ISLAMABAD, May 28, 2025 — In a bold and controversial move, the Federal Board of Revenue (FBR) is gearing up to slap luxury cars with significantly higher withholding taxes in the upcoming FY26 federal budget — a decision that could shake Pakistan’s elite automotive market.
Insiders reveal that the FBR has already submitted its aggressive proposal to raise withholding tax rates on luxury cars, targeting vehicles with engine capacities above 1300cc. If approved by Parliament, this hike could send shockwaves across the high-end auto sector and significantly alter the dynamics of car ownership in the country.
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The current tax structure imposes a withholding tax ranging from 2% to a staggering 12%, based on engine capacity. But under the new FBR proposal, these rates are expected to climb sharply, with high-end luxury cars facing the steepest increases. Vehicles above 3000cc — the hallmark of prestige and power — could become dramatically more expensive as a result.
The FBR argues that this bold step is aimed at boosting revenue and cracking down on the unchecked rise in luxury vehicle imports and sales, particularly at a time when the country is grappling with fiscal pressure. In 2024 alone, the FBR collected over Rs4 billion in withholding taxes from vehicle purchases, but officials believe there’s potential for far more — especially from those driving the most extravagant cars on Pakistan’s roads.
The shift to a value-based taxation model last year laid the groundwork for this move, replacing the outdated fixed advance tax system. Now, the FBR wants to go further by ensuring that the ultra-wealthy pay their fair share when buying high-end cars.
Critics argue that the move targets only a small segment of society, but supporters claim it’s a step toward equitable taxation. Either way, the message is loud and clear: owning luxury cars in Pakistan is about to get a lot more expensive — and the FBR is unapologetically driving the change. Buckle up.