Tax on immovable properties: FBR urged to give taxpayers online declaration option

ISLAMABAD: The Federal Board of Revenue (FBR) should introduce an option for the taxpayers in the online declaration form under the “IRIS” system to deal with the issues of the tax on immovable properties under section 7E of the Income Tax Ordinance, 2001 (ITO).

According to Ashfaq Tola Chairman of the Reforms and Resource Mobilization Commission of Pakistan (RRMC), the Section 7E of the Income Tax Ordinance, 2001 (ITO) was introduced through the Finance Act 2022, whereby, immovable properties having fair market value more than Rs 25 million held by resident persons, are subject to 20% tax on the amount equal to 5% of their fair market value, subject to certain exclusions. This imposition was made applicable both retrospectively and prospectively, i.e., applicable for tax year 2022 and onwards.

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However, this section had been challenged by majority of the taxpayers and multiple cases had been filed all over the country in the concerned provincial High Courts. The Supreme Court of Pakistan has granted a leave to appeal to the appellant taxpayers against the Order passed by the Sindh High Court (SHC) and issued a stay order in favour of the appellants, subject to deposit of 50% of the tax demand.

Now, the Finance Act 2023 (Act 23) has introduced an amendment, sub-section (2A) in Section 236C, whereby no immovable property can be sold or transferred without providing evidence to the transferring authority that the seller/ transferer had duly paid the deemed income tax liability on the said property. However, rules and modes for payment for the purposes of Section 236 C (2A) were not prescribed in the Act 23. On July 21, 2023, the FBR, vide Circular No. 01 of 2023-24 has issued instructions regarding the mode and manner of payment.

Moreover, this can also potentially ensure that the properties subject to exemption under section 7E and the effect of the stay order are integrated in the tax particulars online, which can then be shared with the person responsible to register the immoveable property by the FBR, to assist him in ensuring compliance of section 236C (2A) in a more efficient manner, he said.

Since the apex court has granted a stay order subject to deposit of 50% tax demand under Section 7E, for those who have declared property under section 7E on IRIS, an option in the online declaration under IRIS should be added to upload a certified copy of the Stay Order for the applicable tax year. This will create a digital database with the FBR of those taxpayers that have a Stay order operating in favour of them.

Further, the process of obtaining the certificate should be switched to online vide IRIS. This again will create a digital trail of the documents. Moreover, this can also potentially ensure that the properties subject to exemption under section 7E and the effect of the stay order are integrated in the tax particulars online, which can then be shared with the person responsible to register the immoveable property by the FBR, to assist him in ensuring compliance of section 236C (2A) in a more efficient manner, Ashfaq Tola added.

Copyright Business Recorder, 2023