Government to Eliminate Federal Excise Duty on Property Transfers

ISLAMABAD: To provide a boost to the real estate sector, the government is preparing to remove the 3 to 7 percent Federal Excise Duty (FED) imposed on property and commercial plot transfers through the Finance Act 2024.

Top officials from the Federal Board of Revenue (FBR) stated that Prime Minister Shehbaz Sharif has given his approval to eliminate the FED on property transactions. The FBR has submitted a proposal to the federal cabinet for consideration.

The government is considering two methods for withdrawing the Federal Excise Duty (FED) on property transactions: issuing a Presidential Ordinance or introducing a Bill in Parliament.

Sources suggest that the government is very likely to present a Bill in Parliament to promptly abolish the duty.

Concurrently, the Computerized Payment Receipt (CPR-FE) for settling the 3-7% FED will also be discontinued for the allocation or exchange of commercial properties, in addition to the initial allotment or transfer of undeveloped plots or residential properties.

Reports indicate that the aforementioned tax initiative did not yield the anticipated outcomes in the first half of fiscal year 2024-25. The earnings produced via this measure have thus far been minimal. Sources have confirmed that the government intends to soon eliminate FED on the allocation or exchange of commercial properties, along with the initial allocation or exchange of undeveloped plots or housing units.

The FBR had previously released two forms: Form-A and Form-B. Form-A pertains to the Computerized Payment Receipt (CPR-FE), while Form-B contains specifics on FED payments for property, including the buyer’s name, property location/area, compensation received, and the FED rate/amount paid.

Currently, every builder or developer is required to collect a duty of 3 percent on the total amount of consideration at the time of allocation or transfer of commercial property and first allocation or first transfer of open plots or residential property, provided that the buyer is listed on the active taxpayer list maintained under section 181A of the Income Tax Ordinance on the property acquisition date.

The FED stands at 5 percent of the total consideration if the buyer has not submitted their income tax return by the deadline specified in proviso to rule IA of the Tenth Schedule of the Ordinance.

The FED is 7 percent of the total consideration when the buyer is not included on the active taxpayer list maintained under section 181A of the Ordinance on the date the property is acquired.