Real estate is considered the best investment sector globally. With, sometimes, more than 100% return in one year & most of the times, more than 50% return in the same time, real estate in Pakistan the most safe & secure investment.
Now, on November 30th, 2016, National Assembly of Pakistan passed an amendment bill for income tax, grating people with hidden wealth (black money), an amnesty from declaring their source of income. Through this amendment, more than 7 trillion is expected to be declared by the people. The details of this tax amnesty scheme to white your money through real estate are as follow:
If you’ve un-taxed money in the form of cash: Its very simple for you, simply go out & buy a property. You would only have to pay 3% advance tax (un-adjustable) on the difference of the DC & FBR notified values of the property. No questions asked, you’ve easily whitened your money through real estate.
If you’ve an un-declared property: You can simply sell your asset to convert it into cash and buy a new plot.
Now you would be thinking what are the DC & FBR notified values? In Pakistan, there’re two different valuations of a property:
Valuation of the property by the deputy commissioner (DC Rate). This valuation is used to calculate provincial taxes (CVT & Stamp Duty) at the rate of 5% (2% for CVT & 3% for Stamp Duty). These taxes are payable by the purchaser of the property.
Valuation of the property by Federal Board of Revenue (FBR Rate). This valuation is used to calculate federal taxes (Advance Tax & Capital Gains Tax). The purchaser has to pay 3% advance tax & the seller has to pay up to 10% capital gains tax (CGT).
So, to white your money, you’ll have to pay: 5% for CVT & Stamp Duty (calculated on the DC Rate) + 3% for Advance tax (Calculated on the difference between DC Rate & FBR Rate).