Clarification by a senior FBR officer friend,

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It was sent to me by a FBR officer friend on my WhatsApp


I would like to clarify the misconceptions about the changes in property taxation


1. The withholding taxes collected on property transactions will be on the basis of the registered value and not on the basis of fair market value which according to the recent change in law will be determined by the valuers to be notified by the State Bank.



2. Property registration and recording transactions thereof is the domain of the provincial governments and the federal government has no role in that.



3. Individual cases shall be referred to the valuers for determining the fair market value not for collection of transaction taxes referred in the above post but for determining the sources of investment made by the purchaser. When a person makes an investment he is required under the Income Tax law to prove that he has available with him sufficient declared funds on which he has paid due tax at the time of earning the income from which the surplus is being invested. If the purchaser can not explain the investment from known (taxed) sources the amount invested by him is treated as his income and subjected to tax and penalty. When a person understated the quantum of his investment he is required to explain the sources of the declared investment and not the actual amount. This then becomes an easy way of gising un taxed money.


4. The proposal for determination of fair market value through independent valuers is meant to plug this loophole that promotes tax evasion and provides a mechanism for parking un taxed money.


5. It also needs to be understood that it is in the interest of the seller to declare the actual price received because he will have white money available with him that he can use subsequently to explain any investment or expenditure made by him. Receiving underhand amounts make the seller fall in the vicious circle of trying to understate his investments and expenditure too.


6. This proposal was put forward by FBR and met stiff opposition from the politicians and business people because it has the potential to improve our tax system and contribute towards increase in our revenues.
8. The expatriates have no problem regarding explaining the sources of their investment provided they have remitted the amount through normal banking channels and the change in law will not reduce their appetite for investment in real estate.
8. The detailed procedure and mechanism of how the system will work is still to be issued.
I have tried to explain in simple words a complicated subject and I am available if any friend needs any further clarification