CVT imposed on property lease renewal

[Naveed Yaseen]

SOHAIL SARFRAZ
ISLAMABAD (July 19 2009): The Federal Board of Revenue (FBR) has imposed capital value tax (CVT) on renewal of lease, or any premium paid thereon, pertaining to immovable property from July 1, 2009. According to Income Tax Circular 4 of 2009 issued here on Saturday, through amendment made in sub section (1) of section 7 of Finance Act, 1989, the scope of levy of CVT has been extended by bringing the renewal of lease or any premium paid thereon in respect of immovable property in the ambit of chargeability of CVT.

The CVT is payable with effect from July 1, 2009 on the renewal of lease or any premium paid thereon. The shares of a public company traded in any registered stock exchange in Pakistan by a resident person have been excluded from the payment of CVT on the trading of said shares from July 1, 2009. The explanatory circular has also specified the rates of CVT for immovable property.

The paragraph (CA) of sub-section (2) of section 7 has been substituted with following new paragraph (CA) to prescribe the rates of CVT leviable on immovable property from July 1, 2009:

In case of residential immovable property, (other than flats), situated in urban area, measuring at least 500 square yards or one kanal (whichever is less) and more, following would be the CVT rates: Where the value of immovable property is recorded, the rate of the CVT would be 4 percent of the recorded value (whichever is higher).

Where the value of immovable property is not recorded, the rate of CVT would be Rs 100 per square yard of the landed area. Where the immovable property is a constructed property, the CVT would be Rs 10 per square foot of the constructed area in addition to the value worked out above.

In case of commercial immovable property of any size situated in urban area, where the value of immovable property is recorded, the CVT rate would be 4 percent of the recorded value. Where the value of immovable property is not recorded, the CVT would be Rs 100 per square foot of the landed area. Where the immovable property is a constructed property, the rate of CVT would be Rs 10 per square foot of the constructed area in addition to the value worked out above.

In case of residential flats, where the value of immovable property is recorded, the CVT rate would be 4 percent of the recorded value. Where the value of immovable property is not recorded, Rs 100 per square foot of the covered area (which ever is higher).

Previously, a registered stock exchange in Pakistan was obliged to collect the CVT at the rate of 0.01 percent, on transactions with effect from July 1, 2004, of the purchase value of any modaraba certificates or any instrument of redeemable capital as defined in the Companies Ordinance, 1984 (XLVII of 1984), or shares of a public company listed on a registered stock exchange in Pakistan transacted through its automated trading system. Capital Value Tax on shares traded on the Stock Exchanges has been withdrawn from July 1, 2009, the circular added.

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