As Pakistan prepares for discussions with the International Monetary Fund (IMF) regarding a new loan program, the government is expected to increase taxes on the purchase and sale of immovable property in the 2024-25 budget.
Sources indicate that during talks with the Federal Board of Revenue (FBR), the IMF has urged Islamabad to raise the advance tax on property transactions to boost overall tax revenue.
This development comes as a team from the Washington-based lender, led by Nathan Porter, is set to meet Pakistani authorities to discuss a new bailout program under the Extended Fund Facility (EFF). Pakistan has formally requested a fresh bailout package of $6-$8 billion under the EFF, with potential augmentation through climate finance.
Notably, the IMF has recently asked the FBR to revoke the discretionary powers of the board and the cabinet to grant tax incentives and to amend tax laws affecting NGOs, charitable organizations, and taxed pensioners.
Regarding pensions, the IMF recommends taxing either pension contributions or benefits. The lender aims to eliminate the deduction benefit for voluntary payments to workers’ participation funds and the exemption of pensions, proposing taxation based on one of the outlined alternatives.
Read more: Pakistan’s Weekly SPI Drops by 1.06%
The IMF also suggests that tax incentives should only be provided when their economic benefits, such as employment and value addition, outweigh the budgetary costs.
In line with the potential tax hikes, sources suggest the government may amend Section 236K of the Income Tax Ordinance in the upcoming budget. This amendment would impose a 7% tax for non-filers and 3% for filers on property purchases up to Rs50 million. For properties valued between Rs50 million to Rs100 million, the tax would be 13% for non-filers and 4% for filers. Properties worth more than Rs100 million would see a tax of 35% for non-filers and 5% for filers, aiming to generate over Rs100 billion in revenue in the next financial year.
Currently, the tax rate stands at 3% for filers and 10.5% for non-filers.
Additionally, the tax on the sale of immovable property has been adjusted by amending Section 236C of the Income Tax Ordinance. For sales up to Rs50 million, the tax is set at 12% for non-filers; for properties between Rs50 million to Rs100 million, the tax is 18%; and for properties worth more than Rs100 million, the tax is 35%.
For filers, the proposed advance tax on property sales is increased to 3% for properties up to Rs50 million, 4% for properties between Rs50 million to Rs100 million, and 5% for properties worth more than Rs100 million.
