Islamabad, March 22, 2025: In a significant development for Pakistan’s real estate sector, the International Monetary Fund (IMF) has agreed in principle to reduce the withholding tax rate on property purchases by two percent. The decision follows a request from the Federal Board of Revenue (FBR) and is set to take effect in April 2025.
However, the withholding tax rate on property sellers will remain unchanged, as the IMF declined to approve a reduction for sellers.
According to sources, a recent virtual meeting between Pakistani officials and the IMF led to multiple agreements, including a two percent cut in the withholding tax rate for property buyers under Section 236 of the tax law. No change in the withholding tax rate for sellers under Section 236C, a reduction of Rs60 billion in Pakistan’s March 2025 tax revenue target, as requested by the FBR and permission for the government to raise PKR 1,257 billion from banks to address circular debt in the power sector.
These concessions are expected to pave the way for a consensus on the Memorandum of Economic and Financial Policies (MEFP) and a staff-level agreement between Pakistan and the IMF, which is likely to be finalized next week.
The IMF’s approval of tax relief for property buyers is seen as a boost for the real estate sector, which has been struggling due to high taxation and inflationary pressures. The reduction in March’s tax revenue target also provides short-term relief to Pakistan’s economy, as the government works towards stabilizing its fiscal deficit while addressing power sector challenges.
This decision comes as Pakistan seeks to revive investor confidence and negotiate new financial agreements with the IMF to sustain economic stability.
