FBR Grants Tax Relief To Builders And Developers

The Federal Board of Revenue has introduced relief for builders and developers by permitting exemption from withholding tax on property transactions for entities operating under the special tax regime prescribed in Income Tax Ordinance 2001.

Through a recent circular, the FBR clarified that taxpayers governed by Section 7F may apply for exemption from advance tax under Section 236C, subject to the condition that their tax liability has already been fully discharged under the fixed tax regime and that no additional taxable income exists against which such tax may be adjusted.

This clarification addresses concerns raised by stakeholders regarding the imposition of withholding tax on developers whose income is computed as a fixed percentage of gross receipts under Section 7F. In such circumstances, the collection of advance tax was resulting in unnecessary liquidity constraints, particularly where no other taxable income streams were available.

Under the revised framework, eligible builders and developers may submit applications to the relevant Commissioner Inland Revenue under Section 159 of the Income Tax Ordinance 2001 to obtain exemption certificates, thereby avoiding withholding tax deductions on the sale of immovable property.

The FBR has further directed Commissioners to evaluate each application on a case-specific basis, ensuring that all statutory conditions are satisfied prior to granting exemptions, while adhering to prescribed timelines for processing.