IMF Cuts Property Tax in Pakistan – 2% WHT Reduction Approved

IMF Approves 2% Tax Cut on Property Purchases in Pakistan – What It Means for Buyers

The International Monetary Fund (IMF) has agreed in principle to reduce the withholding tax (WHT) on property purchases in Pakistan by 2%, starting from April 2025. This decision follows persistent efforts by the Federal Board of Revenue (FBR) to ease tax burdens on real estate investors and boost transactions in the property sector.

Key Highlights of the IMF Decision on Property Tax

• Reduced Withholding Tax for Property Buyers: The IMF has approved a 2% reduction in WHT under Section 236K, making real estate investment more attractive.
• No Tax Relief for Property Sellers: The withholding tax on sellers remains unchanged despite FBR’s request for reductions under Section 236C.
• Federal Excise Duty (FED) Reduction: The IMF has also agreed to lower the higher slab of FED from 10% to 9% for buyers, making transactions more cost-effective.
• Lower Tax Collection Target for March 2025: The FBR’s tax collection target has been reduced by Rs60 billion due to Eid ul-Fitr holidays.
• Circular Debt Crisis Management: Pakistan has secured IMF approval to raise Rs1,257 billion from banks to address the ongoing power sector circular debt crisis.

How This Impacts Pakistan’s Real Estate Sector

The reduction in WHT and FED is a major boost for the real estate market. High transaction costs had been discouraging buyers, leading to capital flight. By lowering these taxes, the government aims to revive the real estate and construction industries, increasing investment and economic activity.

Pakistan’s Progress in IMF Talks

The virtual meeting between Pakistan and the IMF, held on March 22, 2025, indicated significant progress toward finalizing the Memorandum of Economic and Financial Policies (MEFP). If an agreement is reached soon, a Staff-Level Agreement (SLA) could be signed by the first week of April 2025. This would pave the way for the next IMF tranche, which may be linked to the approval of the 2025-26 budget.

Finance Minister’s Statement on Economic Stability

Finance Minister Muhammad Aurangzeb remains optimistic, stating that Pakistan is on track to meet its fiscal discipline targets. He emphasized that climate change financing and structural reforms are crucial for long-term economic stability.

Boost in Government Revenue from Windfall Tax Cases

In a separate development, the Lahore High Court (LHC) has vacated the stay order on windfall tax cases for banks, resulting in an Rs11.5 billion benefit to the national exchequer. Combined with previous court rulings, a total of Rs34.5 billion has been recovered, strengthening Pakistan’s fiscal position.

Final Thoughts

The IMF’s approval of tax cuts for property buyers is a positive step for Pakistan’s economy. As real estate investment becomes more feasible, market activity is expected to surge. If the government continues implementing pro-investor policies, the property sector could experience significant growth in the coming years.

Stay tuned for more updates on Pakistan’s economic policies and real estate market trends! 

REF: https://www.thenews.com.pk/print/1294077-imf-agrees-to-lower-taxes-for-property-purchasers