IMF Allows Pakistan to Lower Property Tax

After discussions, the International Monetary Fund (IMF) has signaled a tentative agreement to adjust certain tax measures proposed by the Federal Board of Revenue (FBR). Specifically, starting April 2025, the IMF has indicated it will allow a 2% reduction in the withholding tax rates applied to those who purchase property. However, the existing withholding tax rates for property sellers will not be altered. Furthermore, the IMF has also consented to a decrease in the Federal Excise Duty levied on property buyers, while the duty imposed on sellers will remain as is. In recognition of the expected slowdown in tax collection due to the extended Eid ul-Fitr holiday period, the IMF has approved the FBR’s request to lower the tax collection target for March 2025 by Rs. 60 billion. Finally, the IMF has given its approval for the government to raise Rs. 1,257 billion through banks to address the ongoing circular debt crisis within the power sector. A virtual meeting between Pakistan and the International Monetary Fund (IMF) concluded late Friday, with Pakistani officials voicing optimism that the session had cleared the path for finalizing the Memorandum of Economic and Financial Policies (MEFP) and securing a Staff Level Agreement (SLA) in the near future. This meeting is widely believed to be the final step before the IMF potentially announces the SLA next week. During the talks, the Federal Board of Revenue (FBR) sought reductions in Withholding Tax (WHT) rates for both property sellers and buyers, specifically under Sections 236C and 236K, respectively. While the IMF agreed to lower the WHT rates for buyers, they maintained the current rates for sellers. The existing WHT rates for property purchasers, which vary from 3% to 4% based on property value, will see a decrease. Additionally, the IMF approved a reduction in the Federal Excise Duty (FED) for property buyers, lowering the highest tax slab from 10% to 9% .