ISLAMABAD (January 19 2009): The Federal Board of Revenue (FBR) has directed the Large Taxpayer Units (LTUs) to check non-payment of capital value tax (CVT) on buying and selling of property by housing/development societies. Sources told Business Recorder on Saturday that the FBR has taken the decision during last board-in-council meeting to probe investment and non-payment of CVT by the housing societies.
The board would also examine the possibility to charge CVT on transaction value instead of recorded value of immovable assets. Sources said that the CVT is payable on the acquisition of immovable property and is levied on its value as recorded in mutation deed, registered deed, or power of attorney. The recorded value is mainly based on the valuation rates fixed by provincial governments for the purpose of collection of stamp duty.
Secondly, the law has also made it obligatory on every person registering or attesting the transfer of immovable property to furnish information on names, address and National Tax Numbers (NTNs) of the sellers and buyers besides complete description of the property and value for which the property is transferred. Through this measure transactions are being regularly reported to the department for building a data bank.
The housing societies have to take permission from the district government for sale/purchase of the immovable property. The tax department can ask the district governments to ensure withholding of the CVT by the housing societies.
Sources said that housing societies comes within the definition of companies. This society could be a private limited company, trust or co-operative society. The LTUs have the authority to obtain data from the housing societies for proper collection of the CVT on buying and selling of property.
Sources said that presently CVT has to be collected on the recorded value of the immovable property including commercial property and residential flats. However, certain housing societies do not record value, but only transfer property. For effective collection of CVT, the board is examining proposal that transaction value of the buying and selling should be taken for levying the CVT.
As many housing societies do not record value of the immovable property, transaction value should be taken to ensure maximum collection of the CVT on property.