The federal cabinet on Friday approved an ordinance for the construction industry that will give special tax breaks to builders and land developers as business suffers due to the spread of the novel coronvirus in Pakistan and across the world.
The tax breaks will be applicable as soon as the ordinance is officially notified, sources told Geo News. Under the ordinance, those investing in land development schemes will not be asked about the sources or origin of their investments into the schemes.
Builders and developers who wish to take advantage of this scheme will have to deposit their investments into bank accounts by December 31. These builders and developers will then be bound to withdraw money from these accounts for the investments.
Some of the important parts of the ordinance are listed below. Fixed tax regime for builders and developers would include:
- Tax levied on per square foot / per square yard basis.
- No withholding taxes on materials except for cement and steel.
- No withholding taxes on services except those rendered by companies.
- Builders and developers can take credit of income / profit from project up to ten times of tax paid.
- For low cost housing projects, tax further reduced by 90%.
- Applicable to new projects starting before 31st of December, 2020 and existing incomplete projects who opt for taxation under this scheme.
- Both new and existing projects would have to get registered with FBR by filing a prescribed form on IRIS web portal.
- Existing projects would self-declare the percentage of completion and shall pay fixed tax for the remaining project under the new fixed tax scheme.
- Exemption of tax on dividends paid to shareholders by builders and developers opting for taxation under this scheme.