ISLAMABAD -  A parliamentary committee on Monday proposed to give a tax amnesty scheme to the real estate sector, offering investors to declare their hidden assets by paying a nominal tax of only 4 percent.

A subcommittee of the National Assembly Standing Committee on Finance, under the chair of Mian Abdul Manan, has discussed the proposed amnesty scheme with the officials of the Federal Board of Revenue (FBR), ABAD (Association of Builders and Developers of Pakistan) and representatives of the real estate sector. The committee proposed that one should pay only four percent tax if he purchases a property from his undeclared money.

The committee also proposed that FBR should review the fair market value of the immovable property according to the real market situation time to time. Similarly, it proposed that old DC rate in property transactions would be effective in those cities where new Fair Market Value has not determined yet.

The committee also suggested that FBR should charge only one percent tax from those, who purchased the property on the real value. The subcommittee would present its proposals in the National Assembly Standing Committee on Finance for approval. The parliament would approve the ordinance within this week, said Manan.

It is pertinent to mention here that the government had introduced amendments in the Income Tax Ordinance to collect taxes on property transactions. However, due to the resistance from the real sector, the government promulgated an ordinance with consensus of property dealers and introduced fair market value. Realty sector backtracked from their agreement and refused to pay taxes on the rates they already agreed. They had asked the government to reduce the taxes and given opportunity to declare their hidden assets.

To give effect to the amnesty, fresh amendments will be proposed in the final draft of the already under discussion “Income Tax (Amendment) Ordinance-2016”. The ABAD has presented its demand in the committee’s meeting. “The federal government may charge one percent in total for withholding tax, Advance Income Tax from both (buyers/sellers) and Capital Gain Tax. Prevailing federal government taxes charged by FBR on property transactions are approximately 3 percent to 6 percent of the FBR valuation table excluding Capital Gain Tax. The federal government will charge 3 percent to 6 percent of FBR values as per today’s valuations on 1 percent of fair market value, whichever is higher,” ABAD suggested.

The ABAD has also demanded that provincial and local governments’ taxes should be brought down to 1 percent proportionally. The provincial government may charge 7.5 percent of DC value or 1 percent of fair market value, whichever is higher. “No sources of funds should be asked for booking of under construction flats/shops/houses for a period of five years from individuals buyers or else one house/apartment may be allowed to be bought by every Pakistani without the amount be reconciled in wealth statement up to the value of 50 million,” they demanded. This facility may be only provided for registered NTN holders and will encourage people to register with the FBR and encourage investment in Pakistan,” the ABAD suggested.