ISLAMABAD: The Federal Board of Revenue (FBR) and realty stakeholders on Saturday agreed on new valuation tables for the purposes of taxation of property prices in major cities of the country.

Both sides also agreed on new tax rates, and the FBR accepted suggestions on the process of property valuation that were given by the stakeholders.

The decisions were taken in a meeting between government officials and industry stakeholders, chaired by Finance Minister Ishaq Dar.

The task of determining a property`s fair market price will now be carried out by the FBR. Earlier, the task was given to professional valuators approved by the State Bank of Pakistan (SBP).

Saturday`s meeting also approved the upward revision of the valuation table for property prices in 18 major cities.

New valuation tables have been issued for 10 cities in Punjab: Lahore, Rawalpindi, Jhelum, Gujranwala, Gujrat, Sialkot, Faisalabad, Multan, Rahim Yar Khan and Bahawalpur; three in Sindh: Karachi, Hyderabad and Sukkur; two cities each in Khyber Pakhtunkhwa and Balochistan: Peshawar and Abbottabad; and, Quetta and Gwadar. A revision wasalso approved for Islamabad, where rates had remained unchanged since 2004.

The existing deputy commissioner (DC)-approved rate of property in Lahore and cities in KP are closer to the market value as compared to other cities in the country, a source privy to the meeting told Dawn.

He said the bulk of the work was done on the valuation tables of Islamabad, Rawalpindi and Karachi, which are the main cities where the real estate business thrives. `We used different formulas city-wise while looking at existing DC rates,` the of ficial added.

`We have removed the major discrepancies in val-ues of property determined by both sides,` Mr Dar told reporters af ter the meeting.

He said that for areas where no valuation tables had been notified, the DC rate will apply. New valuation tables will be used for the purpose of calculating Capital Gains Tax (CGT), withholding taxes and for the purposes of Section 111 of the Income Tax Ordinance 2001.

In a major relief for real estate stakeholders, the government has reduced the holding period of property from five years to three years for CGT-exemption. No CGT will apply on a property held for more than three years.

To further facilitate real estate investors, the government has introduced three slabs, effective from July 1, 2016, on properties.

According to the decision,the rate of CGT will be 10pc on a property held for one year, 7.5pc on a property held between one and two years, and 5pc if the holding period is between two and three years. If a property is held for more than three years, it will be exempt from CGT.

On the issue of transactions made before July 1, 2016, the CGT rate will be 5pc to declare a property at its actual cost on a one-time basis if the holding period is less than three years. It has also been proposed that tax will be paid on the amount of the difference between the declared cost and actual cost.

On stakeholders` demand, the government has increased the basic threshold for application of withholding tax on purchase of immovable property from Rs3 million to Rs4m.

`We may promulgate an ordinance to give effect to these decisions,` the minister said.

He said the valuation tables would be effective until June 2017. `We will announce new tables with the next budget,` he said.

Revenue impact Senator Dar noted that a notification would be issued, providing details of the new tax rates and valuation tables. He also announced that the lesser rate of 0.4pc on banking transactions will continue for the month of August 2016.

Answering a question, he said that there will be a major revenue impact of the decision.

The government has estimated that the changes made in the value of property and tax rates will yield revenue of over Rs10 billion in FY2016-17.

Mr Dar said that provinces would be engaged informally to use these tables for taxation at the provincial level, but that these valuation tables were only applicable for federal taxes. In the provinces, the valuation table is normally notified by the collector of a district under Section 27-A of the Stamp Act, 1899.

FPCCI President Abdul Rauf Alam told Dawn the government had accepted nearly all their demands. A major demand was the withdrawal of the decision empowering the SBP to determine fair market value of properties, which could have led to corruption in the sector.