ISLAMABAD: Pakistan’s tax regulator, the Federal Board of Revenue (FBR), has announced significant changes aimed at easing tax procedures for builders and developers, offering faster relief through a streamlined exemption process. The move is expected to benefit the real estate sector by reducing delays and improving cash flow management.
Under Circular No. 08 of 2025-26, issued under the Income Tax Ordinance 2001, the FBR has directed tax authorities to issue withholding tax exemption certificates within seven working days. The directive applies to developers operating under Section 7F, a special tax regime that taxes income based on gross receipts rather than net profits.
The new policy specifically addresses concerns related to withholding tax under Section 236C, which is typically applied to property transactions. Builders and developers had raised issues that such advance tax deductions were creating liquidity challenges, particularly when they had already fulfilled their tax obligations under Section 7F.
According to the FBR, if an eligible taxpayer submits a complete application and meets all requirements, the concerned Commissioner Inland Revenue must process the exemption request within the stipulated time. If no action is taken within seven days, the system will automatically issue the exemption certificate through the IRIS platform, ensuring transparency and efficiency.
The clarification overrides an earlier circular issued in March 2026 and aims to resolve long-standing concerns within the construction and real estate industry. Developers who have fully paid their tax liability under Section 7F and do not have additional taxable income can now apply for exemption under Section 159 to avoid further withholding tax on property sales.
Officials stated that applications will still be reviewed on a case-by-case basis to ensure compliance with legal requirements. However, the introduction of a strict timeline and automated processing marks a major step toward simplifying tax administration.
Industry experts believe this reform could encourage investment in Pakistan’s property sector by reducing administrative hurdles and improving financial predictability for developers.
