The Federal Board of Revenue (FBR) has released a list of 988 projects registered with the FBR to avail tax amnesty scheme under the Prime Minister’s incentive package for the construction sector.
The FBR has uploaded the names and complete addresses of the 988 individuals, companies, and firms registered under section 100D of the Income Tax Ordinance, 2001 under the said scheme.
These construction projects worth Rs. 355 billion have so far been registered with the FBR. However, the FBR has not specified the value of the projects or the amount of investment made under the amnesty scheme in these projects.
The list of the 988 projects revealed that the registered projects belong to Karachi, Lahore, Faisalabad, Rawalpindi, Islamabad, Multan, Bahawalpur, Peshawar, Gujrat, Sialkot, Sahiwal, Rahim Yar Khan, Gwadar, and other cities.
The FBR’s list showed that almost all major developers and builders in the country have availed of the amnesty scheme and registered with the FBR under section 100D of the Income Tax Ordinance, 2001.
The FBR’s list revealed business addresses of famous projects registered with the FBR under section 100D of the Income Tax Ordinance, 2001.
The FBR’s approved projects have addresses of DHA, Bharia Town, Gulberg Greens, resort projects on Muree expressway and Nathiagali, Shanze Builders having the address of State Life Insurance Employees Co-operative Housing Society Lahore, Gulberg Residencia, Islamabad; Smart Buildings having the address of IB Employees Cooperative Housing Society Limited, Islamabad; Good Luck Builders having the address of Naval Anchorage Islamabad; Mumtaz City, Islamabad,
The international tax expert, Dr. Ikramul Haq, has repeatedly said at different forums that the Federal Board of Revenue (FBR) should disclose the names of individuals, companies, and firms who have invested in construction projects under the said scheme.
Dr. Haq stated that the intent of the scheme envisaged by the prime minister was very good. However, there are serious concerns about not disclosing the names of the investors availing of the tax amnesty scheme at the time of registration with the FBR.
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 of 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 deadline 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 schedule-based fixed tax regime for Builders and Developers based on project area in respect of their income from the sale of building or sale of plots, for the tax year 2020 and onwards.
Necessary Rules to that effect have been enacted by way of insertion of the Eleventh Schedule to the Ordinance. Similar to other schedule-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 apply to all Builders and Developers, who opts for such taxation and are registered with the Federal Board of Revenue (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 the 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.
Tax credits are also not allowed against tax payable except for tax collected from the builder or developer under section 236K of the Ordinance after the commencement of the Amendment Ordinance on the purchase of immovable property utilized in eligible projects. No refund of any taxes suffered is allowed.
The provisions of section 113 (minimum tax on annual turnover) and section 113C (Alternative Corporate Tax applicable on accounting profits) will not apply to 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 the following payments:
Purchase of materials (except steel and cement); and
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 has 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.
If the source of an investment represents escaped/concealed income or unexplained investments, 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 will not be expected to explain the sources of his investments to the tax authorities.
Courtesy: Pro Pakistani