IMF reduces property purchase tax in Pakistan by 2%

The International Monetary Fund (IMF) has agreed to reduce the property purchase tax in Pakistan by 2%. This change will take effect in April 2025. The Federal Board of Revenue (FBR) requested this reduction as part of ongoing negotiations with the IMF. The reduction focuses on the Withholding Tax (WHT) for property buyers, but the tax rate for sellers will remain the same. Officials believe this decision will benefit the real estate and construction sectors, which have faced challenges due to double taxation. There have been complaints from developers about excess taxation during property registration. This has caused delays in issuing property registries, particularly in Punjab. The conflict revolves around a specific tax regulation that has created uncertainty in property transactions. In addition to lowering the WHT, the IMF also agreed to reduce the Federal Excise Duty (FED) on property buyers while maintaining the current rates for sellers. The FBR's initial request included reductions for both sellers and buyers but the IMF only approved the buyer reductions. The FBR has shown the IMF data indicating that lowering taxes for buyers could boost real estate transactions. Following discussions, the IMF and Pakistani officials are close to finalizing a key economic agreement, with hopeful expectations for an agreement next week. Moreover, the IMF has revised the FBR's tax collection target for the current fiscal year, lowering it from about Rs12,970 billion to approximately Rs12,334 billion. The FBR had sought a further reduction for March due to additional holidays for Eid ul-Fitr, which the IMF approved but urged for increased tax collections in the following months.