Karachi, March 23, 2025 – The Large Taxpayers Office (LTO) Karachi has successfully collected Rs 3.60 billion as Capital Value Tax (CVT) on motor vehicles and foreign assets during the first eight months (July to February) of the fiscal year 2024-25.
This marks a significant increase of 17.23% compared to Rs 3.07 billion collected during the corresponding period of the previous fiscal year, according to sources within LTO Karachi.
LTO Karachi officials have attributed this growth in CVT collection to improved compliance and enforcement measures. The imposition of CVT was introduced through the Finance Act, 2022, with specific provisions for its collection from high-value assets, including motor vehicles and foreign assets held by resident individuals.
Imposition of Capital Value Tax (CVT) 2022
The Finance Act, 2022, under Section 8, outlines the applicability of CVT on the following categories of assets for the tax year 2022 and onwards:
1. Motor Vehicles Held in Pakistan
o If the engine capacity exceeds 1300cc, or in the case of electric vehicles, if battery power capacity exceeds 50 kWh, a CVT of 1% of the vehicle’s value is applicable.
2. Foreign Assets of Resident Individuals
o If the aggregate value of such assets exceeds Rs 100 million on the last day of the tax year, a 1% CVT is charged.
3. Other Assets Specified by the Federal Government
o The Federal Government, through official notification, can impose a CVT of up to 5% of the value of specific assets.
Collection of CVT on Motor Vehicles
The valuation of motor vehicles for CVT collection is categorized as follows:
• Imported Vehicles: The import value assessed by Customs authorities, inclusive of all duties and taxes. The Collector of Customs collects CVT at the import stage.
• Locally Manufactured or Assembled Vehicles: The ex-factory price, inclusive of all duties and taxes, with CVT collected by the local manufacturer or assembler.
• Auctioned Vehicles: The auction value, inclusive of all duties and taxes, with CVT collected by the auctioneer.
Each year, the assessed value of a vehicle is reduced by 10%, and after five years from the initial purchase or import, no CVT is charged.
Additionally, every motor vehicle registering authority under the Excise and Taxation Department is responsible for collecting CVT at the time of registration, unless it has already been collected at an earlier stage. Furthermore, CVT must be collected upon every subsequent transfer of vehicle ownership within the five-year period.
CVT on Foreign Assets
Foreign assets held by resident individuals include direct and indirect ownership, as well as beneficially owned assets. The value of these assets is determined based on their total cost in foreign currency, converted into Pakistani rupees using State Bank of Pakistan’s exchange rate as of the last day of the tax year. If the cost cannot be accurately determined, the fair market value is used for CVT calculation.
LTO Karachi ensures that resident individuals pay CVT on foreign assets at the time of filing their income tax returns. Inland Revenue officers have the authority to recover unpaid CVT along with a default surcharge, holding individuals personally liable for non-payment. The provisions of the Income Tax Ordinance, 2001, and Income Tax Rules, 2002, govern the collection, payment, recovery, and refund of CVT.
LTO Karachi continues to strengthen its tax collection mechanisms to enhance compliance, ensuring that CVT contributions on motor vehicles and foreign assets significantly contribute to national revenue.