FBR delays increase in valuation of real estate until September
The Federal Board of Revenue (FBR) recently announced a temporary delay in the intended increase in the valuation of immovable properties until September 2023, as reported on August 6.
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Reportedly, FBR Chairman Amjad Zubair Tiwana and a team of tax officials met with real estate industry representatives at FBR headquarters to discuss the matter at length. The parties reached a consensus to delay the issuance of increased property values until September 2023. Prior to this month, FBR was in the midst of introducing new values.
Local committees will be formed in each municipality to determine new property values in collaboration with real estate associations. In September 2023, the board will reconvene to validate a 10% uniform increase in property values for all immovable properties. This action is being taken to rectify any discrepancies in property values.
In addition, the board will add an online feature to the updated ‘IRIS’ system, allowing citizens to register for exemptions or pay the 1% tax on immovable properties imposed by Section 7E without involving the Commissioner of Internal Revenue (FBR). This action seeks to eliminate the discretion of Commissioners of Inland Revenue in deciding matters under Section 7E of the Income Tax Ordinance of 2001.
A new Section 7E was added to the ordinance in accordance with the Finance Act of 2022, which mandates residents to declare as income 5% of the fair market value of their domestic capital assets. This income is then taxed at a rate of 20%, equivalent to 1% of the value of the property. The FBR has acknowledged implementation difficulties with the new section. It has ensured that the Commissioner of Internal Revenue will not abuse his authority under Section 7E when granting exemptions.
In an additional development, section 236C of the Ordinance has been amended by the Finance Act of 2023 to stipulate that property transfers cannot occur unless the seller has paid their taxes pursuant to section 7E and provided proof of payment to the transferring authority on the prescribed form. Pakistan Revenue Automation Limited (PRAL) has updated the IRIS system of the FBR to facilitate these modifications. Taxpayers can locate section 7E documents in their IRIS accounts, and the system will automatically grant exemptions or provide assistance with tax payments as required.
