LAHORE, Sept 3: People, especially those living overseas, are facing severe problems in managing their properties through the agents holding the power of attorney (PoA) because of imposition of two per cent capital value tax on the instrument.

The government imposed the CVT on the purchase of property measuring one kanal or more in the 2006-07 budget in order to control heavy speculative investment in land and property.

However, the lawyers dealing in property matters say the CVT applies only on acquisition of an asset(s) by a person, and cannot and should not be recovered from an agent who is just managing a property or properties on behalf of his or her client(s).

“The instrument of PoA is neither absolute nor perpetual because it can be revoked any time,” says a senior lawyer Salim-ul-Haq, who has been handling property matters for several years.

He says the PoA is given to an agent, who can be relative or any other person, for the management of a property by another person on his or her behalf because the latter is unable to look after it personally for one reason or the other. “It is simply a stopgap arrangement, and the donor of the instrument of PoA can revoke or cancel it any time. The instrument is also revoked and cancelled in case of death of the donor,” he says.

Mr Haq says the PoA does not represent purchase of a property, and is issued for a specific purpose, and thus is neither absolute nor perpetual. “PoA is not covered under the Transfer of Property Act (1882), which governs transfer of land/property, and thus unless the land/property for which PoA is given is actually purchased by someone, CVT should not apply on it.”

The federal government in the budget for the current fiscal year levied CVT on urban immovable property through an amendment in Section 7 of Finance Act 1989 through Finance Act 2006. Transfers falling in the scope of transactions attracting charge of CVT include acquisition of assets through purchase, gift, exchange, surrender, PoA, or relinquishment of rights. However, transfers from spouse, parents, grand parents, brother, and sister through inheritance or gifts have been excluded from the ambit of the tax.

Mr Haq says the overseas Pakistanis have been facing difficulty in the management of their property in their homeland because of the CVT imposition as they have to pay a heavy amount to the government for issuing powers of attorney to their agents. Same, he adds, is the case with the resident Pakistanis who want their property in their own city or outside it to be looked after in a proper manner through an agent holding PoA on their behalf.

“Now no one can manage his or her property through PoA because issuing the instrument to one’s agent involves payment of the two per cent tax, which in most cases is quite a sum,” Mr Haq says.