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.PSX witnesses
bearish trend,
loses 755 points
The 100-Index of the Pakistan Stock Exchange (PSX) witnessed a bearish trend on Wednesday, losing 755.40 points, a negative change of 0.65 percent, closing at 116,020.11 points as compared to 116,775.50 points on the last trading day.
A total of 481,813,460 shares were traded during the day as compared to 479,465,114 shares the previous trading day, whereas the price of shares stood at Rs38.536 billion against Rs30.449 billion on the last trading day.
As many as 451 companies transacted their shares in the stock market, 140 of them recorded gains and 260 sustained losses, whereas the share price of 51 companies remained unchanged.
The three top trading companies were Cnergyico PK with 35,607,758 shares at Rs 8.51 per share, B O Punjab Limited with 25,483,545 shares at Rs 11.11 per share and Fauji Foods limited with 25,268,499 shares at Rs 15.91 per share.
Unilever Pakistan Foods Limited witnessed a maximum increase of Rs 273.35 per share closing at Rs 22,967.97 whereas runner-up was PIA Holding Comapny LimitedB with Rs 148.85 rise in its share price to close at Rs 1,753.61.
Hoechst Pakistan Limited witnessed a maximum decrease of Rs 45.05 per share price, closing at Rs 3,194.95, whereas the runner-up Philip Morris (Pakistan) Limited with Rs 43.60 decline in its per share price to Rs 1,132.27.
Separately, Asian stocks swung Wednesday after Nvidia’s announcement of new US licensing rules on shipments of its new chip to China rattled investor confidence already shot by Donald Trump’s sweeping trade war.
After a relatively peaceful couple of days following last week’s tariff-fuelled ructions, investors were once again on the defensive as a standoff between the world’s top economic superpowers shows no signs of abating.
China did little to soothe worries by saying that US levies were putting pressure on its economy, which data showed expanded more than expected in the first quarter.
A decision by Hong Kong’s postal service to stop shipping US-bound goods in response to “bullying” levies added to the unease.
Chip behemoth Nvidia said Tuesday that US officials had told the firm it must obtain licences to ship its new H20 semiconductors to China because of concerns they may be used in supercomputers there, adding the rule would last indefinitely.
The move marks the latest salvo in an increasingly nasty row that has seen Washington and Beijing hit each other with eye-watering tariffs, with the technology sector and security at the heart of the issue. APP
The task force also recommended reducing the policy rate to single digits—an idea the central bank and the IMF did not accept.