ISLAMABAD – The International Monetary Fund (IMF) has agreed in principle to provide a partial concession on the request of the Federal Board of Revenue (FBR) to reduce the withholding tax rate on property purchases by 2 percent starting from April 2025.
However, the withholding tax rate on sellers will remain unchanged.
The IMF has also agreed to reduce the Federal Excise Duty (FED) on property buyers while the tax will still be collected from sellers. Similarly, at the request of the FBR, the IMF has agreed to reduce the tax target for this month (March 2025) by 60 billion rupees.
According a report published by a local newspaper The News, a senior government sources confirmed that in a major and long-awaited development for the real estate and construction sectors, the government has convinced the IMF to reduce the withholding tax rate by 2% for buyers.
Pakistani officials and the IMF held a virtual meeting on Friday night, and the Pakistani officials stated that this development will pave the way for consensus on the Memorandum of Economic and Financial Policies (MEFP) and a staff-level agreement (SLA), which is expected to be finalized by next week.
Regarding the reduction in property taxes, the FBR requested the IMF to reduce the withholding tax (236C and 236K) on both sellers and buyers. However, the IMF has only agreed to reduce the tax rate for buyers under section 236K by 2%.
The IMF has also granted permission for banks to collect 1,257 billion rupees to reduce the circular debt issue in the power sector.
Meanwhile, Federal Minister for Finance Mohammad Aurangzeb stated that negotiations with the IMF are ongoing, and final efforts are being made for consensus on the staff-level agreement. He added that there is no significant hurdle to the success of the talks, and good news is expected soon. He also mentioned that the economy is facing severe risks from increasing population and climate change.
He further stated that after the devastating floods in Pakistan, only a third of the $10 billion promised by the international community has been received. The government has approached the IMF for the Climate Resilience Fund (CRF), and a positive response has been received. Further progress on this matter is expected in the coming days.
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