Game-Changing Real Estate Reforms in Pakistan: A Step Towards Transparency and Economic Growth

We are in the midst of a groundbreaking evolution in Pakistan's #realestate sector. The government's recent amendments have reshaped the playing field, aiming to streamline transactions, enforce tax compliance, and provide a clearer, fairer business environment.

As per the Income Tax Ordinance 2001, Section #236C designates the transferring authority as the collector of an adjustable advance income tax from sellers. This was set at 3% for Active Taxpayers' List (#ATL) sellers and 6% for non-ATL sellers.

However, the Finance Act 2022 introduced Section 7E, creating a new tax category. Now, resident individuals will be considered to have derived an income equivalent to 5% of the fair market value of their immovable property. This income is subject to a tax rate of 20%, effectively a 1% tax on property value.

In 2023, a further modification in Section 236C now obliges the transferring authority to ensure tax liability under Section 7E has been fulfilled before property transfer. This necessitates sellers to provide evidence of their tax payments under Section 7E, or a certificate from the Commissioner Inland Revenue if applicable.

These reforms underline the government's commitment to regulate and tax the real estate sector more effectively, ultimately stimulating economic growth. While they may impose additional obligations on property sellers, they also promise a more transparent, credible real estate market. This encourages more robust investments, domestically and internationally.

At #bakertilly, we are ready to guide you through these changes. Our experienced consultants can help ensure compliance and optimize your strategies in light of the new regulatory framework. Contact us today and let's navigate the future of Pakistan's real estate together!

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