IMF Agrees to Tax Relief on Property Transactions, Buyers Withholding Tax to Reduce by 2%

Islamabad, March 22, 2025 – The International Monetary Fund (IMF) has agreed, in principle, to provide tax relief on property transactions in Pakistan. Effective April 2025, the 2% withholding tax reduction will apply to property buyers, while the tax rate for sellers will remain unchanged. The IMF has also approved collecting PKR 1,257 billion from banks to address the circular debt crisis in the power sector.

Read IMF Declines to Reduce Tax on Property, No Immediate Relief for Property Buyers

Pakistan’s Finance Minister, Muhammad Aurangzeb, confirmed that discussions with the IMF are progressing, with final efforts underway to reach a staff-level agreement (SLA). He reassured that no major obstacles remain and that a positive outcome is expected soon. The minister also warned that climate change and population growth pose serious risks to Pakistan’s economy. Moreover, despite the $10 billion in climate aid promised by the international community after the 2022 floods, only one-third of the pledged amount has been received. To address climate-related economic challenges, Pakistan has approached the IMF for a Climate Resilience Fund (CRF) and has received a favorable response. Further developments on this initiative are expected in the coming days.

آئی ایم ایف نے اصولی طور پر پاکستان میں جائیداد کی خریداری پر ٹیکس میں 2 فی صد کمی پر اتفاق کیا ہے، جو اپریل 2025 سے نافذ العمل ہوگی۔ اس فیصلے کے تحت خریداروں کے لیے ود ہولڈنگ ٹیکس کی شرح کم کر دی گئی ہے، جبکہ فروخت کنندگان پر عائد ٹیکس کی موجودہ شرح برقرار رہے گی۔ اس کے علاوہ، پراپرٹی خریداروں کے لیے فیڈرل ایکسائز ڈیوٹی کو بھی 10 فیصد سے کم کر کے 9 فیصد کر دیا گیا ہے، تاکہ سرمایہ کاروں کو مزید سہولت فراہم کی جا سکے۔

حکومت اور ایف بی آر کی جانب سے آئی ایم ایف کو قائل کرنے کے بعد یہ رعایت دی گئی، کیونکہ زیادہ ٹیکسوں کی وجہ سے سرمایہ کا بیرون ملک انخلاء بڑھ رہا تھا۔ اس فیصلے کا مقصد جائیداد کے شعبے میں سرمایہ کاری کو فروغ دینا اور معیشت کو مستحکم کرنا ہے۔ حکومت اب آئی ایم ایف کے تحریری جواب کی منتظر ہے، جس کے بعد اس فیصلے کو باضابطہ طور پر نافذ کرنے کے لیے مزید کارروائی کی جائے گی۔

Tax Reduction on Property in April 2025

The IMF has agreed to implement a tax reduction on property April 2025, specifically by lowering the withholding tax for buyers by 2%. However, sellers will continue to pay the existing tax rates. Additionally, the Federal Excise Duty (FED) on property transactions for buyers will also be reduced, while sellers will still be subject to the full tax rate. The IMF has further agreed to lower the Federal Board of Revenue’s (FBR) tax collection target for March 2025 by PKR 60 billion.

A senior government official confirmed that Pakistan successfully negotiated with the IMF to lower the withholding tax on property April 2025 under section 236K of the Income Tax Ordinance. Currently, the tax on property April 2025 varies between 3%, 3.5%, and 4%, but will now be reduced by 2% for buyers. Additionally, the Federal Excise Duty (FED) will drop from 10% to 9% for property buyers.

This decision follows a high-level meeting between the FBR, real estate sector representatives, and the IMF, where Pakistani officials emphasized that excessive taxation was leading to capital flight. Investors were moving funds overseas instead of reinvesting in the local real estate sector. The government now awaits the IMF’s official written approval, after which the tax relief on property will be finalized and presented for formal government approval.

IMF Adjusts Pakistan’s Tax Collection Target

The IMF has also agreed to reduce the FBR’s annual tax collection target from PKR 12,970 billion to PKR 12,332–12,334 billion.

Speaking to journalists, Finance Minister Muhammad Aurangzeb reiterated that Pakistan remains committed to meeting the IMF’s economic discipline targets. He stated that negotiations with the IMF are moving smoothly and will soon be concluded. He further emphasized that Pakistan is adhering to its agreed fiscal framework, which is crucial for securing the next loan installment from the IMF.

Pakistan’s Economic and Climate Challenges

The Finance Minister warned that Pakistan must prioritize environmental protection measures to avoid economic shocks. He stressed that sustainable economic policies and climate resilience efforts are necessary for long-term stability.

Meanwhile, Pakistan and the IMF have made significant progress in reaching a staff-level agreement (SLA) for the first review of the $7 billion loan program. The government remains committed to fiscal responsibility and anticipates that the agreement will soon be finalized, ensuring the release of the next IMF loan tranche.

Read FBR gearing up to raise in immovable property valuations significantly

Read more about the Real Estate, Economy, Taxation, Finance, and News here.