• New rates to be finalised in over 50 cities
• Property values expected to rise from 75pc to 90pc of estimated market rates
• Fixed monthly tax introduced for retailers

ISLAMABAD: At a time when the government has implemented several tax measures in the budget for the real estate sector, the Federal Board of Revenue (FBR) on Tuesday directed its field formations to increase property valuation rates to bring them closer to market values, starting next month.

FBR Chairman Amjed Zubair Tiwana told Dawn that the new rates will be finalised in the coming days across more than 50 cities.

“I have directed the regional tax offices to revise the valuation rates,” he said, noting that the process had been delayed due to tax officials’ involvement in finalising indicative incomes and tax rates for retailers under the Tajir Dost Scheme.

The FBR did not raise property valuation rates last year due to a change of government. Property values, currently around 75 per cent of market value, are expected to increase to 90pc of estimated market rates.

The tax authority has previously adjusted property valuations four times, in 2018, 2019, 2021 and 2022.

Since 2016, the FBR has been carrying out the task of determining a property’s fair market price in major urban centres. In the provinces, valuation tables are typically notified by the district collector under Section 27-A of the Stamp Act of 1899.

The revised property tables will be used to calculate federal taxes, including capital gains tax (CGT) and withholding tax. Internatio­nally, tax is charged on the transaction value, but in Pakistan, the collector value is often much lower than the actual transaction value.

Mr Tiwana confirmed that the FBR had completed the preliminary work to revise property valuations. He said tax officials would complete the revisions for over 50 cities shortly, aiming for implementation by Sept 1. The new rates will then be officially notified.

He said tax officers had been busy finalising tax rates with trader representatives. The final rates for indicative incomes and fixed rates are now being notified.

Tajir Dost Scheme

According to SRO 1024 of 2024, the FBR has introduced fixed monthly tax payments ranging from Rs100 to over Rs20,000, depending on the location of 25,989 identified localities for small shopkeepers and retailers registered in 42 big and small cities.

Under the notification, the FBR has issued market- or area-wise indicative income, indicative income tax and monthly advance tax for small traders.

This scheme applies to cities including Abbottabad, Attock, Bahawalnagar, Bahawalpur, Chakwal, Dera Ismail Khan, D.G. Khan, Faisalabad, Ghotki, Gujranwala, Gujrat, Gwadar, Hafizabad, Haripur, Hyderabad, Islamabad, Jhang, Jhelum, Karachi, Kasur, Khushab, Lahore, Larkana, Lasbela, Lodhran, Mandi Bahauddin, Mansehra, Mardan, Mirpurkhas, Multan, Nankana, Narowal, Peshawar, Quetta, Rahim Yar Khan, Rawalpindi, Sahiwal, Sargodha, Sheikhupura, Sialkot, Sukkur and Toba Tek Singh.

Individuals owning a shop of 50 square feet or less in a commercial area, or a temporary shop, khoka, kiosk, or small shop of no more than 5x3 square feet, will be subject to an annual fixed advance tax of Rs1,200.

Monthly tax instalments for shopkeepers, including wholesalers, dealers, distributors, retailers, manufacturers-cum-retailers, importers-cum-retailers, or those combining retail and wholesale with other business activities, range from Rs100 to Rs1,000, based on the fair market value of their shops as determined by the FBR.

All unregistered traders and shopkeepers are required to register under Section 181 of the Income Tax Ordinance, 2001. Registration can be completed through the Tajir Dost module in the Tax Asaan app, the FBR’s web portal or tax facilitation centres.

The mobile app is also available in Urdu, and there is no registration fee. The registration process requires only the applicant’s name, CNIC number, city name, mobile number, and power consumer number, with no need for assistance from tax professionals or lawyers.

Despite contributing 18pc to the gross domestic product, the retail and wholesale sectors account for only 4pc of tax revenue. Recognising this disparity, the government has long sought to integrate this sector into the tax net effectively, though these efforts have yet to achieve the desired results.

Published in Dawn, July 24th, 2024