Finance Bill 2026 Moves to Scrap Capital Value Tax on Overseas Assets Held by Individuals
The federal government, while presenting the Pakistan Budget 2026-27, has proposed the abolishment of Capital Value Tax (CVT) on foreign assets held by resident individuals.
The move has been introduced through the Finance Bill 2026, aiming to withdraw the existing tax framework implemented under the Finance Act 2022.
According to an analysis by A.F. Ferguson, the proposed legislation seeks to eliminate CVT applicable on overseas assets owned by resident taxpayers.
At present, the tax is charged at a rate of 1 percent on the value of foreign-held assets if the total worth exceeds Rs100 million at the end of a tax year. The tax liability arises when individuals file their annual income tax returns.
Under the current system, the taxable value of foreign assets is calculated based on the higher of either the acquisition cost, including improvements, or the fair market value of the asset. This valuation method was introduced to ensure accurate reporting of high-value offshore holdings by resident individuals.
The CVT on foreign assets was initially introduced under the Finance Act 2022 as part of broader measures to expand the tax net and improve documentation of wealth held outside Pakistan.
However, the proposed abolishment reflects a significant policy shift in the upcoming fiscal framework.
Legal experts also note that the constitutional validity of the existing CVT provision remains under review before the Federal Constitutional Court of Pakistan. This pending case adds further complexity to the implementation and future enforcement of the tax.
If approved, the removal of CVT on foreign assets would reduce compliance requirements for resident individuals with overseas holdings and potentially ease tax-related reporting obligations.
The proposal is now awaiting final approval as part of the broader Finance Bill 2026 process, which will be debated and voted on in Parliament.
