FBR finalising new valuation for immovable properties

KARACHI: Tax authorities are in the process of finalising new valuation for immovable properties to enhance its revenue from sale/purchase transactions, sources said on Saturday.

In this regard, the Federal Board of Revenue (FBR) issued new valuation table of immovable properties located in 19 different metropolises for not only bringing the valuation at par with the open market, but also to generate sizeable revenue under this head.

The new valuation was to be implemented from July 1, 2019, but the implementation was delayed due to certain reasons, the sources said.

The FBR clarified that the proposed values of immovable properties that were issued on June 3, 2019 would be applicable after an official notification was issued by the board. Therefore, the proposed rates are not applicable from July 1, 2019.

The sources said the valuation of immovable properties enhanced by the FBR on February 1, 2019 will continue for the collection of income tax on transactions till further notification.

Sources in the FBR said through the proposed rates, the FBR had enhanced the valuation by more than 200 percent for different segments of immovable properties.

The FBR proposed new valuation tables of immovable properties for 19 cities, including Islamabad, Lahore and Karachi.

The FBR introduced the property valuation in August 2016 to document the real estate sector. However, the valuations were much lower than the open market rates, and the purpose to document the real sector was not much achieved as per the desire.

Therefore, on February 1, 2019, the FBR enhanced the valuations up to 20 percent for immovable properties located in various cities of the country. The enhanced values are still much lower than the fair market value.

The sources said the FBR has reduced withholding tax rates by amendment through the Finance Act, 2019 and all these rates were based on the values notified by the revenue board.

The sources also said the withholding tax rate on the purchase of immovable properties had been reduced to one percent from two percent with the condition that the declaration should be made on the fair market valuation.

To create deterrence, the FBR had already created Directorate General of Immovable Properties, which can confiscate any properties where valuations are misdeclared.

Further, the FBR has also abolish the scheme from July 1, 2019, under which the revenue authorities cannot seek information about the source for purchasing immovable properties at the FBR values.

Considering these measures with proposed high valuations may double the revenue from transactions, an official at Inland Revenue said.