Pakistan eyes construction sector relief, tax breaks for overseas investors

The Pakistan government is considering significant tax relief for the construction sector and incentives for overseas Pakistanis to invest in real estate, sources indicate, following directives from Prime Minister Shehbaz Sharif.

The proposed measures, expected in the upcoming budget, aim to stimulate growth in the construction industry and attract foreign investment.

Among the key proposals, the Federal Excise Duty (FED) on property purchases is expected to be completely abolished, potentially as early as July 1. This would eliminate the 3% FED for filers, 5% for late filers, and 7% for non-filers currently levied on property transactions.

Sources familiar with discussions at the Federal Board of Revenue (FBR) say the prime minister has taken an interest in addressing the challenges faced by the construction sector. They believe abolishing FED will foster industry growth and ultimately lead to higher tax collection.

In a move to further facilitate overseas Pakistanis, the requirement for a No Objection Certificate (NOC) from the Regional Tax Office (RTO) for tax exemptions on property purchases will also be scrapped.

Additionally, the government is reportedly preparing to offer relief on raw materials for the construction industry. This could involve a reduction or complete abolition of withholding tax on raw materials for various industries, including construction, making them more affordable. Similar reductions or eliminations of withholding tax on property transactions are also being considered.

The budget proposals also include plans to register builders and developers associated with the real estate sector starting July 1, and to ensure 100% elimination of benami (nameless or fictitious) transactions in the real estate sector.

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