FBR introduces new law making NOC mandatory for property transactions

The Federal Board of Revenue (FBR) has recently implemented a new law that mandates obtaining a No Objection Certificate (NOC) from the FBR prior to buying or selling property.

The introduction of this law aims to tackle the long-standing issues of tax evasion and black money within the real estate sector and to bolster the government’s revenue generation efforts.

The FBR officials have expressed their intention to achieve the target of taxation by ensuring that all property transactions are accurately recorded and taxed appropriately.

One of the primary implications of this new law is that citizens planning to buy or sell property will now have to make a mandatory visit to their local FBR office to obtain the necessary NOC before proceeding with their transaction.

Additionally, the officials emphasize that this measure will not only increase revenue for the government but will also encourage non-filers to become tax filers.

In the Finance Act 2023, a new sub-section (2A) in section 236C of the Ordinance prevents the transferring authority from registering, recording, or attesting the transfer of any immovable property unless the seller or transferor has fulfilled their tax liability under section 7E and provided evidence of such compliance to the transferring authority in the prescribed manner.

It is worth mentioning here that the implementation of the mandatory requirement to comply with section 7E payment has brought property documentations across Pakistan to a near halt.

Representatives from the real estate sector in major cities conveyed this concern during a meeting of the National Assembly Standing Committee on Finance at the Parliament House, the media reported.

According to the real estate sector’s representatives, the Federal Board of Revenue (FBR) is expected to issue revised valuation tables for immovable properties in August 2023. However, the introduction of section 7E of the Income Tax Ordinance 2001 has complicated the situation, leading to a suspension of property transfers and registrations.

The Federation of Realtors Pakistan (FORP) informed the committee that property registries have decreased by up to 95%, and property transfers across the country have come to a standstill. The increase in taxes has resulted in difficulties for both local and overseas investors, with capital now being transferred abroad. This has made overseas investors uneasy about their investments in Pakistan. Section 7E was introduced through the Finance Act 2022, treating every resident person’s income as 5% of the fair market value of the capital asset situated in Pakistan, with exclusions provided in the law. This deemed income is taxed at a rate of 20% (effectively 1% of the fair market value of immovable property). – News Agencies