Islamabad – The Federal Board of Revenue (FBR) has announced a 24.3% surge in withholding tax (WHT) collections from Pakistan’s property sector during the first nine months of the current fiscal year. According to the latest data, the FBR collected PKR 169 billion from the sale and purchase of immovable properties, up from PKR 136 billion during the same period last year.
Despite a 15% decline in property transactions, mainly due to the rise in tax rates, the overall WHT collection from real estate dealings surpassed expectations. Although the FBR had originally targeted a 50% increase in tax revenues from the sector, the actual growth stood at a strong 24%.
Key Changes in Withholding Tax Rates on Property Transactions
The government made significant adjustments to withholding tax rates last fiscal year to enhance revenue collection:
- Property Sales: WHT increased from 2% to 3% for tax filers and from 4% to 6% for non-filers.
- Property Purchases: Advance tax raised to 3% for filers and 10.5% for non-filers.
These hikes were aimed at boosting the country’s tax base, even though they have contributed to a slowdown in the volume of real estate transactions.
Possible Removal of Federal Excise Duty (FED) on Property Deals
In a related development, the government is actively considering abolishing the Federal Excise Duty (FED) on property transactions. Sources revealed that a proposal to eliminate the FED, which generated less than PKR 2 billion over the past nine months, has been submitted to the federal cabinet for approval. If passed, this change will soon be tabled in parliament for final discussion.
Property Sector vs. Salaried Class: Tax Contributions Compared
While the real estate sector remains a vital contributor to Pakistan’s economy, the salaried class continues to outperform other segments in tax contributions. During the same nine-month period, salaried individuals contributed approximately PKR 370 billion, surpassing both the property sector and exporters.
Outlook for Pakistan’s Real Estate Market
Despite higher taxes, Pakistan’s property market remains a robust source of government revenue. Future reforms, including the potential abolition of the FED, could influence property sector dynamics in the coming months. Investors, developers, and buyers are advised to stay updated on these changes, as they could significantly impact transaction costs and overall market sentiment.
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