ISLAMABAD: The Federal Board of Revenue (FBR) has released the names of 988 projects of developers and builders registered with the FBR under the prime minister's incentive package for the construction sector.
The FBR has uploaded the names and complete addresses of the names of 988 individuals, companies, and firms registered under Section 100D of the Income Tax Ordinance, 2001, who availed the PM's incentive package.
Last month, international tax expert Dr Ikramul Haq had raised this issue while speaking as a guest in “Paisa Bolta Hai” with Anjum Ibrahim on Aaj News that the Federal Board of Revenue (FBR) shall disclose the names of individuals, companies, and firms, who have invested in construction projects under the said scheme. Dr Haq had added that the intent of the scheme envisaged by the prime minister was very good.
These construction projects that have so far been registered with the FBR are reportedly worth Rs355 billion.
However, the FBR has not specified the value of the projects or amount of investment made under these projects.
List of the 988 projects revealed that the registered projects belong to Karachi, Lahore, Faisalabad, Rawalpindi, Islamabad, Multan, Bahawalpur, Gwadar, Peshawar, Gujrat, Sialkot, Sahiwal, Rahim Yar Khan, and other cities.
The FBR's list disclosed that almost all major developers and builders in the country have got themselves registered with the FBR under Section 100D of the Income Tax Ordinance, 2001.
The FBR's list revealed business addresses of famous projects, which are registered with the FBR under Section 100D of the Income Tax Ordinance, 2001. The FBR's approved projects included DHA, Bharia Town, Gulberg Greens, resort projects on Murree expressway and Nathiagali, Shanze Builders having address of State Life Insurance Employees Co-operative Housing Society Lahore, Gulberg Residencia, Islamabad; Smart Buildings having address of IB Employees Cooperative Housing Society Limited, Islamabad, Good Luck Builders having address of Naval Anchorage Islamabad, Mumtaz City, Islamabad, Defence Skyline Shah Faisal Town, Karachi East, Country Naval View Karachi, East Jamshed Town, Karachi, Dominion Business Center Bahria Town, Karachi Central and AL-Mustafa Builder, Karachi, Central North Karachi Town.
When contacted, Dr Ikramul Haq told Business Recorder that it is very encouraging that 988 projects have been registered with the FBR for availing the PM's incentive package.
The disclosure of the names and addresses of the projects is a very positive step by the FBR, and it would facilitate the buyers to know about the investors of their projects.
The disclosure of names of the projects would also ensure transparency in the whole process, providing an opportunity to the buyers of these projects.
Under the package, the last date for seeking immunity by builders and developers from probing their source of funds and availing fixed tax regime has been extended from 31st December 2020 to 30th June 2021.
Similarly, the last date for builders and developers who want to avail a fixed tax regime was extended from 31st December 2020 to 31st December 2021. The last date for completion of projects was extended from 30th September 2022 to 30th September 2023, and the last date for buyers of housing units and plots has been extended from 30th September 2022 to 30th March 2023.
A new provision Section 100D was introduced in the Income Tax Ordinance, 2001, prescribing a scheduler-based fixed tax regime for Builders and Developers on the basis of project area, in respect of their income from the sale of building or sale of plots, for tax year 2020 and onwards.
Necessary rules to that effect have been enacted by way of insertion of Eleventh Schedule to the Ordinance.
Similar to other scheduler based taxation provisions, all other provisions of the Ordinance (including recovery of tax not paid and matters connected therewith) not specifically covered under Section 100D and Eleventh Schedule will remain applicable on Builders and Developers.
The provisions of Section 100D read with Eleventh Schedule to the Ordinance are applicable to all Builders and Developers, who opts for such taxation and are registered with the FBR on a Project-by-Project basis ('eligible project/project' as the context so requires).
Computation of income and annual tax payable thereon at the fixed rates under the regime is to be made on a Project-by-Project basis as Final Tax.
Such income, being subject to final tax regime, shall not be chargeable to tax under any head of income in computing the taxable income.
No deduction for any expenditure, deductible allowance or set-off of any loss will be allowed.
The provisions of Section 113 (minimum tax on annual turnover) and Section 113C (Alternative Corporate Tax applicable on accounting profits) will not apply on the builders or developers on their turnover, income, profits and gains from eligible projects.
Builders and developers covered by the special tax regime are absolved from the obligation as a payer to withhold tax under Section 153 of the Ordinance on following payments:
a) purchase of materials (except steel and cement); and
b) services (plumbing, electrification, shuttering and other similar and allied services), which are provided by non-corporate service providers.
Dividend income paid out of the profits and gains derived from an eligible project by the builder or developer being a company will be exempt from tax and a specific exemption from withholding tax provisions of Section 150 have also been provided.
Section 111 of the Ordinance empowers the tax authorities to require any person to explain the sources of his investments or assets, etc.
In case of unexplained investments or where the source of an investment represents escaped/concealed income, the fair market value of such investment or asset is taxed as income in the hands of such person which can also attract penalties and prosecution provisions.
The provisions of Section 111 have been made inapplicable in respect of capital investments to be made by a person in eligible new projects which has to be an investment as equity sources and should not include borrowed funds.
This means that an investor who fulfills the conditions below will not be expected to explain the sources of his investments to the tax authorities.
Copyright Business Recorder, 2021