The International Monetary Fund (IMF) has agreed to reduce the withholding tax (WHT) on property purchases by 2%, effective from April 2025. This decision comes after a request by Pakistan’s Federal Board of Revenue (FBR) to lower transaction costs in the real estate sector. However, the IMF has decided not to cut taxes for property sellers, keeping their rates unchanged.
In addition to the WHT reduction, the IMF also approved a decrease in the Federal Excise Duty (FED) on property buyers. The higher FED slab will drop from 10% to 9%, but the tax on sellers remains the same. These changes were discussed in a virtual meeting between Pakistani authorities and the IMF, with a staff-level agreement expected soon.
Originally, the FBR had proposed tax cuts for both buyers and sellers, but the IMF only approved the reduction for buyers. The decision comes after the FBR argued that high transaction costs are holding back investment and activity in the real estate sector. Lowering the tax burden on buyers is expected to stimulate the market, which has seen limited growth due to heavy taxation and capital flight.
In another development, the IMF approved a reduction of Rs60 billion in the FBR’s tax collection target for March 2025, due to fewer working days during the Eid holidays. The new target is Rs1,160 billion, down from Rs1,220 billion. To compensate for this shortfall, the IMF has instructed the FBR to increase collections in April and May. The IMF also approved a plan to raise Rs1,257 billion through banks to address the growing circular debt in Pakistan’s power sector.