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Friday, September 22, 2023

FBR Announces Tax Exemption for Overseas on Property Sale

The Federal Board of Revenue (FBR) has announced that non-resident individuals including non-resident Pakistanis are not required to pay tax on immovable properties under section 7E of the Income Tax Ordinance 2001.

The FBR has relaxed many procedural conditions of section 7E through issuance of circular number 3 of 2023 issued on Tuesday.

The FBR has also relaxed the condition of obtaining exemption certificates from the Inland Revenue Commissioners in different cases, as specified in the said circular.

The FBR said that the explanatory Circular, which is being issued for facilitating the sale of property or transfer transactions, will be valid for an interim period till the development of an automated system for this purpose.

The FBR has further clarified that the conditions regarding obtaining a certificate from the Commissioner outlined in Circular No. 1 of 2023-24 will not apply with respect to the situations enumerated.

However, transferring authority of immovable property will maintain a proper record of the seller/transferor data along with relevant documents with respect to properties under sale/transfer covered under these specified situations.

The aforesaid record of data will be shared by the transferring authority with the concerned Chief Commissioner IR of the Regional Tax Office having jurisdiction over the seller/transfer on a weekly basis starting from the date of issuance of this circular.

Under the circular, the section 7E of the Ordinance does not apply to immoveable property owned by a local authority, development authority and builders and developers for land development and construction, subject to the condition that such persons are registered with the Directorate General of Designated Non-Financial Business and Professions (DNFBP).

The provisions of section 7E are not applicable on a property in the first year of acquisition on which tax under section 236K has duly been paid by the purchaser. In such a case the seller/transferor of the property will furnish to the transferring authority a Computerized Payment Receipt (CPR) having a unique CPR number, bearing the seller or transferor’s name, CNIC number and showing the tax paid under section 236K, date of payment as well as tax year.

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