On New Year’s Eve, the Prime Minister of Pakistan (Imran Khan) stretched extension up to one year in the date for fixed tax regime. It is now 31 Dec 2021. It was a major demand, placed by the construction industry, fulfilled by Prime Minister.

The announcement about the construction incentive package, also referred to as the construction amnesty scheme was in April 2020. The scheme signed a much-needed relief for the country’s economy during a tough year. On the expiration day of the package, the government declared a full-year allowance in the stir of the second wave of the Corona Virus pandemic.

The PM in his televised conference, provided approval for the following points, listed as follows:

• Fixed Tax Regime is now available until 31, Dec 2021.
• The exemption, offered under section-111 states that it inhibits inquiry into the income sources investment, extended until June 30, 2021.
• The time limit for completion of the registered project is September 30, 2023, i.e. another year added.
• The exemption for buyers concerning disclosing investment is now until 31st of March 2023.

What do you mean by a construction incentive/amnesty scheme?

The declaration of construction package associated with the government’s policy made it to the news in 2019. However, the moment came into existence following COVID 19 lockdown, first implemented in March. Apart from all other concerns, it came off as a message of hope from the Pakistani government in a time when the future looked uncertain all over the world.

The basic points of the incentive package include:

• Investors will not be questioned about their source of income whenever investing in the construction sector.
• A fixed tax regime now implemented on ‘per square yard’ and ‘per square feet,’ serving as the basis for the construction sector.
• Tax impositions are less by 90% for Naya Pakistan Housing Program Constructions (NPHP).
• Withholding tax is now waived for all construction companies, except those industries involved in steel, and cement related projects.
• In subsidy for NPHP, PKR 30 billion was announced.
• ‘Industry Status’ is now given to the construction sector.
• The establishment of a ‘Construction Industry Development Board’ will legalize its workings.

The above-mentioned points are the basic outlines, soon followed in a legal manner.

Why is this news great for the economy of Pakistan?

Unarguably, the incentive package provided a significant and much-needed boost for the economy of Pakistan. It breathes a wave of fresh air, a new spirit of optimism into the construction business all over the country.

The construction package is in alignment with the federal government’s aims to construct five billion homes across the country. It offered millions of jobs, which as a result, enhances the state economy in particular.

Additionally, the pandemic and lockdown serve as favorable signs; otherwise, the government might have tackled resistance from IMF (International Monetary Fund) and FATF (Financial Action Task Force). As per news reports, the international lending agency IMF also gave its signal to the current extension.

The impact of fixed tax regime on the real estate of the country:

During a recent meeting held in Islamabad, the FBR chairperson, Javed Ghani discussed the government hailed enticement package. As per news reports, Ghani delivered a review of the FBR portal and revealed that increased construction activities are going on in the country, specifically Punjab.

Also, another impact discussed was that more numbers of builders and developers are registering with FBR.

Read on to know more in detail about the impact of the fixed tax regime in the real-estate sector.

To start with its benefits; the FBR real estate fixed tax scheme will offer an allowance to those who plan to invest in low-cost housing projects. Additionally, the tax rates for such developers or builders are less by 90 percent.

Secondly, constructors are bound to pay PKR 210 per square tax for the development of commercial buildings in urban cities, including Karachi, Islamabad, Lahore, Multan, Quetta, Hyderabad, Rawalpindi, Faisalabad, Sahiwal, Peshawar, Mardan, to name a few. Meanwhile, construction rates will vary with each city.

Another way, the fixed tax scheme benefits the developer’s hints at the form of an established dispute resolution committee. As per the report, a national jurisdiction of builders and developers will come under the new scheme.

The FBR fixed tax regime has now made it obligatory for constructors and industrialists to get hold of a certificate from NESPAK (National Engineering Services Pakistan).

Besides, developers and constructors who opt for the regime are bound to seek FBR’s approval. This is required for developing schemes that exceed the three-year time limit, as launched by the authority.

Additionally, it is important to mention that these rules vary accordingly for individuals, companies, and associations all over Pakistan.