Section 7E of the Income Tax Ordinance 2001, according to the Federal Board of Revenue (FBR), does not require non-residents, including non-resident Pakistanis, to pay tax on movable property.
The FBR has relaxed several of Section 7E’s procedural requirements with the issue of Circular No. 3 of 2023, which was announced on Tuesday.
The FBR has also relaxed the obligation of obtaining exemption certificates from the Inland Revenue Commissioners in particular cases, as noted in the aforementioned circular.
FBR Circular
According to the FBR, the explanatory Circular, which is being produced to facilitate the sale of property or transfer transactions, will be in place for a transitional period until the construction of an automated system for this purpose.
The FBR has further underlined that the situations described in Circular No. 1 of 2023-24 do not qualify for a certificate from the Commissioner.
The immovable property transferring authority, on the other hand, will retain an accurate record of the seller/transferor information as well as essential documentation with regard to properties under sale or transfer covered by the aforementioned situations.
Beginning with the date of this circular’s publication, the transferring authority will exchange the aforementioned data record on a weekly basis with the appropriate Chief Commissioner IR of the Regional Tax Office with jurisdiction over the seller/transfer.
The circular states that section 7E of the Ordinance does not apply to real estate used for land development and construction owned by local authorities, development authorities, builders, and developers who are registered with the Directorate General of Designated Non-Financial Business and Professions (DNFBP).
FBR Section 7E
Section 7E does not apply to a property acquired in the first year for which the buyer has legally paid tax under section 236K.
In such a case, the transferring authority must be given a Computerized Payment Receipt (CPR) with a specific CPR number, the seller’s or transferor’s name, CNIC number, and information indicating the tax paid under Section 236K, date of payment, and tax year.
The provisions of section 7E of the Income Tax Ordinance, 2001 do not apply to ex-servicemen, serving members of the armed forces, or ex-employees who die while serving in the Pakistan Armed Forces or the Federal and Provincial Government, suffer a war injury while serving in the Pakistan Armed Forces or the Federal or Provincial Government, or are former employees.
Therefore, if a seller or transferor comes under one of the aforementioned categories of persons, the need of method and mode of giving evidence to the transferring authority issued under Circular No. I of 2023 will not apply to such categories of persons.
There have been numerous public comments about the use of section 7E of the Income Tax Ordinance, 2001 (the Ordinance) for the purpose of selling or transferring real property as allowed under sub-section (2A) of section 236C of the Ordinance.
Newly Added Sub-Section (2A)
The newly added sub-section (2A), as well as a partial revision and addendum to the Circular No. 1 of 2023-24’s instructions, are being introduced in order to resolve any implementation-related concerns.
With reference to the decision in WP no. 52559 of 2022, dated 06-04-2023, FBR further stated that the contents of the Circular will not apply in cases that are within the purview of the Lahore High Court, unless and until the said decision is reversed, suspended, or vacated in an appeal to the Inter Court of Pakistan or by the Supreme Court of Pakistan.
To read our blog on “FBR launch an online fee & exemption service for 1% property tax,” click here.
