ISLAMABAD (January 14 2006): The Central Board of Revenue (CBR) has directed all Regional Commissioners' of Income Tax (RCITs) to allocate National Tax Numbers (NTNs) to real estate investors engaged in buying/selling of plots through housing societies, co-operative societies, land developers and real estate agents.
The CBR on Friday issued a directive to the field formations to bring the real estate sector within the tax net.
According to instructions, the tax officials have launched a countrywide exercise to tax maximum investment in real estate. The campaign has been started to bring on record all cases of housing societies, co-operative societies, land developers, and real estate agents to ensure payment of tax in all such cases. The data collection and subsequent issuance of NTNs to investors would start simultaneously in all major cities.
The CBR has informed RCITs that the field officers will ensure that investors of real estate sector will be allocated the NTN. Once tax numbers are issued to them, the department would be in a position to take subsequent action for recovery of taxes on the basis of investment made by these persons.
It has also been decided that complete information about the investors with the housing societies, co-operative societies, land developers and agents will be sent to the Board for developing a national database.
The CBR will monitor NTN allocation in the real estate sector during next RCITs conference.
The RCITs have been directed to forthwith implement these instructions and the requisite information to be provided to the Board by January 14, 2006, the instructions added.
Independent sources told Business Recorder that the exercise primarily focuses on taxation of investment in real estate sector. Legally, the CBR is empowered to issue NTN to all potential investors, out of the tax net.
There are both, the buyers and sellers, in the property transaction. The data from these housing societies would help the income tax department to search for the potential investors in the real estate sector, who are still out of the tax net. There is a need of liaison with the housing societies for obtaining data about the investors to broaden the tax-base.
The CBR has already asked the field formation to examine the legal status of persons investing in real estate business in United Arab Emirates (UAE) for desired changes in the Income Tax Ordinance 2001, to deal with such investors. The department is already investigating huge investment in real estate sector of Dubai and London. The companies based at Dubai and not having office in Pakistan are persuading people to invest in the real estate sector of the UAE and other countries. The properties in Dubai and London consisting of apartment buildings were advertised for sale.
The provisions of Income Tax Ordinance of 2001 being weak rather non-existent while questioning international money transfers further encourages such deals.
However, it is difficult to get the particulars of the people who indulge in the purchase of property in Dubai mainly due to the resistance on the part of local agents and insufficient and ineffective legal provisions, sources added.