ISLAMABAD:
More than 1,000 construction projects worth Rs355 billion have so far registered during the first year of Prime Minister Imran Khan’s second tax amnesty scheme, as the government protects the income tax exemption of real estate investors for another three years.
There has been a steady increase in the number of schemes registered under tax amnesty schemes but that figure remains below the government’s target, according to government statistics.
So far, 1,016 projects worth Rs355 billion have been registered under the scheme, according to government statistics. This includes 274 projects that were implemented before the announcement of the amnesty a year ago and the reasons for granting the amnesty.
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In April last year, Prime Minister Imran Khan announced his government’s second ten-month tax amnesty scheme aimed at ‘boosting economic growth’ and minimizing the impact of COVID-19 on people’s lives.
This scheme allows people to invest in the construction sector without disclosing their source of income. The construction sector is the prime minister’s flagship project and he is betting on a revival for a boom in economic activity.
The government expects more than Rs1 trillion of projects to be registered by December last year. But the process took longer and the prime minister eventually granted a six month extension to the scheme.
Of the more than 1,000 schemes, the majority – 782 – were registered in December, which was the initial deadline for the scheme. The second highest number of projects was registered in October last year – 121.
These schemes are also being offered to projects that are under construction even before they are announced. The condition is that new and ongoing projects must mostly be completed by September 30, 2022 – the current deadline has been extended.
The government first announced a presidential regulation in April and then granted permanent legal protection to the scheme by making it part of the 2020 Finance Bill. Another regulation was issued in January to extend the scheme to June 2021. The government extended that date to start construction projects from December 2020 to June 2021 and the project completion period was also extended.
Under the terms of the International Monetary Fund (IMF), the government has already withdrawn an income tax exemption of IDR 140 billion worth 75. But it has succeeded in protecting real sector concessions until 2024 in an effort to boost economic activity.
The government has protected a 50% reduction in tax liability in cases of public low-cost housing projects until 30 June 2024. Similarly, a 90% reduction in tax liability in cases of low-cost housing developed or approved by the Naya Pakistan Housing and Development Authority (RANAM) or under the Ehsaas Program also protected until June 2024.
In addition to the 1,016 projects that have so far registered under the scheme, another 285 schemes worth Rs78 billion are in the registration process, according to the government. These 285 projects have not met all the procedural requirements for utilizing the scheme.
Of these, the majority of 143 schemes worth Rs43 billion are in Punjab followed by 76 schemes with an estimated value of Rs18 billion in Sindh. Some 57 projects worth Rs17 billion are in the process of approval located in the Islamabad Capital Territory. There are nine projects located in Khyber-Pakhtunkhwa.
The IMF has banned Pakistan from providing further tax amnesty schemes over the currency of the IMF program after the Pakistani government Tehreek-e-Insaf (PTI) awarded a tax amnesty scheme in May 2019 to allow people to declare their money haram and black money. .
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The Federal Revenue Council (FBR) said that the construction sector tax amnesty scheme provides immunity from Section 111 of the regulations relating to disclosure of sources of income. It said there was no question about the nature and source of funds from investors who invested in new construction projects in the form of money or land, either as individuals, as associations of people or companies.
In the case of builders, the project should be considered completed by the date of completion of the gray structure. In the case of the developer, the project must be considered completed by the date when at least 50% of the total plots have been ordered on behalf of the buyer; at least 40% of sales have been received; landscaping has been completed; and at least 50% of the roads have been installed to the sub-grade level as certified by the approval authority or NESPAK.
Builders and developers who choose the proposed scheme are not required to withhold income tax on the purchase of building materials except steel and cement.
Published in The Express Tribune, March 28th, 2021.
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