12/06/2024
*What changes are proposed in taxes on Pakistan Real Estate from July 1 2024 onwards*?
The current capital gains tax on real estate in Pakistan has undergone significant changes with the 2024-25 budget. Here's a summary of the new tax structure:
- **For assets acquired on or after July 1, 2024**:
- A **flat tax rate of 15%** will be applied to all filers, regardless of the holding period¹.
- For non-filers, tax will be imposed at the standard slab rates from **15% to 35%**, again irrespective of the holding period.
- **Current Taxation Structure** (before the new budget):
- 1 year holding period: **15%**
- 2 years holding period: **12.5%**
- 3 years holding period: **10%**
- 4 years holding period: **7.5%**
- 5 years holding period: **5%**
- 6 years holding period: **2.5%**
- After 6 years: **0%**
The new system introduces a uniform rate aiming to simplify the tax system and potentially discourage speculative short-term investments in the property market. This is a major shift from the previous tiered tax rate system that encouraged long-term holding of property by reducing the tax burden over time. *Must keep in mind capital gain tax is due only on profit on property sold not on entire amount of sale. Also FBR or DC rates are used to calculate and this amount* is very reasonable for filers in my opinion. I personally think non filer should be barred from buying selling property.
*Government's decision to impose withholding tax on filer and non-filer on sale and purchase of property (Advance Income Tax on sale purchase of property)*
Introduction of 3 slabs related to purchase and sale of property
The tax rate for the filer will be 3% on property worth Rs.5 crore
The tax rate for non-filers on assets worth Rs 5 crore will be 12 per cent, the proposal said
A tax of 3.5 per cent will be levied for the filer on sale and purchase of properties worth Rs 5 to 10 crore, the proposal said
Non-filers will be taxed at 16% on property worth Rs 5-10 crore, proposed
Tax 4% proposal for property above 10 crores
20% proposal for non-filers on properties above 10 crores
*FED 5% imposed on new files or plots are launched by developers after July 1st 2024*.
The term *FED* in Pakistan refers to **Federal Excise Duty**. It is a tax imposed by the federal government on the manufacture and sale of certain goods within the country, including imported goods. The purpose of FED is to generate revenue for the government and to regulate the production and sale of certain goods. It's applied to a variety of goods and services and is an important part of the country's tax system. If you're dealing with taxes or business in Pakistan, understanding FED is crucial for compliance with the federal tax regulations.
Please note that these changes are proposed to start from July 1, 2024. If you're dealing with real estate transactions before this date, the structure would still apply. It's always recommended to consult with a tax professional for the most accurate and personalized
