FBR asked to recover WHT from LDA, developers

[Salman]

Directorate General of Internal Audit Inland Revenue has detected that most of the housing schemes/estate developers are not deducting withholding tax as per law, prompting Chairman Federal Board of Revenue (FBR) to order recovery action against the non-deduction of withholding taxes by owners of such schemes and developers.

It is learnt that the Directorate General of Internal Audit Inland Revenue has pointed out to the Federal Board of Revenue (FBR) to ensure collection and recovery of withholding tax from Lahore Development Authority and all other owners of housing schemes/estate developers as per provisions of law as LDA is not recovering withholding tax on transfer/registration of plots.

According to sources, Sajjad Haider Afzal Director General, Directorate General of Internal Audit Inland Revenue has communicated the case to the FBR and relevant Regional Tax Office for compliance. The report is related to the default of withholding tax provisions by the said housing scheme and other land developers.

It said that it is developing a housing scheme at Lahore. Reportedly, the LDA is not recovering withholding tax on transfer/registration of plots. Similarly the owners of housing schemes/property developers are not deducting withholding taxes as per provisions of law. In a meeting held in the Board to review the performance of 3rd quarter of the financial year 2014-15, the issue of non-deduction of withholding taxes by owners of Housing Schemes and Estate Developers also came under discussion and the FBR Chairman Tariq Bajwa directed to take remedial action.

As per section 236 C of the Income Tax Ordinance 2001, any person responsible for registering or attesting transfer of any immovable property at the time of registering or attesting the transfer shall collect advance tax from the seller or transferor on the consideration received by the seller from the buyer at the rate specified in Division X of Part IV of the First Schedule to the Income Tax Ordinance, 2001. In view of these provisions of law the owners of housing schemes and estate developers at the time of booking/selling of plots/flats/shops, etc have to pay advance tax on the consideration received for the sale of any property. If the amount is received in instalments, they are liable to pay advance tax, being a seller of property on the consideration received in installments, directorate said.

Likewise, as per section 236 K of the Income Tax Ordinance, 2001 any person responsible for registering or attesting transfer of any immovable property shall, at the time of registering or attesting the transfer, collect advance tax from the purchaser or transferee on the value of assets purchased at the rate specified in Division XVIII of Part IV of the First Schedule to the Income Tax Ordinance, 2001.lf a person purchases a property in installments whose value is more than three (3) millions, he will have to pay advance tax on the whole amount of purchase value of asset at the time of purchase, directorate said.

It has also been observed by the Directorate of Internal Audit (Inland Revenue) that most of the housing schemes/estate developers are not deducting tax in accordance with the provisions of law. The FBR is requested to please look into the matter personally and ensure collection and recovery of withholding tax from the said authority and all other owners of housing schemes/estate developers as per provisions of law, Directorate General of Internal Audit Inland Revenue added.

Copyright Business Recorder, 2015