Pakistan Real Estate Taxes

Ever since the new real estate taxes in Pakistan, a lot of people are misinterpreting them specially CGT(Capital Gains Tax) and Advance Tax.  There are a lot of confusions and different interpretations even among the Tax lawyers. In this article we will try to bring more clarity about the real estate taxes.

Categories Of Real Estate Taxes

Basically there are three different broad categories of Pakistan real estate taxes.

1. Advance income Tax collected by Federal Government.
2. Property Tax collected by Provincial Government.
3. Capital Gains Tax.

Now we will discuss these three broad categories in detail and the taxes included in them one by one.

Advance Income Tax Collected By Federal Government

Normally called as advance income tax or withholding tax. This tax is collected before the transfer of the property and is adjustable in the income tax  returns you submit annually. It is important to understand that this is not a direct tax on property but a tax on your income.

Which Property Rate To Use

For the purpose of Advance Withholding Tax, FBR (Federal Board Of Revenue) Values of properties are used for calculation.

Who Pays It

It is payable by both seller and purchaser if the FBR Value of the property is more than 4 Million PKR as per following rate :

1. Purchaser : Filer pays 2% and Non Filer pays 4% as per FBR Value.
2. Seller : Filer pays 1% and Non Filer pays 2% as per FBR Value if the property is sold within 3 years of its purchase.

Exemptions

1. No Advance withholding Tax is collected if the FBR Value of the property is less or equal to 4 Million.

2. Dependents of Shaheeds do not pay any Advance Withholding Tax regardless of the FBR Value of the Property.

Important Notes

1. The tax you submit as Advance Tax is adjustable  against  your income tax returns.

2. If you do not have any income source in Pakistan and you are a non-resident . You can demand a refund of this amount in your annual tax returns.

3. The Advance Withholding Tax is adjustable against Capital Gains Tax in income tax returns.

4. FBR Values shall apply on the areas which are notified in such notifications. The area which are not yet notified shall be subjected to DC Rates or any other authority authorized for stamp duty.

Property Tax Collected By Provincial Government

These are the taxes collected by the Provincial Government and are the only direct taxes on your property. It includes two taxes as under:

1. Capital Value Tax (CVT)
2. Stamp duty

Which Property Rate To Use

For the purpose of CVT and Stamp duty, DC Values of properties are used for calculation.

Who Pays It

It is payable by the purchaser regardless of the DC Rates as under:

1. CVT at 3% of DC Rates.
2. Stamp Duty at 2 % of DC Rates.

Exemptions

No one is exempted from CVT and Stamp duty on purchase of real estate as per Pakistan Real Estate Taxes law.

Important Notes

1. They are paid as per DC rates and not FBR Value of your property. There is a lot of confusion and some real estate agents are charging it at FBR Values which is completely wrong.

2. These are direct taxes on your property and are not adjusted or refunded in annual tax returns.

Capital Gains Tax

CGT is payable to the Federal Government as per the new policy of Pakistan Real Estate Taxes. Capital gains tax on property (CGT) is applicable  on the difference between your buying price and your selling price.

Who Pays It

It is payable by seller as per following rate :

1. 10% of profit you have made if you sell it in first year of your purchase.
2. 7.5% of  profit you have made if you sell it in second year of your purchase.
3. 5% of  profit you have made if you sell it in third year of your purchase.
4. 0% of  profit you have made if you sell it in fourth year of your purchase.
5. 5% flat rate on profit for all properties purchased before 1st July 2016 if they sold within 3 years of their purchase.
6. For army officers and government welfare plots it is 50% of the normal percentage. 5% in first year , 3.7% in the 2nd year and 2.5% in the 3rd year.

Exemptions

1. CGT is not levied on any property if sold after 3 years of its purchase.

2. Dependents of Shaheeds do not pay any CGT .

Important Notes

1. Advance Tax submitted by the seller at the time of transfer of the Property is adjusted against CGT in income tax returns.

2. The registration authorities are not authorized to collect such Capital Gain Tax on immovable property. The registration authorities are to collect advance tax under Section 236C from seller of the property and advance tax under section 236K from buyer of the property. Hence capital gain tax on the sale of immovable property is to be paid by the taxpayer himself while filing the income tax return. For example, if any sale of immovable property is made in the financial year from July 2016 to June 2017, the taxpayer while filing the income tax return for the tax year 2017 shall pay the capital gain tax after adjusting the advance tax paid under section 236C.

If you have any more questions please feel free to ask us at our website imlaak.com Discussion Forum.

IMP: The information provided in this article is based on 100% Facts and figures and deducted from various reliable sources including the FBR notifications and website.

Contributed by

Captain (Retd) Shahnawaz Yaqub Bhatti

CEO & Investment Consultant at Imlaak

Mob & whatsapp : +923331717170

Skype : Shahnawaz.yaqub

Earning Our Military Pride

A few days back on September 11, 2016 a scuffle between Army Officers and Motorway Police Constables came into highlight in media. I am not going to go into details of it, however if you are interested , you can read some biased journalism about the incident here. The reaction from Anti Army elements came in strong and the incident was blown out of proportion. I am just going to address the real issues here which are not been addressed anywhere in the media. The so called pseudo-intellectuals are just busy spicing things up for there rankings without considering how deep it can hurt our society. Creating Civil Military divide is one of the basic strategy of psyops in new wars .

It is now imperative that we understand the complete spectrum of this threat and launch a counter narrative to help our brothers who are being mis-guided by this false flag propaganda. Threats of this kind have a deep impact on our society and they intend to achieve following :

1. Creating a deep Civil-Military divide by creating an opinion against the Armed forces.
2. Hitting on a soldiers pride and thus demoralizing Armed forces.
3. Making both the Public and the Military believe that they are different cultures and society and therefore its not worth supporting or fighting for each other.

Some of our brothers have fallen into negative propaganda campaigns and it is important to tell them following:

Soldiers Belong To Civilian Families 

One of the usual rhetoric used by the advocates of Anti Army is dividing our Nation as Civilians and Military. They forget to mention though that every soldier of Pakistan Army comes from a Civilian background. The families of soldiers of Pakistan Army serve this Nation in every sector including Police itself. This grave misconception and illusion which is created by these elements is one of the biggest threat to the Unity of our Nation in present times. It is also important to mention that every soldier has spent at-least 18 years as a civilian till his recruitment usually between 18 to 20 years of age and most of them end up being part of the civil society again by the age of 45 after retirement.  

Soldiers Are Supposed To Be Aggressive 

At 18 years of tender age we put weapons in hand of young people and train them to give and take life for the protection of there families, friends and country, which consists of mostly civilians. Aggression and pride are taught to them so they can stand up and fight with their lives against the enemy. We train them to kill and teach them to stand up against injustice and criminals while most of the other young men of their age are still trying to complete education. It is just unrealistic to not expect a strong reaction from them when disrespected or if their pride and ego are put under threat by any one. 

Corrupt Civilian Infrastructure

When a soldier joins Military, his family continues to live under civil infrastructure and therefore he remains part of both these segments of the society.  It is unfortunate that our civil infrastructure is weak and unjust in its dealings and usually every soldier ends up facing issues in civil matters relating to there families. Our civil set up has grown corrupt and numb showing no regard for the issues faced by the families of soldiers, who are away fighting to protect this country. Irritated and helpless these young soldiers ultimately turn to violence and why such incidents are bound to happen again and again unless some solid action is taken by the Government and Pakistan Army to protect them from these social injustices.

In Pakistan many a times we see various segments of the society pitched against each other. We have seen lawyers beat Police , politicians do the same , However as soon as it comes to army an unfortunate incident by some young officers in early twenties is blown out of proportions to undermine the popularity of Pakistan Army among people. Here are a couple of reminders:

Former chairman Senate Nayyar Bokhari’s son, Jarar Bokhari, slapped the special branch constable, revealed CCTV footage of the incident.

PML N MPA Shoaib Idrees beating Police 

Now do not get me wrong i am not saying that this is right , but just that this happens in societies where civil bureaucracy and infrastructures are corrupt and justice does not prevail. Now in relation to this particular incident how many of you really believe that the Army officers came out of their car with guns blazing without any incitement by the motorway Police? Why can't Motorway police be respectful and lodge a complain through proper channel to Army authorities instead of trying to manhandle young Army officers?

Some people just can't get over the political affiliations of Pakistan Army in the past, regardless of the reality that for almost the last decade Pakistan Army has remained neutral and just done its duty in a professional way. It is time to get over with the old grudges and learn how a civil society respects its veterans and as we get most of our inspirations from west here is a little video for you all .

Airport Crowd Applaud Soldiers Coming Home 

In the end i will request the Military leadership to not fall into the hands of this propaganda. The propaganda campaign is being led by Corrupt political elements and bureaucrats who are threatened by the Love and support to Pakistan Army by the people of Pakistan.

Pakistan Army must take care of its soldiers and strive to maintain their dignity , these young men are dying every day to save this country and they need encouragement not punishment. Bureaucracy, Police and other elements of Government must be advised to show respect to Military personal as they do to the officers of the same rank in Civil and Police.

Contributed By
Captain (Retd) Shahnawaz Yaqub Bhatti
Blogger and CEO Imlaak