Government to Eliminate Federal Excise Duty on Property Transfers

In a move aimed at revitalizing the real estate sector, the Cabinet is poised to eliminate the 3 to 7 percent Federal Excise Duty (FED) imposed on the transfer of plots and commercial properties through the Finance Act 2024.

High-ranking officials from the Federal Board of Revenue (FBR) revealed that Prime Minister Shehbaz Sharif has already given his assent to abolish the FED on property transactions. The FBR has prepared and submitted a proposal to the federal cabinet for formal approval.

The government is considering two avenues for enacting this change: issuing a Presidential Ordinance or introducing a Bill in Parliament to repeal the Federal Excise Duty (FED) on property transactions.

Likely Path: Parliamentary Bill

Sources suggest that the government is highly inclined to pursue the legislative route by presenting a Bill in Parliament to promptly abolish the aforementioned duty.

Concurrently, the Computerized Payment Receipt (CPR-FE) system for remitting the 3-7% FED will also be discontinued for the allocation or transfer of commercial properties, as well as the initial allocation or transfer of open plots or residential properties.

Reports indicate that this taxation initiative has not yielded the anticipated outcomes in the initial half of the 2024-25 fiscal year. The revenue generated from this measure has been minimal. Sources further stated that the government will soon eliminate FED on the allocation or transfer of commercial properties, along with the initial allocation or transfer of open plots or residential properties.

The FBR had previously introduced Form-A and Form-B. Form-A pertains to the Computerized Payment Receipt (CPR-FE), while Form-B encompasses the specifics of FED payments on property, including the buyer’s name, property location/area, consideration amount, and FED rate/amount paid.

Current FED Rates
  • Currently, every developer or builder is obligated to collect duty at a rate of 3 percent of the total consideration amount during the allocation or transfer of commercial property and the first allocation or transfer of open plots or residential property, provided the buyer is listed on the active taxpayer list under section 181A of the Income Tax Ordinance on the property acquisition date.
  • The FED stands at 5 percent of the gross consideration amount if the buyer has not submitted their income tax return by the deadline specified in proviso to rule IA of the Tenth Schedule to the Ordinance.
  • The FED is 7 percent of the gross consideration amount 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.