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Builders and developers can save around six times on taxes if they register under the Prime Minister Imran Khan’s construction package as it has a fixed regime.
“This saving on tax will add up to whatever profit you make,” explained the FBR’s Abdul Hafeez while addressing them at a seminar on the ‘PM’s Package on Naya Pakistan Housing Scheme’ at the Association of Builders and Developers House October 7. Abdul Hafeez is the Commissioner for Inland Revenue Audit at the FBR. FBR MTO Chief Commissioner Abdul Hameed Memon and ABAD members attended.
Builders and developers can register with the FBR by December 31, 2020 for both existing and new projects. FBR officials have been trying to reach out to builders and developers across the country to explain the benefits.
Over 60 allied industries get a boost when construction does well, which is why this strategy is often said to be good for economies.
The scheme is not for government employees.
People can also whiten their “legally earned” money under the package as they will not be asked for a money trail. But money earned illegally or received through bribes cannot be laundered through this process.
The fixed tax shall be reduced by 90 percent in the case of low-cost housing developed or approved by the Naya Pakistan Housing and Development Authority or under the Ehsaas Programme.
In line with its vision of providing affordable housing to the masses, the government will be providing a markup subsidy facility for the construction and purchase of new houses.
“This facility will allow individuals, who will be constructing or buying a new house for the first time, to avail bank’s financing at subsidized and affordable markup rates,” said a statement issued by the central bank. “This facility will be provided with the administrative support of State Bank of Pakistan as executing partner with government and Naya Pakistan Housing and Development Authority (NAPHDA).”
One may find State Bank (SBP) press release and detail note on SBP website:
https://www.sbp.org.pk/press/2020/Pr1-12-Oct-20.pdf
https://www.sbp.org.pk/smefd/circulars/2020/C11.htm
To another query, the FBR responded that in the case of buildings having dual usage i.e. both commercial and residential the respective rates specified for each category shall apply. Moreover, in case the development of plots and construction of buildings upon the same constitutes a single project, the respective rates for developers and builders shall both apply.
The government has allocated Rs33 billion for payment of markup subsidy for financing over a period of 10 years and has assured continuity of the facility. For this purpose, the SBP and the government have signed a memorandum of understanding.
The markup subsidy facility will be available through all banks and is divided in three tiers; financing under Tier I is available for purchase of houses/apartments/flats of up to 5 marla or 125 sq. yards, with maximum covered area of 850 sq. feet and maximum price of Rs3.5 million, under NAPHDA projects. Maximum financing under this Tier is Rs2.7 million with maximum tenor of up to 20 years. Banks will charge maximum markup rate of KIBOR plus 250 basis points.
The markup subsidy facility will be available through all banks and is divided in three tiers.
The FBR clarified that a builder or developer falling under this scheme shall pay advance tax equal to one-fourth of the tax liability for the year as determined under the scheme in four equal installments. A builder or developer opting for taxation under section 100D shall be allowed to incorporate profits and gains accruing from such projects in up to ten times of the tax paid under the scheme, the FBR said.
The FTS is applicable to builders and developers, who opt for the scheme by registering their project(s) with FBR. The term “Builder” means a person who is registered as a builder with the Board and is engaged in the construction and disposal of residential and commercial buildings. The term “Developer” means a person who is registered as a developer with the Board and is engaged in the development of land in the form of plots of any kind either for itself or otherwise. Builders and developers eligible for this FTS include individuals, a company or an Association of Persons, the FBR added.
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