ISLAMABAD: The Federal Board of Revenue (FBR) has issued guidelines on tax payment for property sellers and transferors aimed at simplifying property transactions and ensuring tax adherence.

As part of the Finance Act 2023, an important amendment was introduced, stipulating that any immovable property cannot be sold or transferred without concrete evidence presented to the transferring authority. This evidence must demonstrate that the seller or transferor has duly fulfilled the deemed income tax liability related to the respective property.

The regulations are different for taxpayers who appear on the Active Taxpayers List (ATL) or a non-ATL person. The guidelines are issued through an Income Tax Circular no. 01 of 2023-24.

Taxpayers on the ATL have two methods to show that they have met their tax liability under section 7E. If a taxpayer has not yet paid the tax alongside their income tax return for tax year 2022, they must make the payment using a separate payment challan (CPR) found in the FBR online payment system.

Taxpayers challenge the amentment in high courts

This payment receipt will act as evidence for the recently added sub-section (2A) of section 236C of the ordinance.

On the other hand, if taxpayers already declared the property and paid the tax under section 7E in their tax return for the tax year 2022, or if they are exempt from the tax due to a court order, they will need to get a certificate (Form ‘A’) from the Commissioner Inland Revenue who has jurisdiction over them.

This certificate will act as evidence for the new sub-section (2A) of section 236C of the ordinance.

For obtaining the required certificate, taxpayers will fill in the necessary details in Form ‘A’ and submit it to the Commissioner Inland Revenue. Within seven days, the commissioner will review the information and issue the certificate, ensuring a quick and hassle-free procedure.

It is important to note that when a property is owned by more than one person, each person is responsible for fulfilling their tax liability under section 7E based on their respective share in the property. They can use any of the methods described earlier to meet their tax obligations.

For non-ATL individuals, the persons must pay the tax under section 7E and provide evidence of payment to the transferring authority. Utilise the separate payment challan provided in the FBR online payment system, and the receipt will serve as evidence for the new sub-section (2A) of section 236C of the ordinance.

In 2022, the government introduced Section 7E in the Income Tax Ordinance 2001. According to this section, if a resident person owns immovable properties valued at more than Rs25 million, they are liable to pay a 20pc tax on an amount equal to 5pc of the property’s fair market value, with some exceptions. This tax applies to properties held in the tax year 2022 and onwards.

However, many taxpayers contested this section, and numerous cases were filed in provincial high courts. The Supreme Court has granted permission for taxpayers to appeal against the Sindh High Court’s decision and issued a temporary stay order in favour of the appellants. For availing a stay order, the appellants are required to deposit 50pc of the tax amount that was demanded from them.

Published in Dawn, July 25th, 2023