Overseas Pakistanis to be exempted from paying Advance Tax on Immovable Property 


Overseas Pakistanis rejoice! This is the best possible time for Overseas Pakistanis to invest in the real estate sector of Pakistan.

The federal government has announced the withdrawal of the Advance Tax under Section 236k of the Income Tax Ordinance 2001 as a major step towards creating investment opportunities in Pakistan. Overseas Pakistanis will only be subjected to Section 236c, which is the Advance Tax on the Sale/Transfer of immovable property.

Investment in immovable property has been deemed by many for many years as a dead investment, as it does not stimulate the national economy. Keeping this in mind, the FBR has already substantially raised the values of immovable properties across the country, with the government doubling the taxes on the real estate sector in the last sector. This audacious move had severe negative effects on this sector.

In the last budget, the rate of Advance Tax on the sale or transfer and on the purchase or transfer of immovable property has been enhanced from 1% to 2%. Moreover, sub-section (3) of section 236C has been omitted. Now advance tax on the sale or transfer of immovable property will be collected under this section irrespective of the holding period. In the case of purchasers of immovable property who are not appearing on the active taxpayer’s list, the rate of tax to be collected under section 236K will increase by two hundred and fifty percent of the rate specified in the law.

It is worth mentioning that some non-resident Pakistanis may not be required to file income tax returns by virtue of applicable provisions of the Ordinance. Therefore, they do not appear on the active taxpayer’s list and are hence likely to suffer the mischief of rule 1 of the Tenth Schedule of the Ordinance. In order to facilitate non-resident Pakistanis holding Pakistan Origin Card (POC) or National ID Card for Overseas Pakistanis (NICOP), provisions of Section 100BA and Rule 1 of the Tenth Schedule will not apply to them in respect of transactions on which tax is collectible under section 236C and 236K of the Ordinance that applies on purchase or sale of immovable property.

Historically speaking, this endeavor is one of many initiatives taken by presiding governments to encourage overseas Pakistanis to start investing in the real estate sector of the country, similar to the Naya Pakistan Certificate put in place by the PTI tenure.