Government officials confirmed that the IMF’s decision marks a significant relief for the real estate and construction sectors, which have long faced taxation challenges. The agreement follows concerns raised by the Association of Builders and Developers of Pakistan (Abad), particularly regarding double taxation issues in Sindh and Punjab.
Abad Chairman Hassan Bakhshi highlighted that developers and housing societies were being taxed twice during initial property allotments, causing a deadlock in the issuance of registries in Punjab. The dispute arises from the interpretation of Section 236C of the Income Tax Ordinance, 2001, by provincial tax authorities, who argue that it applies to housing societies and developers, leading to confusion and delays in property transactions.
The Board of Revenue (BOR) Punjab and the Punjab Land Revenue Authority (PLRA) maintain that WHT under Section 236C also applies to allotment registries, further burdening the real estate sector.
In addition to the WHT reduction for property purchasers, the IMF has agreed to lower the Federal Excise Duty (FED) on buyers, though the duty on sellers will remain unchanged. The IMF also approved the FBR’s request to lower the tax collection target for March 2025 by Rs60 billion due to the impact of Eid ul-Fitr holidays.
The FBR had initially sought a reduction in WHT rates for both buyers and sellers under Sections 236C and 236K of the Income Tax Ordinance. However, the IMF agreed only to a reduction for purchasers. Currently, WHT for property buyers ranges from 3% to 4%, depending on the value slab. Additionally, the highest FED slab of 10% has been lowered to 9% for purchasers.
FBR officials argued that reducing tax rates for buyers would boost real estate transactions by lowering overall costs. The IMF was presented with data showing that high tax burdens were driving capital out of the country.
Pakistani and IMF officials held a virtual meeting on Friday, with Islamabad expressing optimism that these discussions would soon finalize the Memorandum of Economic and Financial Policies (MEFP) and pave the way for a Staff-Level Agreement (SLA), expected next week.
The IMF has also revised the FBR’s overall tax collection target for the current fiscal year, reducing it from Rs12,970 billion to Rs12,332-12,334 billion. While the FBR had requested a Rs70 billion reduction in its March 2025 collection target, the IMF granted a Rs60 billion cut but directed the FBR to increase collections in April and May to meet the revised annual target by June 2025.
Pakistani authorities are now awaiting the IMF’s written confirmation before finalizing and submitting the proposal for government approval.
