Rising property taxes caused the real estate sector to stall in the first quarter of 2015, according to new analysis from Lamudi Pakistan.
During Q12015, an increase was levied in the transfer fee, stamp duty, capital value tax (CVT), and withholding tax. Similarly a new corporation fee has also been added.
These policies hamper the activity of Pakistan’s real estate sector, with real estate agents now looking for other business opportunities as the sector has come to a standstill in the past quarter.
For instance, if a homeowner wants to transfer their property, they have to pay a variety of taxes. The transfer charges vary from each housing society to the next, however, there are some fixed transfer charges that have to be paid to the government.
The government says that the transfer charges are five percent of the DC rate, which is the minimum land value. The break up of the transfer charges includes the following: three per cent tax on stamp papers, one per cent is the newly-added corporation fee and two percent is the capital value tax.
A one per cent advance withholding tax has also been levied since July 2014 on the purchase of both commercial and residential immovable properties having a DC rate, of more than PKR 3,000,000.
If the seller is a taxpayer then he has to pay 0.5 per cent of the DC rate, and if he is not a taxpayer then he has to pay one per cent of the DC rate. The buyer has to pay two per cent of the DC rate. In the end these taxes adds up to around nine per cent of the DC rate.
Sounds like Government has stepped too far. Have they got greedy with their taxes? They have single handedly stopped the housing market. How can we not thank them?
The government needs to understand and ease new taxes or the investment will go away!
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