ISLAMABAD: The IMF has suggested that the FBR expand the coverage of the Capital Gains Tax (CGT) by incorporating cryptocurrencies into the tax framework.
Additionally, it has proposed a reassessment of real estate and listed securities tiers to ensure all profits are subject to taxation, irrespective of the duration of asset holding.
Furthermore, the IMF has advised the FBR to enforce regulations obligating property developers to monitor and report all transactions before the finalization and registration of property titles. Failure to comply with these regulations may lead to penalties being imposed. This recommendation aims to bring the widespread practice of trading files for various plots within housing schemes under the tax ambit.
These suggestions by the IMF could potentially be integrated into the forthcoming bailout package under the Extended Fund Facility (EFF), with the FBR expected to incorporate them into the next fiscal year’s budget through the finance bill.
According to the IMF’s technical assistance report, Pakistani authorities have encountered difficulties in assessing and collecting taxes on capital gains from the sale of interests in real estate. As properties are usually not formally registered until legal completion, transfers of real estate interests before this stage often go untaxed.
To address this issue, the IMF proposes compelling property developers to monitor and report all such transfers before property title registration, with penalties for non-compliance, including secondary liability for any outstanding taxes. This would mean that if the transferor fails to pay the tax, the responsibility would shift to the property developer.
The IMF has also suggested methods to enhance capital gains taxation, including broadening the range of assets subject to taxation to include new types of investments like cryptocurrencies. It also recommends taxing capital gains on real estate and listed securities regardless of the duration of ownership.
Additionally, the IMF has recommended amending the definition of “personal moveable property” in Section 37(1) of the Income Tax Ordinance to include a catch-all category covering any investment property that is not stock-in-trade or assets subject to depreciation or amortization for tax purposes.
(Islamabad51_Newsdesk)
