Construction Industry Package Details & Review
Construction Industry Package Details & Review: Here are the details which were announced for the construction sector’s incentive package:
- People investing in the construction sector in 2020 will not have to answer for their sources of income.
- The construction sector will have a fixed tax regime that will be implemented on ‘per square feet’ and ‘per square yard’ bases.
- 90 percent tax impositions will be slashed for Naya Pakistan Housing Programme (NPHP) constructions
- Except for companies that are working with steel and cement-related ventures, the rest of the companies will have their withholding tax waived off.
- Families selling their houses will have Capital Gains Tax (CGT) waived off, and NPHP will get PKR 30 billion in subsidy.
- Industry status will be given to the construction sector, and its working will be regularized by a ‘Construction Industry Development Board’
Here are the details of the special incentive package that was proposed for the Construction Industry:
Incentives by FBR
1. Special Tax accessibility for Developers and Builders.
A Fixed Tax Regime will be introduced, which will be following the draft presented by FBR, for developers and builders. This will be done after consultation with NAPHDA and the representatives of the construction industry/association of builders and developers. There are the included salient provisions:
A. The tax will depend on the per square foot construction and per square yard land development for developers and builders, respectively. The income that will be gained in this regime will be treated as a separate class of income.
B. Other than cement, steel, and services (such as shuttering and plumbing, etc.), the builders and developers will be exempted from holding tax (section 153) on buying material for building.
C. Under this schedule, developers and builders will be able to take impute or credit income, which can be equal to 10 times the tax paid while stating their net wealth.
D. The laid down tax rates will be cut by 90 percent in terms of low-cost housing and projects which are developed by NAPHDA.
2. Exemption from provisions of Section 111 of Income Tax Ordinance 2001, on Construction Activity till June 2022.
Any investment made by anyone from now till 30 June 2022 will have the provisions of Section 111 not applied to them. This will happen on the purchase of land or construction of any structure. This will also include the development of a structure on land. Also, the area already having the possession within this period or the first purchase of the newly constructed property. The amount of the described investment will then be permitted to be incorporated in the wealth statement.
3. Rationalization of Capital Gains Tax (CGT)
A. The rate of tax will be brought down according to the increase found in the valuation table.
B. The period which was reserved by CGT for the constructed property will be brought to 3 years from 4 years.
C. The holding period of CGT will remain eight years for real estate/plots; however, from the fourth year onwards, the tax rate will show a significant decline on the sliding scale.