Houses rented to foreign missions: owners to be brought into tax net

[LahoreEstate]

RECORDER REPORT
ISLAMABAD (February 03 2010): The owners of luxurious houses and bungalows, earning rental income in US dollars from foreign missions and embassies, would be registered with the income tax department in the second half of 2009-10 (January-June). The Federal Board of Revenue (FBR) has decided to bring potential owners of big houses into the tax net where properties have been given on rent to foreign missions and embassies.

In this connection, Finance Minister Shaukat Tarin has issued instructions to FBR to bring potential owners of properties into the tax net. The FBR will give top priority to those owners of big houses who are earning rental income in US dollars from foreign embassies.

According to the directive of the Finance Minister, "the FBR should immediately contact all the foreign missions and embassies and ask for details of properties rented by them in order to ascertain the landlords, who receive rent in US dollars so they can be brought into the tax net. The FBR should co-ordinate with the National and Database Registration Authority (NADRA) to identify owners of property earning huge amount in US dollars from diplomats in Pakistan".

Sources told Business Recorder here on Tuesday that the FBR would approach all foreign missions, particularly located in the Diplomatic Enclave area and other posh areas of the federal capital. In many cases, the owners of these houses are getting rents in dollars, but are still not filing income tax returns.

The purpose of the whole exercise is to bring such rich owners of houses used by diplomats into the tax net. Another aspect of the exercise is to check whether the foreign missions in Pakistan are dully deducting withholding tax on rental income under Income Tax Ordinance 2001.

A number of hospitals, schools, AOPs, trusts and non-profit organisations frequently hire the buildings but reportedly do not deduct the tax. The institutions like foreign missions are also not reminded to deduct and deposit the tax, despite the fact that they have hired a large number of houses in the federal capital.

The foreign missions in Pakistan, who have hired buildings, have to deduct the withholding tax from the total rent, and deposit the same in the State Bank of Pakistan (SBP). Contrary to this, there is a need to educate the foreign missions and other listed categories to deduct the tax and deposit in the national kitty. The foreign embassies in Pakistan have to operate as withholding agents for deduction of tax on renal income, sources added.

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