Islamabad, March 22: The International Monetary Fund (IMF) has agreed in principle to grant partial relaxations to the Federal Board of Revenue’s (FBR) request to lower the Withholding Tax (WHT) rates on property purchases by two percent, effective from April 2025. However, the withholding tax rates on property sales will remain unchanged.
Additionally, the IMF has approved a reduction in the Federal Excise Duty (FED) on property buyers, while the duty on sellers will remain the same.
The IMF has also agreed to cut the FBR’s tax collection target for March 2025 by Rs60 billion due to the increased number of holidays caused by Eid ul-Fitr.
Furthermore, the IMF has allowed the government to raise Rs1,257 billion from banks to address the circular debt issue in the power sector.
In a significant development for Pakistan’s real estate and construction sector, the government has successfully convinced the IMF to lower the WHT rates for property buyers by two percent.
Official sources confirmed this progress, stating that this change is expected to significantly boost transactions in the real estate market, which has been burdened by high tax rates.
Tax on Property Buyers: IMF MEFP
On March 14, 2025, Pakistan and the IMF held virtual discussions during which Pakistani authorities expressed confidence that they would finalize the Memorandum of Economic and Financial Policies (MEFP), clearing the way for a Staff Level Agreement (SLA).
It is expected that this will be the final round of talks, with the SLA likely being reached by the first week of April.
In terms of reducing taxes on property, the FBR had initially requested a reduction in WHT rates for both buyers and sellers under Sections 236C and 236K.
Read More: No Hurdle in Staff Level Agreement with IMF; Finance Minister
However, the IMF agreed to reduce the rates only for buyers. The current WHT rates for purchasers range between 3 to 4 percent depending on the slab, while the higher slab of 10 percent for FED has been reduced to 9 percent for buyers.
The FBR presented data to the IMF demonstrating the need to lower the transaction costs for property buyers, as many of them face significant tax burdens.
Tax on Property Buyers: FBR Demands
The FBR argued that reducing these rates would help stimulate the real estate sector.
On March 13, 2025, consultations between the FBR and property sector representatives revealed that high tax rates were contributing to capital flight from the country.
Following these discussions, the IMF agreed to reduce the tax rates for buyers but declined to provide relief to sellers at this stage.
The IMF’s decision on the tax collection target was also discussed. The FBR’s target for March 2025 was initially set at Rs1,220 billion, but the IMF agreed to reduce this by Rs70 billion due to the increased holidays for Eid ul-Fitr.
The FBR was instructed to make up for the reduction by increasing tax collection in April and May 2025, ultimately aiming to meet the revised target of Rs12,334 billion by the end of June 2025.
Also Read: Governor SBP: Pakistan and IMF to Reach SLA Agreement Soon
Meanwhile, Finance Minister Muhammad Aurangzeb, during an informal conversation with journalists following the World Day for Glaciers event on Friday, expressed optimism about the ongoing negotiations with the IMF.
He stated that the discussions were entering their final stages, with no major obstacles hindering progress. The finance minister hoped for positive news soon.
Pakistan and the IMF had held review talks from March 4 to 14, 2025, but while the discussions showed significant progress, they remained inconclusive.
Both parties are now working to finalize the MEFP, a key component of the Staff Level Agreement (SLA), under the first review of Pakistan’s Extended Fund Facility (EFF).
Tax on Property Buyers: Schedule of IMF
If the SLA is concluded by the first week of April 2025, the IMF Executive Board could approve the next tranche of funding without delay.
However, if the SLA is delayed until the second week of April, approval of the tranche may depend on the passage of the 2025-26 budget by the Pakistani Parliament.
Aurangzeb further emphasized that Pakistan is on track to meet the fiscal discipline targets set by the IMF. “We are hoping for good news from the IMF,” he said.
Also Read: IMF Approves $2B for Pakistan Next Month
He also mentioned that, out of the $10 billion pledged by the international community for flood rehabilitation, only one-third of it had been materialized due to capacity constraints in utilizing climate-related financing.
He added that the government had approached the IMF for a Climate Resilience Fund (CRF), and received encouraging feedback. In the coming days, more details are expected about this initiative.
During the launch of the PKR Green Bond, he remarked that Pakistan is increasingly acknowledging the existential threat posed by climate change, including issues like flooding and growing pollution.
