In April last year, Prime Minister Imran Khan announced his government’s second tax amnesty plan for 10 months aimed at “stimulating economic growth” and minimizing the impact of COVID-19 on people’s lives.
So far, more than 1,000 construction projects worth Rs 355 billion have been registered during the first year of Prime Minister Imran Khan’s second tax amnesty plan. According to government statistics, 1,016 projects worth 355 billion rupees have been registered under the program. These included 274 projects that were already underway before the amnesty was announced a year ago and a reason for granting the amnesty.
The scheme allows people to invest in the construction sector without disclosing the source of income. The government planned to register projects worth over Rs 1 trillion until December last year. But the process lasted longer, and the prime minister eventually granted a six-month extension to the scheme.
Out of more than 1,000 plans, the vast majority (782) registered in December, which was the original deadline for the plan. The second largest number of projects was registered in October last year 121.
The scheme was also offered for projects that were under construction even before the scheme was announced. The condition was that both new and ongoing projects were largely completed by September 30, 2022, a deadline which has now been further extended.
The government first issued a presidential ordinance in April and then gave permanent legal cover to the regime by making it part of the 2020 budget bill. Another ordinance was enacted in January to further extend the regime up to June 2021. The government extended the start date of a construction project from December 2020 to June 2021 and also further extended the completion period of a project.
Under the condition of the International Monetary Fund (IMF), the government withdrew 140 billion rupees worth 75 income tax exemptions. But it managed to protect real estate concessions until 2024 in an attempt to revive economic activities.
The government has protected the 50% reduction in tax liability for general low cost housing projects until June 30, 2024. Similarly, a 90% reduction in tax liability for developed or approved low cost housing programs by Naya Pakistan Housing and Development Authority (NAPHDA) or under the Ehsaas program is also protected until June 2024.
According to the government, in addition to the 1,016 projects registered under the scheme so far, another 285 schemes worth 78 billion rupees were in the process of being registered, according to the government. These 285 projects have not yet met all the procedural requirements to be admitted to the plan.
Out of these, most of the 143 plans worth Rs 43 billion are in Punjab, followed by 76 plans with an estimated value of Rs 18 billion in Sindh. Approximately 57 projects worth Rs 17 billion under approval are located in the Capital Territory of Islamabad. There are nine projects found in Khyber-Pakhtunkhwa.
The IMF had banned Pakistan from granting additional tax amnesty plans during the life of the IMF program after the Pakistani government Tehreek-e-Insaf (PTI) issued a tax amnesty plan in May 2019 to allow people to declare their black and illicit money.
The Federal Revenue Board (FBR) said the construction industry tax amnesty scheme provides immunity against section 111 of the source of the income disclosure ordinance.
He said no questions asked about the nature and source of funds by investors making equity investments in new construction projects in the form of money or land, either as an individual, as a partnership or as a company.
In the case of a developer, the project will be considered complete on the date on which at least 50% of the total plots have been reserved in the name of the buyers; At least 40% proceeds from the sale have been received; the landscaping has been completed; and at least 50% of the roads have been laid to the sub-grade level as certified by the Approval Authority or NESPAK.
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