New Tax Regulations for Selling Immovable Properties – What Sellers Need to Know
Pakistan’s Income Tax Ordinance 2001 introduces new tax regulations impacting the sale of immovable properties. All sellers, regardless of their tax-filing status, are required to obtain an exemption certificate or pay a 1% tax under section 7E of the ordinance. Here’s a breakdown of the implications for sellers and how to navigate the process.
Key Points:
Exemption Certificate Requirement:
- Every seller of immovable property must obtain an exemption certificate from the Commissioner Inland Revenue to avoid the 1% tax.
- Even those exempted from section 7E must still obtain proof of exemption from the concerned commissioner.
Exemptions and Verification:
- Certain categories of sellers are exempt from section 7E, such as owners of one capital asset, self-owned business premises, self-owned agricultural land, and capital assets allotted to Shaheeds.
- All exempted categories must still go through the process of seeking approvals from the Commissioner Inland Revenue to verify their exemption status.
Filer and Non-Filer Distinction:
- Sellers are divided into two categories: filers and non-filers.
- Filers can be either liable to pay tax under section 7E or exempted from it.
Applicability and Tax Rate:
- The new tax will be applicable from tax year 2022 onwards.
- The tax rate is 1% of the fair market value of the immovable property.
Tax for Non-Filers:
- Non-filers will pay 1% tax under section 7E in addition to the existing withholding tax (3% for filers and 6% for non-filers) on property sales/transfers.
- Non-filers won’t go through the Commissioner IR process but will pay the due amount of 1% tax on the property’s fair market value.
Providing Evidence to Transferring Authority:
- Non-filers will use a separate payment challan (CPR) in the FBR online payment system as evidence for section 7E tax payment.
- Filers will provide evidence of either obtaining the exemption certificate or paying the 1% tax to the concerned Commissioner Inland Revenue.
Important Note for Single-Property Owners:
- Even if a filer has only one immovable property and is not liable for tax under section 7E, they must still submit the exemption/exclusion certificate to the transferring authority.
- This is necessary since the transferring authority may not know the seller’s tax status or property ownership details.
The new tax regulations for selling immovable properties in Pakistan mandate obtaining an exemption certificate or paying a 1% tax under section 7E of the Income Tax Ordinance. Sellers, both filers and non-filers, must adhere to these regulations to complete property transactions smoothly. Understanding the process and seeking expert advice can help sellers navigate these changes effectively.
