Pakistan imposes taxes of up to 7% on property allotment or transfer

Pakistan has notified a federal excise duty (FED) of up to seven percent on the allotment or transfer of property, which would be collected by developers and builders.

According to a Statutory Regulatory Order (SRO) issued by the Federal Board of Revenue (FBR) on Thursday, a developer is defined as any person who develops land into residential or commercial plots for sale. This includes housing societies, cooperative societies, developing authority or similar entities.

Meanwhile, a builder is defined as a person who constructs residential or commercial properties for sale, including housing societies, cooperative societies, developing authority or similar entities.

Every developer or builder will collect a 3% duty of the gross amount of consideration involved in the allotment or transfer of commercial property and first allotment or first transfer of open plots or residential property if the buyer is appearing on the Active Taxpayers List (ATL) on the date of acquisition of the property.

This duty will go up to 5% of the gross amount of consideration involved if the buyer has not filed the income tax return by the due date and 7% if they are not appearing on the ATL at all.

The duty collected by the developer or builder shall be credited to the government on the same day through a computerized payment receipt — which has already been issued by the FBR — or SWAPS payment receipt.

Developers and builders are required to submit a monthly statement to the tax commissioner. If it is found that they did not pay the duty or paid less than the due amount, then the relevant Inland Revenue officer will collect the amount along with a default surcharge.