July 13, 2020 (MLN): The Government has announced an incentive package for the builders and developers to promote the construction industry.
Taking to his twitter handle on Sunday, FBR spokesperson stated the salient features of the package and incentives available for the builders and developers through a thread of tweets.
A fixed tax regime will be imposed for builders and developers
i. Tax liability to be computed on the basis of square feet/yard, to be paid in quarterly installments
ii. New projects as well as the existing incomplete projects can opt for the scheme up to December 31, 2020. The builders and developers will have to get their projects to be registered with FBR online through the IRIS portal whereas existing incomplete projects have to self-declare the percentage of completion of the project on the relevant date. Projects must be completed by September 30, 2022.
iii. Exemption from requirement of withholding tax on the purchase of building material except for cement and steel
iv. Exemption from requirement of withholding tax on acquisition of services relating to construction, subject to certain exclusions
v. Permission to incorporate ten times of fixed tax paid as income in the books of accounts
vi. 90% reduction in fixed tax liability for low-cost housing
vii. Dividend paid by builder or developer companies shall not be liable to tax and there shall be no withholding on the payment of these dividends
Moreover, the FBR spokesperson also explained the exemption from section 111 on the investment made in new construction projects
ii. Capital investment (money/land) made by a company/AOP in a new project shall not be probed for its source if the following conditions are met:
- A single purpose company or AOP is registered between April 17, 2020 and December 31, 2020
- Money is invested through a crossed banking instrument up to December 31, 2020
- Land owned by the partner/shareholder is transferred to the Company/AOP up to December 31, 2020
iii. Money or Land invested is utilized in the project
iv. The project is completed by September 30. 2022
The project shall be considered completed if the grey structure is completed (top roof as per plan is laid) in the case of a builder.
In case of a developer: Landscaping is completed, and all roads are laid up to sub-grade level; at least 50% plots have been sold and at least 40% sale receipts have been received
Exemption from Section 111 on purchase of Plot
The complete payment is made through the banking channel before December 31, 2020, for the purchase of the plot. Construction on such a plot is started by December 31, 2020 and completed before September 30, 2022.
Buildings, if purchased from a registered project and buyer is the first purchaser of the building, purchase is made before September 30, 2022 and the full payment is made through the banking channel.
Exemption from section 111
Public office holders, listed public companies and real estate investment trusts (REITs) are not exempted, nor there would be any exemption available to “Proceeds of crime”
One-time exemption of tax on capital gain on sale of personal accommodation of size up to 500 sq yard house or 4000 sq feet apartment.
Under the package, the construction sector has been given the status of an industrial undertaking for the import of plant and machinery.
Further, advance tax on an auction of immovable property has been reduced from 10% to 5%. CVT on immovable property and shares has been withdrawn in ICT.
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