates of the immovable properties in their provinces for the purpose of transfer of such properties.