Following intervention by the Federal Tax Ombudsman (FTO), the Federal Board of Revenue (FBR) has confirmed that chartered accountant (CA) firms have been notified to recover taxes from developers/builders. This move addresses a complaint filed by tax lawyers.
Background of the Complaint
Under Section 100D of the Income Tax Ordinance, developers are required to obtain a completion certificate for real estate projects. This certificate issuance involves verification of certain criteria, including:
- Completion of landscaping by September 30, 2023 (certified by the map approving authority or NESPAK).
- A CA firm (with a satisfactory ICAP-QCR rating and notified by the FBR) certifying that:
- At least 50% of plots have been booked for sale by September 30, 2023.
- At least 40% of the sale proceeds have been received by September 30, 2023.
- At least 50% of the roads have been laid to sub-grade level (as certified by the approving authority of NESPAK).
The FBR’s inaction on notifying CA firms was causing hardship for developers and could potentially harm the tax system and national exchequer.
FBR’s Response
In response to the complaint and Mr. Butt’s earlier efforts to reach the FBR chairman and relevant members, the FBR’s Policy Wing submitted a report to the FTO. The report confirms that SRO 399(i) 2024 was issued to notify CA firms with a valid “satisfactory” ICAP-QCR rating. This notification allows these firms to participate in the completion certificate process for real estate projects.
The FBR report considers the grievance addressed and serves as a compliance report to the FTO.
Significance
This development ensures that the process of issuing completion certificates for real estate projects adheres to tax regulations. The involvement of notified CA firms with a satisfactory ICAP-QCR rating adds a layer of credibility and helps ensure developers meet their tax obligations.
