IMF approves tax cut on property purchases in Pakistan
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The International Monetary Fund (IMF) has agreed in principle to a partial reduction in the withholding tax rate on property purchases, following a request from the Federal Board of Revenue (FBR).
The new rate, which will be reduced by two percent, is set to come into effect in April 2025. However, the withholding tax rate imposed on property sellers will remain unchanged.
According to sources, a recent virtual meeting between Pakistani officials and the IMF concluded with an agreement to lower the federal excise duty rate for property buyers. However, the tax on property sellers will still be collected at the existing rate.
In addition, the IMF has also agreed to a reduction of Rs60 billion in the tax revenue target for March 2025, as requested by the FBR.
The sources indicated that this development would pave the way for consensus on the Memorandum of Economic and Financial Policies (MEFP) and a staff-level agreement, which is expected to be finalized next week.
Regarding the tax reduction on property transactions, FBR had previously requested the IMF to lower withholding tax rates for both buyers and sellers under Sections 236C and 236. However, the IMF has only agreed to reduce the tax rate for buyers under Section 236 by two percent.
Additionally, the IMF has permitted the government to raise PKR 1,257 billion from banks to address the circular debt issue in the electricity sector.
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