Capital gains tax revamped on disposal of immovable properties

Capital gains tax revamped on disposal of immovable properties

KARACHI: The Finance Act, 2022 has revamped the taxation of capital gains on disposal of immovable properties.

Amendment has been incorporated in Section 37 of Income Tax Ordinance, 2001 through Finance Act, 2022.

READ MORE: Tax on deemed income arising from capital assets in Pakistan

Capital gains tax on disposal of immovable properties located in Pakistan shall be taxed at the following rates:

01. Where the holding period does not exceed one year: the tax rate for open plots shall be 15 per cent; for constructed property at 15 per cent; and for flats 15 per cent.

02. Where the holding period exceeds one year but does not exceed two years: the tax rate for open plots shall be 12.50 per cent; for constructed property at 10 per cent; and for flats at 7.5 per cent.

READ MORE: Pakistan imposes tax at 10% on money transfers to non-residents

03. Where the holding period exceeds two years but does not exceed three years: the tax rate for open plots shall be 10 per cent; for constructed property at 7.5 per cent; and zero per cent for flats.

04. Where the holding period exceeds three years but does not exceed four years: the tax rate for open plots shall be 7.5 per cent; for constructed property at 5 per cent; and zero per cent for flats.

05. Where the holding period exceeds four years but does not exceed five years: the tax rate for open plots shall be 5 per cent; zero per cent for constructed property; and zero per cent for flats.

READ MORE: Significant changes to sales tax laws through Finance Act 2022

06. Where the holding period exceeds five years but does not exceed six years: the tax rate for open plot shall be 2.5 per cent; zero per cent for constructed property; and zero per cent for flats.

07. Where the holding period exceeds six years: the tax rate shall be zero for open plots, constructed property and flats.

Tax experts at PwC A. F. Ferguson & Co. said consequently, capital gains relating to disposal of immovable properties situated outside Pakistan will be taxed at applicable rates irrespective of holding period.

READ MORE: Key changes to income tax laws through Finance Act 2022

Leave a Reply

Your email address will not be published. Required fields are marked *