Under pressure from the IMF, the government is considering raising the capital gains tax on real estate by 25%.
The International Monetary Fund (IMF) has recommended Pakistan to raise the Capital Gains Tax (CGT) on real estate transactions as part of the current negotiations for the federal budget for 2025–2026.
According to sources, the proposed increase could elevate the CGT rate to 40%, matching the corporate income tax rate, from the existing 15% rate.
Today, the Federal Board of Revenue (FBR), the Ministry of Finance, and the IMF are still engaged in virtual negotiations. The IMF is advocating for more comprehensive tax reforms to improve the tax-to-GDP ratio, which the next budget aims to reach 11%. In contrast, spending is expected to account for 20.3% of GDP.
According to FBR authorities, the present lower tax rates on substantial earnings from real estate transactions necessitate raising the CGT on property sales. However, there are also worries that a sharp increase in CGT would cause fewer real estate deals.
According to insiders, there is also a plan to lower taxes on first-time home purchases in an effort to offset the effects. In addition to resolving revenue issues, this might assist real buyers.
Important fiscal policy choices, such as changes to tax structures, are anticipated to influence the final budget draft as discussions with the IMF continue.
