Expatriates'' investment in real estate: FBR to seek info from UAE tax authorities

The Federal Board of Revenue has decided to approach the tax authorities of the United Arab Emirates (UAE) seeking information about the investment made by overseas Pakistanis in the real estate sector of the UAE. Sources told Business Recorder here on Thursday that the tax authorities would request their counterpart in the UAE to obtain information under the convention on the Avoidance of Double Taxation and Prevention of Fiscal Evasion.
A large number of resident Pakistanis have purchased properties in the UAE, but never declared such investment in their income tax returns. Keeping in view the huge amount of investment involved in real estate sector by the overseas Pakistanis, the FBR is trying to obtain this vital information from the tax authorities of the UAE.
Under Article 27 (Exchange of Information) of the Avoidance of Double Taxation Agreement singed between Pakistan and the UAE, tax authorities of both the countries shall exchange such information (including documents) as is necessary for carrying out the provisions of the Convention or of the domestic laws concerning taxes for the prevention of fraud or evasion of such taxes.
Any information received by a contracting state will be treated as secret in the same manner as information obtained under the domestic laws of that State. The competent authorities will, through consultations, develop appropriate conditions, methods and techniques concerning the matters and in this respect such exchange of information will be made, including appropriate exchange of information regarding tax avoidance, Article 27 of the convention added. When contacted, a tax expert opined the UAE government offers residential visas to those Pakistanis, who purchase flats and any other property in that country. Once these Pakistanis obtain ownership of property, the local tax laws of UAE become applicable on those persons.
In most of the cases, such visa offers are advertised in the press. The question arises whether the UAE government would provide the details of their residents to the FBR? Even if the FBR demands information under the agreement on ''Avoidance of Double Taxation and Fiscal Evasion'', the government is not bound to give such type of information to the Pakistani tax authorities. The idea seemed to be based on assumption that the FBR would be able to get such information," expert said.
Tax expert further said that certain income tax returns of the taxpayers declaring less income were accepted by the department under the Universal Self-Assessment Scheme (USAS). This gives an opportunity to the taxpayers to purchase such property abroad from the undeclared/concealed income. In some cases, the assessments done by the income tax department were turned down by the higher courts. Thus, strict tax laws are needed for obtaining the source of income of the taxpayers. Experts added that the management of the property titles (ownership of property) is also necessary for documentation of the real estate sector in Pakistan.