FBR Introduces New Tax Collection System for Immovable Property Transfers

Islamabad, July 23, 2023 – The Federal Board of Revenue FBR Introduces New Tax Collection has taken a significant step towards streamlining the tax collection process for immovable property transfers in Pakistan. According to Income Tax CIRCULAR NO. 01 OF 2023-24, the FBR designates the person responsible for registering, recording, or attesting the transfer of immovable property as the transferring authority. This authority has been assigned. With the responsibility of collecting advance adjustable income tax from the seller or transferor. As per the provisions of section 236C of the Income Tax Ordinance 2001.

Concession For ATL Payers

Under the new tax regime, the rate of tax to be collect depends on whether the seller or transferor’s name appears on the Active Taxpayers’ List (ATL) or not. If the seller is on the ATL. They will be subject to a 3% tax on the gross amount of consideration received from the property sale. However, for non-ATL sellers or transferors, the tax rate has been increase to 6%.

Why This New Tax Law

The Finance Act of 2022 introduced Section 7E. Which treats every resident person as having derived income equal to 5% of the fair market value of their capital assets in Pakistan. This provision has been brought to ensure that all residents contribute their fair share of taxes.

With the latest Finance Act of 2023. A new sub-section (2A) was add to Section 236C of the Income Tax Ordinance, 2001. Which introduces a condition on the transferring authority. As per the new clause, the transferring authority cannot register, record, or attest the transfer of any immovable property unless the seller or transferor has cleared their tax liability under Section 7E. Moreover, the authority must be provided with evidence of such payment, following the prescribed mode, form, and manner.

How You Can Pay Tax Through This Law

To cater to these changes in the law. The FBR has issued detailed instructions regarding the mode, form, and manner of tax collection under Section 7E. The seller or transferor can provide evidence of tax payment through the FBR online payment system. Which offers a separate payment challan (CPR) for this purpose.

For individuals who have already declared their property in the tax return for Tax. Year 2022 or those who are exempt from paying tax under Section 7E due to a court order or authority’s stay. A certificate (Form ‘A’) issue by the relevant Commissioner Inland Revenue must be furnish.