Builders/Developers Fixed Tax Regime 2020

In 2020, the elements of fixed tax regime for builders/developers under Section 100D of Income Tax Ordinance 2001 are that payable in quarterly installments, tax liability is calculated on the basis of square feet/yard. Furthermore, new projects as well as the existing ones can choose this scheme for themselves up to 31^st December, 2020. Additionally, projects will be registered with FBR on IRIS portal.

Other than that, the existing incomplete project must clearly specify the percentage of completion of project on the date applicable. Projects should be completed by 30^th September, 2022. There is an exemption from the requirement of withholding tax on the purchase of building material except for cement and steel. Likewise, there is an exemption from the requirement of withholding tax on acquisition of construction related services other than those from companies.

The permission is given to incorporate ten times of fixed tax paid as income in the books of accounts. Furthermore, 90% reduction is given in fixed tax liability for low cost housing. Additionally, the dividend paid by builder or developer companies will not be liable to tax and there will not be any withholding on the payment of these dividends.

Following this, the exemptions made under section 111 of the Income Tax Ordinance 2001, on investment made in new construction projects ‘By Individuals’ if either money is deposited in a new bank account up to 31^st December, 2020 or they have the ownership/title of the land invested as on 17^th April, 2020.  Adding to that, ‘By Companies/AOPs’ if a firstly, a single purpose company or an AOP is listen between 17^th April, 2020 and 31^st December, 2020. Secondly, money is invested through a crossed banking instrument up to 31^st December, 2020 and thirdly, the land owned by the partner/shareholder is transferred to the company/AOP up to 31^st December, 2020.

If money or land invested is utilized in the project, the project must be completed by 30^th September, 2022. In case of builder, the grey structure should be completed (top roof) and in case of developer, landscaping must be completed and all roads are laid up to sub-grade level plus at least 50% plots sold and at least 40% sale receipts received. Furthermore, exemption from section 111 is not available for Public office holders, Public companies, REITs and companies whose income is exempted and Proceeds of crime.

The rates of tax under section 100D shall be computed as;

1. For any area in Islamabad, Karachi and Lahore:

• The tax on builders for commercial buildings for any size of land will be Rs. 250 per sq. ft and for residential buildings for land of up to 3000 sq. ft will be Rs. 80 per sq. ft and for more than 3000 sq. ft and above will be Rs. 125 per sq. ft.
• The tax on developers for the entire project for any size of land will be Rs. 150 per sq. yard.
• The tax on development of industrial area for any size of land will be Rs. 20 per sq. yard.

2. For any area in Hyderabad, Sukkur, Multan, Faisalabad, Rawalpindi, Gujranwala, Sahiwal, Peshawar, Mardan:

• The tax on builders for commercial buildings for any size of land will be Rs. 230 per sq. ft and for residential buildings for land of up to 3000 sq. ft will be Rs. 65 per sq. ft and for more than 3000 sq. ft and above will be Rs. 110 per sq. ft.
• The tax on developers for the entire project for any size of land will be Rs. 130 per sq. yard.
• The tax on development of industrial area for any size of land will be Rs. 20 per sq. yard.

3. For any urban area not specified above:

• The tax on builders for commercial buildings for any size of land will be Rs. 210 per sq. ft and for residential buildings for land of up to 3000 sq. ft will be Rs. 50 per sq. ft and for more than 3000 sq. ft and above will be Rs. 100 per sq. ft.
• The tax on developers for the entire project for any size of land will be Rs. 100 per sq. yard.
• The tax on development of industrial area for any size of land will be Rs. 10 per sq. yard.

Let ZAF Consultants do all this strenuous work for you and guide you to become a tax filer and enjoy its benefits. The last date for registration is 31^st December, 2020. Book Your Appointments and Visit Us Today!