The Finance Bill, like any other bill, is a legislative proposal, which becomes a full fledge Act or law, once it is passed from both the houses of Parliament along with assent given to it by the President. The Finance bill is a part of the budget memorandum, presented annually in the National Assembly. Every year through Finance Bill, the government initiates various amendment proposals in different direct and indirect tax laws for levy of new taxes, modification or continuation of existing tax structure. Once these proposals are approved from both the houses of parliaments and formally signed by the President, they become part of the law and enforced accordingly.

This year, as part of economic reforms package, which included tax reforms and amnesty scheme; following four ordinances were promulgated by the President which need to be understood alongside the current Finance Bill 2018:

  1. The Foreign Assets (Declaration and Repatriation) Ordinance, 2018;
  2. The Protection of Economic Reforms (Amendment) Ordinance, 2018;
  3. Voluntary Declaration of Domestic Assets Ordinance, 2018; and
  4. Income Tax (Amendment) Ordinance, 2018.


The Foreign Assets (Declaration and Repatriation) Ordinance, 2018 requires every Pakistani citizen, wherever he/she may be, to declare his/her foreign assets latest by June 2018 and pay the tax on the market value of those assets. In case of immovable assets outside Pakistan, the tax rate is 3% of the fair value of the property.

A new provision has been made in the Protection of Economic Reforms Act, 1992 (PERA) by virtue of which the exemption from taxes on foreign currency account and the immunity previously available to all the foreign currency account holders in Pakistan from enquiries by tax authorities with respect to the source of the capital has now been confined to tax filers only. As such now no non filer will be entitled to open foreign currency accounts in Pakistan.

Voluntary Declaration of Domestic Assets Ordinance, 2018 requires every Pakistani citizen, wherever he/she may be, to declare his/her undeclared domestic assets latest by June 2018 and pay the tax as per valuation criteria defined. A tax rate of 2% and 5% has been fixed for declared value of foreign currency and all other assets respectively. The basis of valuation of all immovable properties shall be as follows:

  1. Open Plots and land       :        Cost of acquisition or FBR rates, whichever is higher
  2. Super Structure               :        Rs. 400 per square feet of covered area
  3. Apartments and flats :   Cost of acquisition or Provincial stamp duty rates whichever is higher


The amendments in the Income Tax Ordinance 2001 through Income Tax (Amendment) Ordinance, 2018 were made to make Income tax ordinance compatible with the provisions of other ordinances promulgated as part of Economic Reforms Package. Besides basic amendment in “the year of income tax chargeable to tax” u/s 111(2) and increasing the maximum exemption limit form Rs.400,000/- to Rs.1,200,000/- no specific changes pertaining to real estate sector were made in this ordinance. The provisions of the Income Tax (Amendment) Ordinance, 2018 were however made part of the Finance Bill-2018 and all the remaining three ordinances are going to be passed from the National Assembly simultaneously.


The area wise value of properties determined by the Deputy Commissioner for the purpose of calculating stamp duty is commonly referred to as DC rates. Since long these rates have also been used as acceptable value of properties for taxation purposes as well. However the fact remains that the fair value, the transaction value and the DC rate of immovable properties differ significantly. The wide gap between these values compelled the Federal Board of Revenue (FBR) in 2016 to come up with a new set of rates for assessing the value of immovable properties. These new values of immovable properties, called the FBR rates, being higher than the DC rates were consequently used in lieu of DC rates for taxation purposes. Despite implementation of more stringent valuation standards, the menace of under-declaration of the actual transaction value remained unresolved. As such, replacement of existing valuation system with a new system is proposed whereby the immovable properties are recommended to be valued on the basis of transactional values rather than their standard values (DC/FBR rates).

In this connection a post of Director General of Immovable Properties is likely to be created under section 230-F of the Income Tax Ordinance 2001, duly empowered to appoint valuation expert to assess the fair market value of the properties and to initiate proceedings, within six months from the date of all such transaction where there are reasons to believe that the consideration for transfer is under stated to avoid tax. However the proceedings shall only be initiated if the fair market value of the property exceeds by more than 50% of the declared consideration. In case the transaction is proved as such, the government shall have the right to acquire the property by making payment of consideration to the seller through FBR. This will help reduce the under valuation trend to a greater extent.

A new section 227-C has also been under consideration by virtue of which nobody can purchase any vehicle or property, exceeding Rs.4.00 million and above, unless he is filer. This may however need to be examined in the light of the fundamental right of every citizen for acquisition of assets.

It is however imperative here to mention that since the immovable properties is a provincial subject as such despite having been officially discussed neither the new rate mechanism nor the provision of section 230-F and 227-C is included in the finance bill-2018. However one thing is very much clear that the government is eyeing on tapping the huge amount of invisible un-taxed funds, spread all over the real estate sector.


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