The Federal Board of Revenue (FBR) has recently announced a significant update regarding tax relief for non-resident Pakistanis on the sales or transfer of immovable properties, as outlined in Section 7E of the Income Tax Ordinance 2001. According to a leading newspaper report published on August 15, this change aims to streamline the process and encourage property sales among non-resident Pakistanis.
In its latest Circular number 3 of 2023, the FBR has taken steps to ease the procedural conditions set by Section 7E. This move is expected to simplify the process of obtaining exemption certificates from Inland Revenue Commissioners in various cases, making it more convenient for non-resident Pakistanis to engage in property transactions.
Islamabad: Tax Relief for Non-Resident Pakistanis on Property Sales Simplified by FBR
The newly issued explanatory Circular aims to facilitate property sales and transfers by simplifying the conditions outlined in Section 7E. This change is intended to remain in effect until an automated system is established for this purpose. Importantly, it has been specified that certain situations will be exempt from the conditions that typically mandate a certificate from the Commissioner, as described in Circular No. 1 of 2023-24.
One notable change is that Section 7E will not apply to immovable property owned by local authorities, development authorities, builders, and developers engaged in land development and construction. However, this exemption is subject to the condition that these entities are registered with the Directorate General of Designated Non-Financial Business and Professions (DNFBP).
To ensure transparency, the authority responsible for transferring immovable property will maintain accurate records of the seller/transferor information. This data, along with relevant documentation, will be shared on a weekly basis with the respective Chief Commissioner IR of the Regional Tax Office.
Additionally, Section 7E exemptions will not be applicable to immovable property allotted to certain categories, such as Shaheeds (individuals who died in service of the Pakistan Armed Forces), their dependents, war-wounded personnel, ex-servicemen, or serving personnel of the armed forces and government. For these categories, the conditions for furnishing evidence to the transferring authority, as outlined in Circular No. I of 2023, will not apply.
This change comes as a result of feedback and representations received by the FBR. The new circular seeks to address challenges related to the implementation of sub-section (2A) of section 236C of the Ordinance concerning the application of Section 7E for property sales or transfers.
It’s worth noting that the contents of this circular will not apply to cases falling under the jurisdiction of the Lahore High Court. This update aims to foster a more straightforward and transparent process for non-resident Pakistanis engaging in property transactions, contributing to the growth of the real estate sector.