FBR allows tax exemption for builders under special regime on property sales

The Federal Board of Revenue (FBR) has allowed withholding tax exemption on property sales for builders and developers operating under the special tax regime defined in Section 7F of the Income Tax Ordinance, 2001.

In a recent circular, the FBR clarified that such taxpayers may apply for exemption from advance tax under Section 236C, provided they have already discharged their tax liability under the fixed tax regime and do not have other taxable income against which the tax can be adjusted.

The clarification follows concerns raised over the applicability of withholding tax on developers whose income is assessed as a fixed percentage of gross receipts under Section 7F. In such cases, the deduction of advance tax was creating liquidity pressures, particularly where no other taxable income existed.

Under the revised guidance, eligible builders and developers can apply to the concerned Commissioner of Inland Revenue under Section 159 for exemption certificates to avoid tax collection on transactions involving the sale of immovable property.

The FBR has directed Commissioners to assess applications on a case-by-case basis and ensure compliance with the prescribed conditions before granting exemptions. It added that standard timelines for processing such applications will apply.