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Federal Board of Revenue (FBR) has decided to completely document business of real estate agents and jewellers, who would be required to maintain record of actual beneficial owners of immovable properties and jewelry, respectively, and report all suspicious transactions of their buyers/ sellers to the FBR.

The FBR has issued SRO 1320(1)2019 here on Friday to issue draft amendments in the Income Tax Rules, 2002.

The FBR has issued special instructions regarding books of accounts, documents and records to be maintained by real estate agents/jewelers and reporting of suspicious transactions.

According to the FBR, the "designated person" or "DP" means jewelers and real estate agents to documents and record where the value of transaction, inclusive of all applicable taxes, duties, rates and cess exceeds, Rs.2,000,000 in case of immovable property and Rs.1,000,000 in other cases.

Under the monitoring and compliance provisions, the record to be maintained and furnished by the real estate agents/jewelers shall be subject to spot inspection by income tax authorities who may be assisted by other law enforcement agencies. Where the record is not maintained in the prescribed form, the business licence of the real estate agents/jewelers shall be suspended forthwith, pending further investigation into the matter.

Where real estate agents/jewelers fails to comply with any of these rules he shall be liable to penalty under Part X and prosecution under Part XI of Chapter X of the Income Tax Ordinance.

On conclusion of investigation, the officer may submit a report to the

Commissioner and make recommendations, regarding, cancellation or reinstatement of the business licence; or referral of the matter to specialized external investigating agencies for further investigation under their respective laws.

For reporting of suspicious transactions, the jewelers and real estate agents (DPs) shall mark a transaction as suspicious in the IRIS online system if the DP has reason to believe that the transaction or a pattern of transactions of which the transaction is a part involves funds derived otherwise than from the business activity or assets declared to the income tax authorities or designed to evade any requirement of the Ordinance or to conceal the beneficial owner or his activity.

The (DPs) shall mark a transaction as suspicious if it has no apparent economic or lawful purpose after examining the available facts, including the background and possible purpose of the transaction; or involves financing of terrorism, including fund collected, provided, used or

meant for, or otherwise linked or related to, terrorism, terrorist acts or

organizations and individuals concerned with terrorism.

A transaction shall be marked as suspicious if the buyer or seller frequently changes bank accounts; uses a bank account other than an account maintained in the name of beneficial owner; makes or receives payment in cash or primarily in cash or maintains a creditor or debtor account with the DP and instructs the DP to adjust the balance of his account against a creditor debtor account of another buyer or seller.

The DP shall not disclose the facts to the customer in relation to suspicious transactions.

The FBR said that the record to be maintained and furnished by the DP under these rules shall be subject to spot inspection by income tax authorities who may be assisted by other law enforcement agencies under section 178 of the Income Tax Ordinance.

Where the record is not maintained in the prescribed form, the business

licence of the DP shall be suspended forthwith, pending further investigation into the matter.

An officer carrying out investigation shall have authorization under section 175 and 176 of the Income Tax Ordinance 2001. Where a DP fails to comply with any of these rules he shall be liable to penalty under Part X and prosecution under Part XI of Chapter X of the Income Tax Ordinance.

On conclusion of investigation, the officer may submit a report to the Commissioner and make recommendations, interalia, regarding, cancellation or reinstatement of the business licence; or referral of the matter to specialized external investigating agencies for further investigation under their respective laws.

The jewelers and real estate agents shall obtain and maintain the following documents relating to its buyers and sellers: In the case of an individual any of the following documents to be submitted:- Copy of computerized National Identity Card (CNIC) issued by National Database and Registration Authority (NADRA); copy of National Identity Card for Overseas Pakistanis (NICOP) issued by NADRA; copy of Pakistan Origin Card (POC) issued by NADRA copy of Alien Registration Card (ARC) issued by NADRA and copy of passport, having valid visa on it or any other proof of legal stay along with the passport (foreign nationals only).

If the DP has reason to believe that the customer is not the beneficial owner, following documents to be submitted: In case of an AOP or company, computerized National Identity Card of the managing partner or chief executive officer, as the case may be, on whose behest the sale or purchase is being made and National Tax Registration Certificate in case of AOPs and companies; business licence issued under section 181D in case of customers who show income from business as their source of funds and copy of the banking instrument used for payment. The copies of documents mentioned in sub-rule (1) shall be stamped as "Original seen" by the DP after viewing the original document.

The DP shall, wherever possible, keep a list of all such customers where the

business transaction was refused or needed to be closed either on account of failure of the customer to provide the relevant documents or the original documents for viewing. The DP shall make arrangements for conducting reliable independent source verification of the customer in order to mitigate risk associated with a transaction, FBR added.

Copyright Business Recorder, 2019

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