ISLAMABAD (April 18, 2011) : The Federal Board of Revenue (FBR) is planning to take a major step in the 2011-12 budget for documentation of the economy by making it mandatory for the sellers of the immovable property to obtain ‘tax clearance certificate’ from the tax department, ensuring that the seller has declared his property details in the wealth statement.
Sources told Business Recorder here on Sunday that the provincial registration authorities would not transfer the property till the seller obtains the ‘tax clearance certificate” from FBR. Under the proposal, the FBR will take some major measures for documentation in the upcoming budget. One of the proposals is to make it compulsory for the seller of the immovable property to obtain “tax clearance certificate” or “property clearance report” from FBR. Every person who intends to sell property would not be able to sell the same till he files the income tax return as well as the wealth statement with the tax department. The FBR will issue ‘tax clearance certificate” to only those sellers of property who would declare the details of property including its actual value in the wealth tax statement.
In his wealth statement, owner of the property would submit basic details of the property particularly its actual value. Unless or until, the seller does not submit the wealth statement, the FBR will not issue the ‘tax clearance certificate” to the concerned person. This declaration known as “tax clearance certificate”, “property clearance report” or “property clearance certificate” would be required at the time of transfer of property.
Without the ‘tax clearance certificate” of the FBR, the provincial registration authorities or property transferring authorities would not carry out the transaction and would not transfer the property. In this connection, the Finance Bill for 2011-12 budget is expected to introduce a provision for making it compulsory for the provincial registration authorities or property transferring authorities to transfer property of only those persons, who have obtained the ‘tax clearance certificate” duly issued by the FBR. Such ‘tax clearance certificate” would have to be submitted to the provincial authorities for selling of the immovable property.
According to sources, the FBR has studied different best tax administrations where properties have been documented through effective measures. The FBR studies have found that compulsion for the sellers to obtain such kind of “property clearance report” from the respective tax department encourages documentation. In different countries, property owners have to follow documentation procedures for carrying out property transactions. Under the proposal, the ‘tax clearance certificate” would be issued to the effect that property has been declared in the wealth statement along with the accurate market value of the property.
If the government implements this proposal in 2011-12 budget, it would be the biggest documentation measure which would document the entire transactions of buying and selling of property without causing any harassment to the taxpayers. The purpose of the proposed measure is to document the property transactions which are taking place without the notice of the FBR. In case such proposal is made part of the Finance Bill for 2011-2012 budget, it would be instrumental in documentation of the owners of property particularly those taking place in posh areas of the country. Secondly, this measure would also ensure that the seller of property is filing both income tax return and wealth statement.