New construction projects: Ordinance increases maximum estimated project life

ISLAMABAD: The maximum estimated project life for new construction projects have been extended from 2.5 years to 3.5 years for developers and builders under the Income Tax (Amendment) Ordinance, 2021.

Sharing salient features of the newly promulgated ordinance, Asif S Kasbati, Karachi based leading tax expert and ICAP Fiscal Laws Committee Members highlighted that the construction amnesty scheme is no more applicable for Tax Year 2020 after promulgation of the Income Tax (Amendment) Ordinance, 2021.

The immunity for first purchaser of a building or unit of a building from a new project or existing project subject to full or remaining payment has been extended from 30.9.2020 to 31.3.2023 under the Income Tax (Amendment) Ordinance, 2021.

He said the important changes are made in section 100D and 11th Schedule. In section 100D, special provisions relating to builders and developers the following amendments are made: (a) For a new project completion, the deadline has been extended from 30.9.2022 to 30.9.2023.

(b) For an incomplete existing project, the completion date has been extended from 30.9.2022 to 30.9.2023.

(c) Tax Year 2020 income, profits and gains of a builder or developer of an incomplete existing project earned, the Amnesty will not be applicable.

He said the builder or developer being an individual, AOP & Company, for investment in new project, the deadline for depositing into new bank account, in order to avail immunity, has been extended from 31.12.2020 to 30.6.2020.

In the case of AOP & Company, the deadline for investment/transfer in the AOP & Company name has been extended from 31.12.2020 to 30.6.2021. The deadline for submitting prescribed forms by all the investors on IRIS has been introduced as 30.6.2021, Asif S Kasbati said.

For builder and developer, the deadline has been extended from 30.9.2022 to 30.9.2023 for certification of grey structure for builder and landscape in the case of developer.

For developer, the deadline for certification from a firm that at least 50 percent of the plots have been booked for sale and at least 40 percent of the sale proceeds have been received, has been extended from 30.9.2022 to 30.9.2023.

For existing project and new projects, project completion be made on or before 30.9.2023 instead of 30.9.2022.

For existing projects, a declaration is provided in the registration form under Eleventh Schedule to the effect of percentage of the project completed up to the last day of the accounting period was earlier pertaining to tax year 2019 only and now may be applied to tax year 2020 at the option of the taxpayer.

Regarding amendments in the Eleventh Schedule, Kasbati highlighted that for new projects, the maximum estimated project life has been extended from 2.5 years to 3.5 years.

For existing projects, the estimated project life has been extended from three years to four years maximum and the tax payable shall be reduced by the percentage of completion up to the last day of the accounting period pertaining to tax year 2019 earlier and now for tax year 2020 as well as declared in registration form 3.3. The deadline for registration has been extended from 31.12.2020 to 31.12.2021.

A builder or developer can now electronically register a project on IRIS through FBR website by 31.12.2021 instead of 31.12.2020.

However, where the building or developer has taken all actions and done all things which are required and necessary to procure any approvals but any such approval is delayed beyond a period of 30 days from date of relevant application and the cut-off date of 31.12.2020 has been extended to 31.12.2020 is not adhered to by the builder or developer, the Board may provisionally accept commencement of such project on a case to case basis, Asif S Kasbati added.

Copyright Business Recorder, 2021