Real estate sector, govt close to agreement on tax issue

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The government and the real estate sector are close to signing an agreement over the contentious issue of taxing gains from property investment.

The government and the real estate sector is expected to finalise a deal to settle issues of pre-July 1 property transactions and income tax rates for transactions carried out after July 1, 2016.

The proposed deal would allow the settlement of past transactions at a fixed income tax rate of around 5% while future ones might be subject to half the fair market rate but significantly higher than the prevailing district commissioner rates.

Moreover, the deal is expected to close doors for corruption at tax authorities as well as valuers.

The Finance Minister Ishaq Dar, Thursday (today) will either vet or reject the proposal; however, any new arrangement would be in deviation to the fair market property valuation mechanism, which was introduced through the Finance Act 2016.

The tax authorities and representatives of the real estate sector met the other day to address the issue, which has crippled the real estate sector in the past three weeks.

Special Assistant to the Prime Minister on Revenue Haron Akhtar Khan led the government team while the real estate sector representatives included business leaders, property agents and representatives of big housing societies.

According to Federation of Pakistan Chambers of Commerce and Industry (FPCCI) President Abdul Rauf Alam said that the real estate sector stakeholders would not accept the property valuations determined by the State Bank of Pakistan (SBP) nominated valuers.

Till June 30, the value of property for tax purposes was determined on the basis of rates set by the district commissioner (DC).

Real estate agents claim that after the recent changes property transactions in major cities had stopped.

According to the reports, the estimated size of black money parked in real estate is around the Rs7 trillion.

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