- Dar says market values will be increased in consultation with stakeholders as govt scales down CGT to three years with three different slabs
The talks between the tax authorities and real estate sector finally concluded on Saturday with the realtors agreeing to let the Federal Board of Revenue (FBR) determine the fair value of immovable property, as the government scaled down the period of capital gains tax (CGT) from five years to three years with three different slabs.
Briefing the media after the talks, Finance Minister Ishaq Dar said that it was agreed that the FBR would determine the fair value of immovable properties every year before the budget in consultation with the real estate sector. “The government will give (it a) legal cover through an amendment in the law as per the agreement,” he added.
Removing the independent valuators from assessing the fair value of real estate had been one of the major demands of the realty sector and the government finally agreed to it. It had been termed as the main irritant by real estate professionals, claiming it would lead to corruption, litigation and a decline in investment.
The minister said that new values were determined in a professional manner, adding that it was done in a very transparent manner. “There is clarity in new prices and all the stakeholders have agreed to the valuation. We have not allowed blackmailing of anybody,” Dar said.
According to the minister, the valuation period for CGT will be reduced from five years to three years. “The tax on selling property in first year of purchase would be 10 per cent between second year 7.5 per cent and five percent in the third year,” he added.
About the properties bought before June 30, 2016, he said a flat tax rate of 5 per cent would apply for the next three years, adding that the differentiation between the filer and non-filer would continue. The non-filers would have to pay 0.4 per cent additional tax on the sale purchase of immovable property, he said.
The minister said the major achievement for the government was that it had determined a new baseline for the collection of federal taxes. “I would be talking to the provinces to adopt the new fair market values to enhance their taxes,” he added.
FPCCI President Abdul Rauf Alam thanked the government and finance team for resolving the issue which had withheld investment activities in the country for over a month. He said the agreement was mutually beneficial and would help further streamline investment in the sector.