Property Tax In Pakistan

Do you know not paying property tax is a source of black money? Negligence in paying taxes might get one into huge trouble with FBR. Every responsible citizen makes sure that a country grows economically which is possible only if tax is paid with honesty and accuracy. In order to file taxes accurately one must understand all about taxation

In Pakistan, the government fails to collect a huge percentage of taxes from the real estate sector that retards the development of the country and the quality of life. If you are a responsible citizen and you want to invest in property, make sure you read this article till the end to know all about Property tax in Pakistan .

What Is Property Tax?

A specific sum of money is paid to the government as property tax. These taxes provide the government with financial support to address state needs. Property taxes do not just apply to the home. It covers all forms of physical property that you possess, such as any plots registered in your name, homes, businesses, farms, etc. According to the provincial Urban Immovable Property Tax Act, the property is essentially a provincial tax assessed on the annual rental value of the property. Every province has a distinct tax rate. Either a flat fee or a portion of the annual rental value applies. The property need not be rented out to have rental value. It merely provides the government’s assessment of the rent that would have been paid had the building been rented out. Whether a property is rented out or used for personal purposes affects the tax rate in each province.

Types Of Property Taxes In Pakistan

Property taxes are not only for houses but for other forms of property as well. Here are the types of property taxes applied to different forms of property.
There are three types of property taxes:

Capital Value Tax.
Capital Gain Tax.
Withholding Tax.

Capital Value Tax

You must pay the government a specific amount of money when a new property is purchased . The Finance Act of 2006 specifies that the capital value tax is levied at a rate of 2% of the recorded value. However, the 2018 budget states that stamp duty will be 3% and the overall capital value tax for an urban region will be 2%. You are therefore supposed to pay a certain amount: stamp duty, for the property’s legal documentation.

Capital Gain Tax

This is a certain amount you are supposed to pay when you sell out a property. The profit that you make will be subject to tax. Capital gain tax may only be assessed under the Pakistan Finance Act of 2017 if the property is sold within the first three years of the original acquisition. The tax rates also vary each year. The tax is 10% in the first year, 7.5% in the second year, and then drops to 5% in the third year. In Pakistan, the seller is exempt from paying capital gains tax after three years.

Withholding Tax

Capital gains tax and capital value tax are both included in the withholding tax. When a property is sold, both the buyer and the seller are required to pay a set amount.

The buyer of a residence who also files income taxes must pay a 2% withholding tax, while a buyer who does not file income taxes must pay a 45% tax

The rate of tax also varies for different types of tax:

Sr	Tax	Rates
1	Capital Value Tax	2% of the recorded value ( Finance Act, 2006)
2	Capital Gain Tax	10% for the first year 7.5% if sold during the second year 5% if sold during the third year(Finance Act 2017)
3	Withholding Tax	12.5 percent (If the recipient is a filer of Pakistan tax return) 20 percent (If the recipient is a non-filer)

How To Calculate Property Tax?

Here is the procedure to calculate property tax:

Find the category your property falls in.
Enter the values (using the valuation table) as:
A: Total land area x Per square yard rent
Determine values and enter them as;
B: Covered area of property x Per square foot rent The property tax you need to pay will depend on n the annual rental value. It is will be the total amount the property is estimated to bring. As the rate of tax is different for different provinces, they have issued their valuation table.
Multiply the answer by 12
GARV = (A x B) x 12
Subtract the GARV from the tax levied by the respective province
Annual Rental Value = GARV – 10% of GARV

To calculate your property tax accurately, prefer to use the Tax calculator which saves half of your time and gives accurate results.

Documents You Require For Property Tax Records

Following are the documents you require;

Application on plain paper with fee.
Copy of CNIC.
Payment proof of property.

Properties are Exempted from Tax?

The following categories of properties are exempted from calculations of tax:

Properties whose rentals are only used to support religious or other public charities as specified.
Public playgrounds and parks, hospitals, libraries, boarding homes, schools, and other facilities.
Mosques and other places of worship.
Those structures are owned by the government or a local authority, like a corporation, municipality, or town committee.
An exception applies to one residential building up to one kanal that is owned and occupied by a Federal or Provincial Retired Government employee.
The structures held by widows, minor orphans, and/or people with disabilities are free from taxation up to PKR.12150 every year.
A single home that, if used by the owner as his residence, does not fetch yearly rent greater than PKR 6480.
The Property cannot command an annual rent of more than PKR. 4320/-.
Other than the location of category “A,” residential homes built on land less than 5 Marla.

Here is the Notice under section 81 of the Land Revenue Act 1967:
‘Whenever an assessee does not pay in time, the ETO with delegated powers of Assistant Collector Grade – I under Punjab Land Revenue Act, 1967 may issue a demand notice under Section 81 of the Act ibid. On receipt of this notice, the assessee should immediately contact Excise & Taxation Officer because the next step will be warrants of arrest to the defaulter.’

We hope this article helps you learn all about property tax in Pakistan. Never forget to know all about taxes and the Types of taxes in Pakistan before filing to avoid inconvenience.

Types Of Taxes In Pakistan

Are you a taxpayer? Well if you pay taxes and you find it difficult to understand how much you should pay? And How should you contribute to raising revenues for the government? It is advised to develop a fundamental understanding of the processes before registering and filing taxes. This basic information ensures that the task is performed flawlessly in a convenient manner.

The taxation system, (defined by the Income Tax Ordinance 2001 and administrated by FBR), categorizes types of taxes in Pakistan. So before you file your tax, ensure you have plenty of information you need.

Basic Categories Of Taxes In Pakistan

In Pakistan, the taxation system is classified into two basic categories; direct taxes and indirect taxes. This system is very complex. There are more than 70 different types of taxes that are administered by roughly 37 different organizations. The following is a general explanation of how these taxes are administered:

Direct Taxes
Indirect Taxes

Taxes are classified into direct taxes and Indirect Taxes In Pakistan as;

Sr	Direct Taxes	Indirect Taxes
1	Income tax	Sales tax
2	Property tax	Value added tax
3	Capital gain tax	Excise duty
4		Custom duty

Direct Taxes

This tax is imposed directly on the earnings or profits of the payer rather than on the purchase of goods and services. Typically, direct taxes are charged according to the ability-to-pay premise. We can say that redistributing the nation’s wealth inside its borders is the fundamental or primary goal of direct taxation. Unlike indirect taxes, which are passed on to different people or organizations, direct taxes are not. Direct taxes are progressive by nature as they reproduce wealth. These taxes collect 25% of tax revenue. These taxes are paid directly to the governing entity.

These taxes include;

Salaries
Property Income
Income on security
Business Income

Types Of Direct Taxes

To calculate total income and charge taxes, further classification is necessary. Direct taxes are thus classified as;

Income tax
Property tax
Capital Gain Tax

1. Income Tax

Following certain allowances, income tax is levied on all earnings obtained by private individuals. Income tax is a significant source of government revenue in the majority of economies.

It depends on a person’s income. Depending on how much a worker makes, a set proportion of his or her pay is withheld. The government is anxious to include credits and deductions that assist people to reduce their tax obligations, which is a good thing.

2. Property Tax

Any resident who owns immovable property in Pakistan is subject to presumed income tax. This deemed income will be calculated as 5% of the immovable property’s fair market value and such income is subject to a 20% specified tax rate. It is a tax based on the property’s worth that the owner must pay. To sustain public services property tax is levied on assets.

3. Capital Gain Tax

The profit made from the sale of a non-inventory asset that was acquired for less is subject to capital gains tax. The selling of stocks, bonds, precious metals, and real estate results in the most frequent types of capital gains. Not all nations impose a capital gains tax, and the majority have various rates of taxation for both individuals and businesses. This tax is calculated by finding the difference between the acquisition amount and the selling amount.

Indirect Taxes

This is a sort of tax that is incurred indirectly by the taxpayer. Taxes like these are transferred from one taxpayer to another. It is imposed on products and services, thereby raising the cost of those items. In contrast to direct taxes, indirect taxes are often imposed on all taxpayers equally, regardless of their wealth. Because all taxpayers, rich and poor, must pay the same amount in taxes on goods and services, indirect taxes are viewed as regressive. In Pakistan, indirect taxes make up the majority of government income. Please read the fundamental distinctions between direct taxes and indirect taxes listed below for additional information. These taxes collect 75% of tax revenue.
This tax includes:

Sales Tax

Types Of Indirect Taxes

Like direct taxes, indirect taxes are also further classified:

Sales Tax
Value Added Tax
Excise Duty
Custom duty

1. Sales Tax

A sales tax is one of the most prevalent indirect taxes. Everything is subject to sales taxes, including groceries, fast food, gadgets, and apparel. The city, county, or state where the transaction is made has different sales taxes.

2. Value-Added Tax

When a product moves through numerous manufacturing or production chain stages, this tax is imposed on products. The product should first be provided through a supply chain, then it should get through production, and finally, it should get to stores or markets for sales. Each stage receives a percentage of the tax applied.

3. Excise Duty

Controls over the production and distribution of excisable goods, like alcoholic beverages and illegal substances, are the responsibility of the Excise Wing of the Taxation Department.

4. Custom Duty

When any commodity or service is imported from abroad, the government is subject to a certain form of duty known as customs duty. This is often paid in Pakistan at the time of customs clearance.

Direct Taxes Vs. Indirect Taxes

Direct and indirect taxes vary from eachother to a great extent. Their major differences are as follows:

Sr	Direct Taxes	Indirect Taxes
1	Paid by an individual directly to the government	Can be transferred to another entity.
2	Reduce inflation	Increase inflation
3	Progressive	Regressive
4	Collected from assesses	Collected from consumer
5	Tax can be avoided by hiding income	Cannot be avoided as they cannot be hidden
6	Not levied equally	Tax Levied equally upon all taxpayers

This article provides basic information about the types of taxes which is very essential to know. We hope it helps you better aware of the taxation system and creates convenience in filing your tax.

There are basically two types of taxes – direct and indirect taxes. The following are the differences between the two:

- Direct taxes refer to taxes that are filed and paid by an individual directly to the government. Indirect taxes, on the other hand, are taxes that can be transferred to another entity. Therefore, the burden of paying them can be put on another person’s shoulders.
- Direct taxes can be evaded in the absence of proper collection administration. Indirect taxes cannot be escaped from because these are charged automatically on goods and services.

Direct taxes can help address inflation while indirect taxes can lead to inflation.
Direct taxes lessen the savings of earners, but indirect taxes encourage the opposite because they make products and services more expensive and unaffordable.
Direct taxes are imposed only on people that belong to various income brackets. Indirect taxes, on the other, can be felt by everyone who buys goods and avails services.

Sales Tax Rates In Pakistan

Are you often worried about calculating tax rates while purchasing goods or services? Well, this is a significant concern for the majority of consumers in Pakistan. The tax rates are often changing and confusing. Moreover, varying rates throughout the country leave you in great trouble.

We believe in creating ease for you while you go through this frustrating process. If you get into this process often you must know all about Sales tax rates in Pakistan, to avoid inconvenience and being betrayed. No matter which area of the country you belong to, just stay with us till the end, and don’t forget to keep notes of the information you require.

Standard Sales Tax Rate In Pakistan

Sales tax rates vary almost throughout the country. It is no doubt applicable for Gilgil Baltistan, Kashmir, Islamabad, and all four provinces but it varies with minor differences. Although, the standard rate for sales tax in Pakistan is 17%.

Sales Tax Rates __ (Provinces, GB, Kashmir, FATA)

All four provinces, the Islamabad Capital Territory, Gilgit-Baltistan, Azad Jammu, and Kashmir impose a sales tax on services at rates ranging from 13% to 16%.

Sr	Area	WHT (withholding tax)	GST (goods and services tax)
1	Punjab	15%	19.50%
2	Balochistan	15%	19.50%
3	Sindh	15%	19.50%
4	KPK	15%	19.50%
5	FATA	10	19.50%
6	Gilgit-Baltistan	0%	0%
7	AJK	15%	19.50%

Sales Tax Applies To The Following

Sales tax applies to services, goods, and import goods.

- Services
- Goods
  All items are taxable, with the exception of those that fall within the section 13 exemptions listed in the 6th Schedule of the Sales Tax Act of 1990. For the purposes of sales tax, goods encompass all transportable property types except actionable claims, cash, stocks, shares, and securities.
- Determine values and enter them as;
  B: Covered area of property x Per square foot rent The property tax you need to pay will depend on n the annual rental value. It is will be the total amount the property is estimated to bring. As the rate of tax is different for different provinces, they have issued their valuation table.

Imports
All items brought into Pakistan are subject to sales tax at the time of import, with the exception of those expressly exempt under section 13 as listed in the Act’s sixth schedule.

Goods Exempted From Sales Tax

The Sixth Schedule of the Sales Tax Act, 1990 lists the items that are eligible for sales tax exemption in accordance with Section 13 of the Sales Tax Act, 1990 . Through various notifications (SROs) released by the government in accordance with section 13, additional exemptions are accessible.

When The Sales Tax Is Due?

At the moment of supply, sales tax is required.
For services, this is often when the taxable supply is supplied or the payment is completed, whichever occurs first. It usually happens when a payment is made to settle an invoice for goods.
On imports, it is due at the time of customs clearance into Pakistan.

If a person fails to pay the tax by the deadline, claims a tax credit or refund that is not due to them, or mistakenly applies the zero percent rate to supplies he has to pay 1.5% of the due tax.

The percentage of additional tax, however, shall be two percent each month in cases of tax fraud.

Invoice Permitted For Retail Sales ___ Sales Tax Compliance

Invoices should include

Name of supplier
Address of supplier
Name of customer
Address of customer
Supply date
Description (goods/services)
Invoice number
Sales tax rate
The amount charged
Gress amount
Currency translated to PKR

Current Sale Rates Of Supplies

The other current rates are:

Sr	Supplies	Current Rates
1	Goods	17%
2	Services	16%, 15%, 13%
3	Local imports produce for export	10%, 8%, 5%, 3%
4	Other specific supplies	18.5% – 25.5%
1	Office Stationery	0%

We hope this short article helps you with your concerns regarding sales taxes. Before you go for any further purchases make sure you have all the information required.