ISLAMABAD: The Federal Board of Revenue (FBR) has introduced a significant procedural reform for Pakistan’s real estate and construction sector through the issuance of Circular No. 08 of 2025-26 (IR-Policy – Income Tax). The circular clarifies the applicability of withholding tax under Section 236C of the Income Tax Ordinance, 2001, specifically for taxpayers operating under Section 7F.
Under the new directive, tax officials are required to issue withholding tax exemption certificates within seven working days to developers who have already fulfilled their obligations under the special tax regime. Should an applicant meet all required conditions and submit a complete application, yet the concerned Commissioner fails to act within the stipulated timeframe, the exemption certificate will be automatically processed and issued through the IRIS system.
Under Section 7F, developers are taxed at a fixed percentage of gross receipts rather than conventional profit-based calculations, a distinction that had previously created ambiguity around the collection of advance tax on property transactions.
The latest circular supersedes Circular No. 7 of 2025-26 dated March 31, 2026, and directly addresses concerns raised by builders and developers regarding the collection of advance tax during property transactions.
The reform is expected to reduce administrative delays and improve the overall ease of doing business within Pakistan’s real estate and construction industry. By introducing an automated fallback mechanism through the IRIS system, the FBR aims to eliminate bureaucratic bottlenecks that have long frustrated developers seeking timely relief from double taxation.
This development signals a broader effort by the revenue authority to modernise tax administration and foster a more investor-friendly environment in the property sector.
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