The Finance Bill 2024 has introduced a significant change in the capital gains tax regime by proposing a flat rate of 15% on the gain from the disposal of immovable property acquired on or after July 1, 2024. This new rule aims to simplify the tax structure and create uniformity in the taxation of immovable properties.
A tax expert explained that under the current system, capital gains from the disposal of immovable property are taxed at varying rates up to 15%, depending on the holding period and the type of property. The properties are categorized into open plots, constructed properties, and flats, each having different tax implications. Additionally, properties disposed of after a specified holding period are currently subject to a 0% tax rate.
The new flat rate of 15% will apply uniformly to gains from the disposal of immovable properties acquired on or after the specified date, irrespective of the holding period. This change will only affect properties acquired from July 1, 2024, onwards, leaving the current capital gains tax regime for properties acquired before this date unchanged.
For taxpayers listed in the Active Taxpayer List (ATL) at the time of disposal, the proposed 15% flat rate will be applicable. This simplification is intended to streamline the tax process and make compliance easier for property owners and investors. In contrast, for those not listed in the ATL, the capital gains tax will be subject to progressive tax rates, with a minimum tax rate of 15%.
The tax expert further highlighted that this proposal also aligns the capital gains tax on immovable properties with the proposed tax rate on securities. Both are set to be taxed at a flat rate of 15% for individuals listed in the ATL. This uniform tax rate is expected to reduce complexity and create a more consistent tax environment for different asset classes.
However, individuals who are not listed in the ATL at both acquisition and disposal dates will face the standard progressive tax rates on their capital gains, ensuring that they are taxed as normal income. This measure aims to encourage more taxpayers to ensure their inclusion in the ATL, promoting greater tax compliance.
Overall, the proposed changes in the Finance Bill 2024 represent a shift towards a more streamlined and consistent tax system for immovable properties and securities. By applying a flat rate of 15% for ATL-listed individuals and maintaining progressive rates for others, the government seeks to simplify the tax process while encouraging higher compliance rates among taxpayers.
