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Big Relief for those looking to sell property in Pakistan; full details here

LAHORE – Pakistani authorities tightened noose around real estate sector, leaving industry in dire straits, but those planning to sell property for the first time. In major relief for property sellers and real estate developers, Lahore High Court’s Rawalpindi Bench restricted Federal Board of Revenue (FBR) from collecting advance tax on people selling property for the first time. This decision is sigh of relief for those selling property for first time as it reinforces their exemption under Section 236C(4)(b) of Income Tax Ordinance. The exemption applies if seller is original allotted and has been certified by the concerned authority. LHC passed on relief after a housing society took legal route against Punjab Land Records Authority for charging advance tax through its online system. The court found that PLRA’s actions had no backing from any official notification from apex tax collection authority. Judge allowed sale of 128 properties on condition that post-dated cheques and written undertakings are provided, in case tax is later deemed payable. The landmark ruling could boost confidence in the real estate sector and ease financial burdens for genuine sellers.  The next court hearing is scheduled for April 28, but for now, this is welcome news for those planning to sell their property for the first time in Pakistan. Federal Excise Duty On Property The Pakistani government decided to abolish the 3pc Federal Excise Duty (FED) on the first sale of properties, a move made in consultation with the IMF. This tax, introduced in the previous budget, had faced strong resistance from the real-estate sector and legal challenges, as property taxation is a provincial matter. FED applied at rates of 3% for filers and 5% for non-filers, and its removal is aimed at reviving the struggling real estate market. A formal proposal has been submitted, and legislation is expected soon. The government also plans to eliminate a 10% income tax surcharge on high earners and offer tax relief to the salaried class, pending IMF approval. Other tax reforms under consideration include scrapping the deemed income tax on property, standardizing stamp duties, revising property valuations, and offering tax exemptions for affordable housing and first-time buyers

Government scraps 3% FED on property sale

Move comes after real-estate sector backlash; broader relief ahead of budget – Estate Safe Marketing The government has decided to immediately abolish the 3% federal excise duty (FED) being charged on the first sale of all properties in Pakistan after July. This reverses a contentious tax measure, that has severely damaged the real-estate sector, after almost 10 months of its introduction. The decision has been taken in consultation with the International Monetary Fund (IMF), a senior Federal Board of Revenue (FBR) official confirmed to The Express Tribune on Tuesday. Separately, an IMF budget special mission is reaching Pakistan on May 14 to vet the fiscal year 2025-26 budget. It has been decided that the 3% FED on allotment or transfer of property by filers, and 5% by non-filers, will be abolished, said the sources. They added that a summary has already been moved by the FBR to initiate the legal process for abolishing the duty. The prime minister’s task force on the housing sector has recommended scrapping the 3% FED, and its decision is proposed to be implemented in due course, said Dr Najeeb Memon, FBR spokesperson. He added that legislation is expected to be introduced soon. There has been negligible collection during the July March period of this fiscal year due to most real-estate authorities’ reluctance to accept the duty, which falls in the provincial domain. Under the Constitution, immovable property is a provincial subject, and taxpayers have challenged the duty in the courts. Finance Minister Muhammad Aurangzeb has already given his consent to move the summary to abolish the duty. The matter will now be tabled before the federal cabinet to amend the Federal Excise Duty Act. The government wants to abolish the duty within this month, subject to required legislative approvals. IMF Resident Representative, Maher Binici, did not respond to a request regarding whether the IMF endorsed abolishing the 3% FED. The duty had been imposed effectively on every house, plot, and apartment in Pakistan sold after June 30, 2024. The levy had been introduced at the time of the budget’s approval by the National Assembly. It applied to commercial properties and the first sale of residential plots or properties, with rates of 3% for filers, 5% for late filers, and 7% for non-filers, collected at the time of booking, allotment, or transfer. As part of additional measures introduced on the eve of the budget’s approval, the government imposed a Rs500,000 tax on farmhouses ranging from 2,000 to 4,000 square yards, and Rs1 million on farmhouses over 4,000 square yards within the Islamabad Capital Territory. Similarly, a Rs1 million tax was imposed on residential homes ranging from 1,000 to 2,000 square yards, while homes exceeding 2,000 square yards now attract a Rs1.5 million tax. A 4% stamp duty was also approved on the value of properties being traded in Islamabad Capital Territory. Adding insult to injury, the government also imposed a 10% surcharge on income tax for individuals earning an annual income of Rs10 million just before the budget’s approval. Sources said a proposal is under consideration to abolish this surcharge starting July. They added that the government is considering various options to reduce the tax burden on the salaried class by lowering tax rates and increasing the taxable income threshold. However, these proposals will be subject to IMF endorsement next month. The IMF’s budget mission is scheduled to arrive in Pakistan on May 14 to vet the next fiscal year’s budget and tax measures before they are presented in the National Assembly, likely on June 4 or 5, just before the Eid holidays. The finance minister stated last Saturday that the IMF mission on the budget would arrive around mid-May. Abolishing the duty will boost the real-estate sector, as the duty is not adjustable, unlike withholding taxes, said Ahsan Malik a real-estate dealer who was also part of the PM’s Task Force on Housing. The real-estate sector is facing sluggish growth prospects due to high property prices and heavy transaction taxes. The IMF, as a policy, discourages speculative trade in the real-estate sector and has favored substantially increasing withholding tax rates in the budget. Despite the overall sluggish market, the government collected Rs108 billion in withholding taxes on property sales and purchases during the first half of this fiscal year Rs17 billion, or 18%, higher than the same period last year. The PM’s task force had also recommended abolishing the deemed income tax on properties, which it described as bad legislation and a matter falling within the provincial domain. It also suggested standardizing and rationalizing stamp tax rates across provinces and Islamabad. Other recommendations include abolishing the capital value tax in Islamabad and ensuring uniform taxation policies through the National Tax Council. The task force has also proposed revising property valuations every three years to reflect market prices and introducing transaction tax exemptions for specific categories, such as low-cost housing, government plots, and first-time homebuyers. It further suggested that capital gains tax should revert to a slab-based system, as was applicable in the last fiscal year, and that input costs be reduced by rationalizing taxes on construction materials. The task force also recommended reducing the policy rate to single digits an idea the central bank and the IMF did not accept.  

Big Relief for Real Estate Sector Major Tax Waiver on Buying & Selling Property in Pakistan

ISLAMABAD: The government has decided to immediately abolish the 3% federal excise duty (FED) being charged on the first sale of all properties in Pakistan after July. This reverses a contentious tax measure, that has severely damaged the real-estate sector, after almost 10 months of its introduction. The decision has been taken in consultation with the International Monetary Fund (IMF), a senior Federal Board of Revenue (FBR) official confirmed to The Express Tribune on Tuesday. Separately, an IMF budget special mission is reaching Pakistan on May 14 to vet the fiscal year 2025–26 budget. It has been decided that the 3% FED on allotment or transfer of property by filers, and 5% by non-filers, will be abolished, said the sources. They added that a summary has already been moved by the FBR to initiate the legal process for abolishing the duty. The prime minister’s task force on the housing sector has recommended scrapping the 3% FED, and its decision is proposed to be implemented in due course, said Dr Najeeb Memon, FBR spokesperson. He added that legislation is expected to be introduced soon.   There has been negligible collection during the July–March period of this fiscal year due to most real-estate authorities’ reluctance to accept the duty, which falls in the provincial domain. Under the Constitution, immovable property is a provincial subject, and taxpayers have challenged the duty in the courts. Finance Minister Muhammad Aurangzeb has already given his consent to move the summary to abolish the duty. The matter will now be tabled before the federal cabinet to amend the Federal Excise Duty Act. The government wants to abolish the duty within this month, subject to required legislative approvals. IMF Resident Representative, Mahir Binici, did not respond to a request regarding whether the IMF endorsed abolishing the 3% FED. The duty had been imposed effectively on every house, plot, and apartment in Pakistan sold after June 30, 2024. The levy had been introduced at the time of the budget’s approval by the National Assembly. It applied to commercial properties and the first sale of residential plots or properties, with rates of 3% for filers, 5% for late filers, and 7% for non-filers, collected at the time of booking, allotment, or transfer. As part of additional measures introduced on the eve of the budget’s approval, the government imposed a Rs500,000 tax on farmhouses ranging from 2,000 to 4,000 square yards, and Rs1 million on farmhouses over 4,000 square yards within the Islamabad Capital Territory. Similarly, a Rs1 million tax was imposed on residential homes ranging from 1,000 to 2,000 square yards, while homes exceeding 2,000 square yards now attract a Rs1.5 million tax. A 4% stamp duty was also approved on the value of properties being traded in Islamabad Capital Territory. Adding insult to injury, the government also imposed a 10% surcharge on income tax for individuals earning an annual income of Rs10 million just before the budget’s approval. Sources said a proposal is under consideration to abolish this surcharge starting July. They added that the government is considering various options to reduce the tax burden on the salaried class by lowering tax rates and increasing the taxable income threshold. However, these proposals will be subject to IMF endorsement next month. The IMF’s budget mission is scheduled to arrive in Pakistan on May 14 to vet the next fiscal year’s budget and tax measures before they are presented in the National Assembly, likely on June 4 or 5, just before the Eid holidays. The finance minister stated last Saturday that the IMF mission on the budget would arrive around mid-May. Abolishing the duty will boost the real-estate sector, as the duty is not adjustable, unlike withholding taxes, said Ahsan Malik—a real-estate dealer who was also part of the PM’s Task Force on Housing. The real-estate sector is facing sluggish growth prospects due to high property prices and heavy transaction taxes. The IMF, as a policy, discourages speculative trade in the real-estate sector and has favoured substantially increasing withholding tax rates in the budget. Despite the overall sluggish market, the government collected Rs108 billion in withholding taxes on property sales and purchases during the first half of this fiscal year—Rs17 billion, or 18%, higher than the same period last year. The PM’s task force had also recommended abolishing the deemed income tax on properties, which it described as bad legislation and a matter falling within the provincial domain. It also suggested standardising and rationalising stamp tax rates across provinces and Islamabad. Other recommendations include abolishing the capital value tax in Islamabad and ensuring uniform taxation policies through the National Tax Council. The task force has also proposed revising property valuations every three years to reflect market prices and introducing transaction tax exemptions for specific categories, such as low-cost housing, government plots, and first-time homebuyers. It further suggested that capital gains tax should revert to a slab-based system, as was applicable in the last fiscal year, and that input costs be reduced by rationalising taxes on construction materials. The task force also recommended reducing the policy rate to single digits—an idea the central bank and the IMF did not accept.

IMF rejects FBR plea to reduce property transaction taxes

ISLAMABAD: The International Monetary Fund (IMF) has ultimately declined the Federal Board of Revenue’s (FBR) request to lower transaction taxes for the property sector at this stage, The News reported on Monday. Previously, senior officials asserted that the Washington-based lender had, in principle, agreed to reduce the withholding tax on property buyers by 2% starting April 1, 2025, contingent on obtaining formal approval in writing. Now the IMF has stated officially that it has not agreed to slash the transaction taxes for property.   The IMF had also refused to lower tax rates for tobacco and beverages and now refused to entertain the last and final plea of the FBR to slash the tax rates for the property sector. On the other hand, Pakistan and the IMF were moving towards striking a Staff Level Agreement (SLA) but Pakistan will have to give assurances to the IMF in writing that the provinces would not plunge into procurement of wheat. The IMF has shown its willingness to augment the existing $7 billion Extended Fund Facility (EFF) with climate finance under RSF, which will be presented before the Fund’s Executive Board for getting approval along with the request for release of the second tranche. It is not yet known exactly about the size of funding under the RSF but it is expected that up to $1 billion will be provided for Climate Resilience Fund (CRF). Pakistan’s Finance Minister Muhammad Aurangzeb also hoped last Friday that both sides would be heading towards striking a Staff Level Agreement soon. The IMF’s Resident Chief in Pakistan Mahir Binci contacted this scribe and stated that “The IMF has not agreed on a lower withholding tax on property transactions and on lowering March 2025 targets”. On lowering the March 2025 tax collection target, the official sources said that the FBR could not achieve the ongoing monthly target at any cost and whether agreed by the IMF or not, it would be facing a shortfall in achieving the desired target of Rs1,220 billion for this ongoing month. According to the FBR’s internal working, it might face a dent in revenue collection in the range of Rs60 to 80 billion owing to an increased number of holidays by the end of the ongoing month due to Eid ul Fitr. So, it was suggested to the Ministry of Finance and the IMF that the shortfall of Rs60-80 billion might be shifted in the revenue collection target for April and May 2025, instead of June 2025 because there would be higher tax collection for the last month of the current fiscal year.

IMF Agrees to Reduce Property Buying and Selling Tax to 2%; Holding Tax to Remain Unchanged

In a major development for Pakistan’s real estate sector, the International Monetary Fund (IMF) has agreed to reduce the holding tax on property transactions by 2%. However, the existing holding tax rate for sellers will remain unchanged. This decision is expected to boost property investments and accelerate buying and selling activity in the real estate market. Industry experts believe that the reduction in holding tax will encourage more transactions, benefiting both investors and users. This decision is expected to boost property investments and buying and selling activity in the real estate market. Industry experts believe that the reduction in holding tax will encourage more transactions, benefiting both investors and end-users. Real estate analysts suggest that lowering the holding tax will make property transactions more affordable, attracting more local and overseas investors. This move is also likely to enhance liquidity in the market, leading to increased construction and development activities across major cities in Pakistan. Moreover, the real estate sector plays a crucial role in the country’s economic growth, contributing significantly to employment and revenue generation. With reduced tax burdens, stakeholders anticipate a positive shift in property demand, further stabilizing the market. Estate Safe Marketing Plays Key Role This tax reduction is anticipated to make property transactions more affordable and encourage both local and foreign investors to engage in real estate activities. Estate Safe Marketing has also highlighted that this move will help stabilize the market and increase transparency in property dealings. As the real estate sector prepares for a surge in activity, Estate Safe Marketing continues to offer its expertise in property management, investment consulting, and market analysis.  Estate Safe Marketing: Your Partner in Secure Real Estate Investments Estate Safe Marketing, a trusted name in the real estate industry, welcomes this decision, considering it a positive step toward revitalizing the property market. As a leading real estate firm, Estate Safe Marketing continues to provide secure and profitable investment opportunities, ensuring clients make informed decisions in the ever-evolving property sector. For the latest updates on Pakistan’s real estate trends and investment opportunities, stay connected with Estate Safe Marketing. Estate Safe Marketing, a trusted name in the real estate industry, welcomes this decision, considering it a positive step toward revitalizing the property market. As a leading real estate firm, Estate Safe Marketing continues to provide secure and profitable investment opportunities, ensuring clients make informed decisions in the ever-evolving property sector.

Pakistan: IMF talks complete About Property, Real Estate & Pivatization

Islamabad In the ongoing discussions between Pakistan and the International Monetary Fund (IMF), the global lender has expressed confidence in various sectors of the economy, excluding property, real estate, and privatization. The IMF remains cautious about these sectors, emphasizing the need for structural reforms to ensure sustainable growth.  Amidst these negotiations, the Federal Board of Revenue (FBR) has proposed tax relief measures for the real estate sector. This move aims to boost investment and stimulate economic activity within the industry. The proposal is particularly significant as it aligns with efforts to counter the decline in foreign remittances, which have historically played a crucial role in Pakistan’s real estate market.  Reports suggest that the government may allow tax reductions in the real estate sector to attract investment and mitigate the adverse effects of reduced overseas inflows. The final decision on these measures will depend on the outcome of IMF discussions and Pakistan’s commitment to broader economic reforms.  MF Talks Highlight Need for Real Estate Reforms in Pakistan In the latest round of discussions between Pakistan and the International Monetary Fund (IMF), the global lender has shown confidence in several sectors of the economy but remains cautious about property, real estate, and privatization. The IMF has emphasized the need for structural reforms in these areas to ensure sustainable economic growth and transparency. This cautious stance underscores the importance of addressing long-standing issues such as tax evasion, underreporting of property values, and inefficiencies in privatization processes. For Pakistan, this signals a critical opportunity to revamp its real estate sector, making it more investor-friendly and compliant with international standards. FBR Proposes Tax Relief to Revive Real Estate Sector Amid ongoing IMF negotiations, the Federal Board of Revenue (FBR) has proposed tax relief measures for Pakistan’s real estate sector. These measures aim to stimulate investment and boost economic activity within the industry, which has faced challenges due to declining foreign remittances. Historically, overseas remittances have played a vital role in driving real estate transactions, and the proposed tax reductions are seen as a strategic move to counter this decline. By making the sector more attractive to investors, the government hopes to revitalize the market and create a ripple effect across the broader economy. Balancing IMF Reforms with Real Estate Growth As Pakistan navigates its discussions with the IMF, the real estate sector stands at a crossroads. While the IMF pushes for structural reforms to ensure transparency and compliance, the government is exploring ways to incentivize investment through tax relief. The final decision on these measures will depend on the outcome of IMF negotiations and Pakistan’s commitment to implementing broader economic reforms. For stakeholders in the real estate industry, this presents both challenges and opportunities. By aligning with regulatory changes and leveraging incentives, investors can position themselves for long-term growth in a more transparent and sustainable market.

IMF Targets Real Estate Sector: What This Means for Pakistan

With the increasing emphasis on tax compliance, regulatory authorities are being established to prevent tax evasion and ensure accurate property valuation. To address concerns regarding misreporting of property values and tax evasion, strict measures are being implemented to standardize real estate transactions. This aligns with the International Monetary Fund’s (IMF) demand to regulate tax collection and curb illicit financial activities in the industry. Through our advanced property valuation and compliance solutions, Estate Safe Marketing ensures that all transactions meet legal requirements, offering buyers and investors a secure and legally sound real estate experience. Stay ahead in the real estate industry with Estate Safe Marketing – where trust meets transparency. Strengthening Real Estate Regulations The International Monetary Fund (IMF) has recently turned its focus toward Pakistan’s real estate sector, urging stricter regulations to enhance tax compliance and curb illicit financial activities. This move comes as part of broader efforts to stabilize the country’s economy and ensure transparency in financial transactions. By targeting the real estate industry, the IMF aims to address long-standing issues such as underreporting of property values and tax evasion, which have historically hindered revenue collection. For Pakistan, this signifies a pivotal shift toward a more regulated and accountable real estate market, fostering investor confidence and economic growth. Estate Safe Marketing: Your Partner in Transparency At Estate Safe Marketing, we understand the importance of these new regulatory measures. As the best real estate company in Pakistan, we are committed to providing our clients with advanced property valuation and compliance solutions that align with the latest legal requirements. Our expertise ensures that every transaction is transparent, secure, and legally sound. By partnering with us, you not only stay compliant with the new regulations but also gain a competitive edge in the real estate market. The Future of Real Estate in Pakistan: Trust, Transparency, and Growth The IMF’s focus on the real estate sector marks a transformative phase for Pakistan’s property market. With stricter measures in place, the industry is poised to become more transparent, efficient, and investor-friendly. Estate Safe Marketing is at the forefront of this change, offering innovative solutions that bridge the gap between regulatory demands and client needs. As the best real estate company in Pakistan, we are dedicated to helping you explore these changes ensuring that your investments are secure and future-proof. Trust Estate Safe Marketing to deliver excellence, transparency, and unparalleled service in every real estate transaction.

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