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No refund against withholding tax on property sale


The Federal Board of Revenue (FBR) has disallowed refund and adjustment against tax withheld on sale of properties in line with a budgetary announcement for the fiscal year of 2017/18, experts said on Thursday.

The government, through Finance Bill 2017, proposed an amendment into Income Tax Ordinance 2001 to withdraw the refund and adjustment facilities against property transactions made during a tax year.

Tax experts at a chartered accountant firm Ford Rhodes said the withholding tax deducted under section 236C of the ordinance would be treated as minimum tax if the immovable property is acquired and disposed off within the same tax year – within 12 months.

The experts said the proposed amendment refers to acquisition and disposal within the same tax year and so any immovable property acquired in one tax year and disposed off in another year would not be covered within the proposed provison and such tax collected would remain advance tax rather than being treated as minimum tax.

Through Finance Act 2016, the government increased withholding tax rates on sale and purchase of immovable properties by 100 percent. Under the revised rate on property sale, a seller, who is a filer, is liable to pay one percent on the gross amount of the transaction, and a non-filer has to pay two percent. Earlier, these rates were 0.5 percent and one percent. Similarly, on purchaser of property, withholding tax rate was up to two percent in case of filer and four percent in case of non-filer, from the previous rates of one percent and two percent.

Muhammad Zubair, ex-president of Karachi Tax Bar Association confirmed that the latest amendment barred refund and adjustment under the minimum tax regime. “Therefore, the FBR will be able to generate huge amount which will not be refundable or adjustable.”

Zubair further said the volume of property transaction happens to be huge and investors rarely keep any property for a longer time due to fluctuation in real estate prices. The Finance Bill 2017 proposed another amendment related to property transactions by extending the scope of withholding agent.

Tax experts said the change was brought to remove any anomaly and to provide wider coverage on the collection of advance tax on sale or transfer of property. This would provide clarity regarding the responsibility of advance tax collection on registering, recording or attestation by a housing authority, housing society, co-operative society and registrar.


Ramiz Imtiaz
Linkers Realty
For any query contact +92-335-1369927 | 021-35639700-2


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