FPCCI Proposes Elimination of CVT on Foreign Assets

FPCCI Proposes Elimination of CVT on Foreign Assets

PkRevenue.com – The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has put forth a significant proposal advocating for the elimination of the Capital Value Tax (CVT) on foreign assets of residents in the upcoming budget for 2024-25.

This move, according to FPCCI, aims to broaden the tax base rather than burdening existing taxpayers, which is crucial for fostering economic stability and growth in Pakistan.

Historical Context and Evolution of CVT

The CVT was first introduced in Pakistan through the Finance Act of 1989. The rationale behind this tax was to target assets created from untaxed money, particularly in the acquisition of properties and vehicles. During the budget presentation for the year 1989-90, the then Finance Minister, Mr. Ihsan ul Haq Piracha, emphasized that the tax would be levied only on individuals not registered with the tax authorities. Those filing Wealth Tax returns could adjust their CVT payments against their wealth tax liabilities.

Initially, the CVT targeted the sale, transfer, or gift of immovable property, such as land or buildings, and later extended to motor vehicles, stocks, and other assets, regardless of whether the investment was made from taxed money.

In 2021, the Finance Act reintroduced the CVT on the total (gross) cost of foreign assets declared by existing taxpayers, calculated in the relevant foreign currency converted to Pakistani rupees. This move aimed to increase direct tax revenue from existing taxpayers, rather than expanding the tax net to include those not currently paying taxes.

FPCCI’s Argument Against CVT

The FPCCI argues that the current application of the CVT is inequitable and unjust. They highlight several key points:

1. Double Taxation: Residents are already taxed on global income, including rental income from foreign property or profit on debt. Imposing CVT on such foreign assets results in double taxation, which contradicts generally accepted tax principles.

2. Impact on Resident Expatriates: The CVT also affects resident expatriates who are temporarily in Pakistan for employment. It seems unreasonable to tax foreign nationals on their assets abroad while they are temporarily residing in Pakistan.

3. Constitutional Concerns: The FPCCI points out that the imposition of CVT on foreign assets declared under the Foreign Assets (Declaration and Repatriation) Act, 2018, is unconstitutional. This Act, passed in 2018, allowed a one-time tax on foreign assets, with the assurance that no further taxes would be imposed on these assets. Therefore, the re-imposition of CVT violates this provision.

4. Discriminatory Nature: The CVT is seen as discriminatory because it does not apply to Non-Resident Pakistanis or residents who are not existing taxpayers. This selective application could drive valuable capital and entrepreneurial talent out of Pakistan, leading to brain drain and a negative impact on business development.

Economic Implications

The FPCCI stresses that the current economic situation in Pakistan is dire, with the economy teetering on the brink of collapse. The elimination of CVT on foreign assets is seen as a necessary measure to prevent further capital flight and retain entrepreneurial talent within the country. The recent trend of Pakistani businessmen joining the Dubai Chamber of Commerce highlights the adverse impact of the current tax regime, where attractive incentives and lower taxes in other jurisdictions are drawing away Pakistan’s business elite.

Recommendations and Future Steps

The FPCCI’s proposal is not merely about eliminating a tax but about shifting the focus towards a more inclusive and broad-based tax system. Key recommendations include:

1. Broadening the Tax Base: Instead of imposing additional taxes on existing taxpayers, efforts should be made to include those currently outside the tax net. This would distribute the tax burden more equitably and enhance revenue without discouraging investment.

2. Encouraging Local and Global Investment: The government should create a conducive environment for local investors to thrive and expand globally. Incentives similar to those offered by countries like Dubai could help retain and attract capital.

3. Legislative Reforms: Ensuring that tax laws are constitutionally sound and non-discriminatory is crucial. This includes revisiting the CVT provisions to align them with the principles established in the Foreign Assets (Declaration and Repatriation) Act, 2018.

4. Support for Resident Expatriates: Tax policies should consider the temporary nature of expatriates’ stay in Pakistan and exempt them from CVT on foreign assets.


The FPCCI’s proposal to eliminate the CVT on foreign assets is a call for comprehensive tax reform in Pakistan. It underscores the need for a fair, broad-based tax system that encourages investment and economic growth. As the government prepares the budget for 2024-25, these recommendations provide a roadmap for fostering a more stable and prosperous economic future for Pakistan. The elimination of the CVT could be a pivotal step towards retaining capital, encouraging investment, and revitalizing the national economy.