NA panel told: Property transfers, registration halted due to Section 7E ITO
ISLAMABAD: The registration and transfers of immovable properties across Pakistan has been totally stopped after implementation of section 7E (tax on deemed income basis) from July 1, 2023.
This has been disclosed by the representatives of real estate sector from all major cities before the meeting of the National Assembly Standing Committee on Finance here on Wednesday at the Parliament House.
The real estate sector’s representatives informed that the FBR is expected to issue the upward revised valuation tables of immovable properties from August 2023, but the section 7E of the Income Tax Ordinance 2001 has complicated the situation and stopped the transfers and registration of properties.
As there was no official from the Federal Board of Revenue (FBR) present in the meeting to respond to the queries of the retail estate sector; therefore, the matter was postponed till next meeting.
Committee members argued whether the discussion on section 7E of the Income Tax Ordinance 2001 would be feasible at this stage and can the committee propose changes in the Finance Act 2023.
Federation of Realtors Pakistan (FORP) informed the committee that the registries have been decreased by up to 95 percent along with the closure of transfers across the country. This surge in taxes has increased sufferings of the local investor, as well as, those from overseas, as the capital has started transferring abroad. Resultantly, the overseas investors are uneasy with their investments in Pakistan, as well.
FORP stated that, “deemed rental income under section 7E is a thorn in the throat and it should be withdrawn. If not possible, then the filer should be exempted of it”.
The FORP proposed the committee that if section 7E is not avoidable, then it should be only charged on plots. The filers should be permitted for the transfers after the undertaking of the affidavit and non-filers must be charged.
Through Finance Act, 2022 section 7E was introduced whereby, for tax year 2022 and onwards, every resident person has been treated to have derived as income, an amount equal to 5% of the fair market value of the capital asset situated in Pakistan subject to exclusions of the capital assets provided in the law.
The said deemed income is chargeable to tax at the rate of 20% (effective rate 1% of fair market value of immoveable property).
Finance Act 2023 has introduced a new sub-section (2A) in section 236C of the Ordinance which places a bar on the transferring authority for registering, recording or attesting transfer of any immovable property unless the seller or transferor has discharged his tax liability under section 7E of the Ordinance and evidence to this effect has been furnished to the transferring authority in the prescribed mode, form and manner.
Copyright Business Recorder, 2023
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