Islamabad, January 28, 2025 – The Federal Board of Revenue (FBR) has revealed that recent tax law amendments will impact only 2.5% of property transactions in Pakistan. The announcement was made during a meeting of the National Assembly’s Standing Committee on Finance at the FBR Headquarters.
Key Points
- Transaction Stats: 97.5% of property transactions valued below Rs 10 million; 93% below Rs 5 million.
- Target Audience: Only 2.5% of high-net-worth individuals fall within the bill’s focus.
- Tax Gap: Rs1.6 trillion missing in the top 5% of transactions.
- Asset Disclosure: Only 12 individuals disclosed assets above Rs10 billion in 2023-24.
- Concerns: Stakeholders fear sweeping powers granted to tax officials.
- Proposed Relief: Suggestions to exempt transactions below Rs 50 million from source disclosure for a year.
The FBR has disclosed that 97.5% of property transactions in Pakistan fall below Rs 10 million, leaving only 2.5% of high-value investors under scrutiny. During a session of the National Assembly Standing Committee on Finance, FBR Chairman Rashid Mahmood Langrial emphasized that the Tax Laws (Amendment) Bill, 2024 will not burden ordinary property buyers. Of the 1.695 million property transactions recorded in 2023-24, 93% were valued under Rs 5 million, and only 3,250 transactions exceeded Rs 50 million.
Despite this, the FBR noted significant under-declaration of income and assets, with only 12 individuals disclosing assets worth over Rs 10 billion. The bill seeks to ensure compliance and transparency, requiring investors to disclose their source of funds while aiming to reduce transaction taxes. However, real estate representatives raised concerns about the potential misuse of powers by tax officials and suggested a one-year exemption on source disclosure for transactions under Rs 50 million to encourage registrations and investments.
Impacts of This Update
Positive Impacts
- Enhanced Transparency: The bill will reduce undervaluation and improve documentation in the real estate sector.
- Revenue Generation: Targeting the top 5% of transactions can help recover an estimated Rs1.6 trillion.
- Market Stability: Ensuring accurate property valuations may stabilize property prices and market conditions.
Potential Concerns
- Stakeholder Worries: Real estate representatives fear that tax officials may misuse powers under the new regulations.
- Investor Hesitation: The source disclosure requirement could deter some high-net-worth investors from entering the market.
Benefits of This Update
- Minimal Impact on the Majority: 97.5% of transactions remain unaffected, protecting general property buyers.
- Encouraged Compliance: High-value investors will face scrutiny, pushing for better compliance and accurate declarations.
- Increased Registrations: Proposed exemptions for transactions under Rs 50 million could lead to more property registrations.
- Boost to Foreign Investments: Enhanced transparency and compliance can attract international investors to Pakistan’s real estate sector.
Conclusion
The Tax Laws (Amendment) Bill, 2024 is a step toward creating a more transparent and fair real estate sector in Pakistan. By focusing on high-value transactions and reducing transaction taxes, the bill has the potential to boost revenue and encourage compliance. While concerns over tax officials’ powers exist, proposed exemptions and reforms may address these apprehensions, ultimately fostering a more investment-friendly environment.
Source: Information sourced from statements by FBR Chairman Rashid Mahmood Langrial during the National Assembly Standing Committee on Finance and the International Customs Day 2025 ceremony.