FBR Introduces Minimum Profit Rates for Builders and Developers in New Tax Scheme

The Federal Board of Revenue (FBR) has implemented minimum profit rates for builders and developers in Pakistan. This change is part of the amended Finance Bill 2024 and aims to streamline tax collection within the construction sector.

Key Points:

  • Minimum Profit Rates: The amended bill establishes fixed taxable profit rates for different construction activities:
    • Ten percent of gross receipts from the construction and sale of residential, commercial, or other buildings.

      • Fifteen percent of gross receipts from the development and sale of residential, commercial, or other plots.

      • Twelve percent of gross receipts from activities involving both construction and development as specified above.

  • Tax on Taxable Profits: A new tax will be imposed on the taxable profit calculated using the aforementioned rates. The tax rate itself is determined by Division I or II of Part-I of the First Schedule
  • Applicability: This section applies solely to income derived from the gross receipts of construction and development activities specified in the bill, excluding income from other sources.
  • Credit Limitations: Taxpayers cannot claim credit for any amount exceeding the calculated taxable profit.
  • Tax Payment Options: If a builder or developer’s taxable income under Section 9 of the Income Tax Ordinance exceeds the minimum taxable profit determined under this new section, they can choose to:
    • Pay tax on the higher taxable income under Section 9.
    • Pay tax on the minimum taxable profit calculated under this section, provided they pay the designated tax rate.
  • Exemptions: Builders and developers established by an Act of Parliament, a provincial assembly, or a Presidential Order are exempt from this section if their activities benefit their employees or focus on housing and facility development in designated areas.

Following Developments:

For a comprehensive list of construction activities categorized under each tax rate and further details on the tax rates themselves, it’s recommended to keep visiting our website to get a more in-depth breakdown of the amended Finance Bill 2024.

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