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CAPITAL VALUE TAX (CVT)

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READ WITH:

IMMOVABLE PROPERTY TRANSACTIONS IN PAKISTAN

SINDH CAPITAL VALUE TAX 

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THE CAPITAL VALUE TAX (CVT) [SECTION 7 OF THE FINANCE ACT 1989 (V OF 1989)]

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FINANCE ACT 2012 – EXPLANATION OF IMPORTANT PROVISIONS RELATING TO CVT: 

The amendments made thru the Finance Act 2012 relating to CVT are explained under Finance Act Explanatory Circular 03/2012 (CVT) dated 01.08.2012 alongwith clarification in respect of Transfer, Mortgage, Power of Attorney etc. that Circular No. 2 of 2006 dated 01.07.2006 and 14.09.2006, Circular No. 2 of 2007 dated 04.07.2007 and Circular No. 04 of 2009 dated 18.07.2009 shall continue to apply in respect of transfers representing purchase, gift, exchange, surrender, power of attorney, relinquishment of rights and payments representing premium and renewal of lease in respect of immoveable property and mortgage deeds executed by the banking companies.

FINANCE ACT 2012 (XVII OF 2012) – SHARES OF A PUBLIC COMPANY:

After incorporating the amendments made by the Finance Act 2012 (XVII of 2012 dated 27.06.2012 Capital Value Tax section 7 of the Finance Act 1989 (V of 1989) updated to read as follows:

7. Levy of tax on Capital Value of certain assets.––(1) A tax on the capital value of assets, to be called the capital value tax, shall be payable by every individual, association of persons, firm or a company which acquires by purchase gift, exchange, power of attorney other than revocable and time bound (not exceeding sixty days) executed between spouses, father and son or daughter, grand parents and grand children, brother and sister, surrender or relinquishment of rights by the owner (whether effected orally or by deed or obtained through court decree) except by inheritance, or gift from spouse, parents, grand parents, a brother and a sister an asset or a right to the use thereof for more than twenty years, or renewal of the lease or any premium paid thereon [, and shares of a public company, listed on a registered stock exchange in Pakistan by a person defined in section 80 of the Income Tax Ordinance, 2001 (XLIX of 2001),]: [1]

Provided that in case of a bank, the capital value tax shall be paid when general power of attorney is used to sell the mortgaged property offered as collateral other than traded security for obtaining loan.

Explanation.––For the purposes of this section, the expressions––

(a) “association of persons” and “firm” shall have the same meaning as contained in the Income Tax Ordinance, 2001 (XLIX of 2001); and

(b) “company” shall have the same meaning as defined in the Income Tax Ordinance, 2001 (XLIX of 2001) except a local authority;

(c ) “development authority” means an authority formed by or under any law for the purposes of development of an area and includes any authority, society, agency, trust, association or institution declared as development authority by the Central Board of Revenue by a notification in the official Gazette; and

(d) “registration authority” means the person responsible for registering or attesting the transfer of the asset or of the right to use thereof for more than twenty years, and in the case of a development authority or a co-operative society, its principal officer.

(e) “urban area” means area falling within the limits of––

(i) theIslamabadCapitalTerritory;

(ii) (iii) [2]

(iv) such areas the Federal Board of Revenue may, from time to time, by notification in the official Gazette, specify.

 

(2) The assets and the rates referred to in sub-section (1) are:

 

Description of asset Rate of CVT percentageof the capital value
A (a) Residential immovable property, (other than flats), situated in urban area, measuring at least 500 square yards or one kanal (which ever is less) and more,––
(i) Where the value of immovable property is recorded 2% of the recorded value Which ever is higher
(ii) Where the value of immovable property is not recorded Rs. 100 per square yard of the landed area
(iii) Where the value of immovable property is a constructed property Rs. 10 per square feet of the constructed area in addition to the value worked out above.
(b) residential flats of any size situated in urban area—
(i) Where the value of immovable property is recorded 2% of the recorded value Which ever is higher
(ii) Where the value of the immoveable property is not recorded. One hundred rupees per square feet of the covered areas of the immovable property; and
(c ) commercial immovable property of any size situated in an urban areas–
(i) Where the value of immovable property is recorded 2% of the recorded value of the landed area Which ever is higher
(ii) Where the value of immoveable property is not recorded One hundred rupees per square feet of the landed area
(iii) Where the immoveable property is a constructed property Ten rupees per square feet of the constructed area in addition to the value worked out above.
[3]
(A) Omitted  
(B) Omitted  
(C) Omitted  
(CA) Omitted  
(D) Omitted  
(E) Purchase of modaraba certificates or any instrument of redeemable capital as defined in the Companies Ordinance, 1984 (XLVII of 1984), 0.2% of the purchase value.
(F) purchase of shares of a public company listed on a registered stock exchange inPakistan 0.01% of the purchase value

[4]

(3) For the purposes of sub-section (1), the capital value of the asset shall be––

(a) Omitted

(b) in the case of a motor vehicle not plying for hire, which is––

(i)

Imported the landed cost as determined by the Customs authorities;

(ii)

purchased from a manufacturer inPakistan. the price paid by the purchaser;

(iii)

Others as declared by the transferee.

(c) Omitted

(4) The capital value tax shall be collected by the person responsible for registering or attesting the transfer of the asset in respect of which the tax is payable, at the time of registering or attesting the transfer:

Provided that in the case of motor vehicle when purchased from a manufacturer inPakistan, the capital value tax shall be collected by such manufacturer before making the delivery of the said vehicle:

2nd Proviso Omitted

Provided further that a registered Stock Exchange in Pakistanshall collect Capital Value Tax on the purchase value of [shares of a public company]. [5]

(5) Omitted

(6) The proceeds of the tax collected under sub-section (4) shall be credited to the Federal Consolidated Fund under the head specified by the Federal Government.

(7) Where the capital value tax is not collected from the person liable to pay it, the tax may be collected by an officer designated by the Central Board of Revenue in this behalf from the said person, and the provisions of Part IV of Chapter X of Income Tax Ordinance, 2001 (XLIX of 2001), shall, so far as may be, apply to the collection of the capital value tax as they apply to the collection of tax under the said Ordinance.

(8) Where any person fails to collect or having collected fails to pay the capital value tax as required, he shall be personally liable to pay the tax alongwith additional tax at the rate of 15% per annum for the period for which such tax or part thereof remains unpaid.

(8A) The Commissioner of Income Tax, on an application by the assessee, may revise any order made under this section.

(9) The Central Board of Revenue may, by notification in the official Gazette, make provisions relating to the collection and recovery of, any other matter relating to the capital value tax.

(10) The Federal Government may, by notification in the official Gazette, exempt any person or class of persons or asset or class of assets from the Capital Value Tax;

Provided that such exemption may be subject to such conditions as may be specified in the notification.

Updated Version of Section 7

  1. [1] :

    SHARES OF A PUBLIC COMPANY – After the word “thereon”, the words, brackets, commas and figures inserted vide Finance Act 2012 (XVII of 2012).

  2. [2]

    URBAN AREAS – Following sub-clauses (ii) & (iii) of clause (e) of Explanation under section 7(1) omitted vide Finance Act 2012 (XVII of 2012).

    “(ii) a Cantonment Board;

    (iii) the rating areas as defined under the Urban Immovable Property Act, 1958 (W.P V of 1958) as inforce in Punjab, NWFP, Sindh and Balochistan except where the rate under section 117 of the respective Provincial Local Government Ordinance, 2001 is zero; and”

  3. [3] ASSETS AND CVT RATES – The above-mentioned new paragraph ‘A’ added vide Finance Act 2012 (XVII of 2012).
  4. [4] SHARES – New clause (F) added vide Finance Act 2012 (XVII of 2012).
  5. [5]

    SECURITIES – Words [in brackets] substituted for the words “modaraba certificates or any instrument of redeemable capital or shares of a public company from the resident persons” vide Finance Act 2012 (XVII of 2012).

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