The government is expected to raise the tax on the acquisition and sale of immovable property in Budget 2024–25 in response to the International Monetary Fund’s (IMF) directive as Pakistan prepares for negotiations with the Fund over a new loan program.
According to reports, the IMF requested that Islamabad raise the advance tax on the acquisition and sale of immovable property in order to improve total tax income during discussions with the Federal Board of income (FBR).
This move coincides with the team from the Washington-based lender, led by Nathan Porter, getting ready to meet with Pakistani officials to talk about a new Extended Fund Facility (EFF) rescue program.
Pakistan has formally requested a new $6–$8 billion rescue package under the EFF, with the potential to be increased through climate funding.
It should be mentioned that the IMF requested earlier this week that the FBR remove the board’s and the cabinet’s discretionary powers to grant tax benefits and modify the tax regulations that apply to NGOs, charity organizations, and taxpayers who are retirees.
Regarding pensions, the IMF suggests taxing either pension benefits or contributions. In order to do this, the multinational lender seeks to do away with the advantages of having voluntary contributions to workers’ participation funds deducted from income, as well as the exemption of pensions from taxes, by using one of the options mentioned above.
The lender also requests that the tax incentives be restricted to situations in which they provide more value to the economy and create jobs than they cost the government.
The report further stated that in light of the potential for higher taxes, the government may modify Section 236K of the Income Tax Ordinance in the budget for the upcoming fiscal year, allowing for the imposition of a 3% tax on filers and a 7% tax on non-filers on the acquisition of real estate up to a maximum of Rs50 million.
In the meanwhile, property valued between Rs. 10 and Rs. 50 million would be subject to a tax of 13% for non-filers and 4% for filers.
To further increase income to over Rs100 billion in the upcoming fiscal year, the Fund has recommended levying a 35% tax on non-filers and a 5% tax on filers who acquire property valued at more than Rs100 million.
It should be mentioned that the current tax rates are 10.5% for non-filers and 3% for filers.
