Amendment required in taxation regime
AMANULLAH KARACHI—Arif Habib Chairman Arif Habib Group has said that the amendments required in the taxation regime affecting Real Estate Investment Trusts (REITs). He said, “REIT is a new concept in Pakistan that needs a stable and enabling taxation environment to develop. Through the government’s support both at the federal and provincial levels along with SECP’s guidance, Arif Habib Group held a prebudget media briefing to discuss the direct and indirect importance of REITs for the economy at the Arif Habib Centre on Tuesday.
Arif Habib, Chairman, Arif Habib Group while addressing the media said, “Through this session, we seek to discuss we were able to launch South Asia’s first listed REIT in the last fiscal year. However, shortly after the launch, the Finance Act 2015 made two changes, which hinder the launch of new REIT schemes. These changes need to be reversed and incentives to REITs should be restored”.
He further said, “REITs will lead to documented real estate transactions and non- speculative growth of the real estate sector. REITs will provide small investors with a secure and liquid investment avenue, creating employment and growth opportunities in over thirty sectors. It will also boost local and foreign investment confidence as transparency mechanisms are set in place.” The briefing covered a number of areas commencing with an overview on the potential and need of the Construction and Housing sector followed by a summary of the changes made in the tax law by the Government through the Finance Act 2015.
The session concluded with an outline of the recommendations presented to the Government for consideration in the upcoming budget. These included reinstating Capital Gains Tax Exemption on Sale of Property to all types of REITs as was available till June 2015 (as per Section 99A of the Second Schedule of the Income Tax Ordinance, 2001) and reclassification of Investment in REIT units as investment in Stock Fund, which are currently being incorrectly classified with Money Market or Fixed Income Fund (as per the Second Proviso of Part I-Division III of the First Schedule ITO, 2001).