FBR Tax on Flats

During the 2013-2018 time period, Pakistan was governed  by PMLN government.  Nawaz Sharif, the leader, imposed new taxes on property in order to generate revenue. The previous government, which was led by PPP’s Asif Zardari, had destroyed Pakistani economy leaving the National Savings empty.

The new government was hungry for money and was exploring ways to increase the National Savings. They decided the best way to generate revenue is to impose taxes on all residential and commercial property. Previously, property taxes were applied on those property that lied on City limits. These limits were those till where the local municipality would serve the residents. Once a property was build outside these limits, there was no tax on it.

With an increasing population and retiring overseas Pakistanis returning home, the demand for houses increased. With the municipality area already peaked out, new property buyers looked at areas beyond the city limits. As a result, many new societies and areas were built to accommodate the rising demand. Slowly, these areas began to fill and soon reached their capacity. Whenever an area starts filling up with residents, commercial ventures quickly follow and setup their outlet in order to have a stronghold in that area. Thus new areas and societies sprung all over the country.

This caught the eye of the hungry government and they decided to add all these areas under the municipality limits and impose taxes on them. As a result taxes were also imposed on residential flats that were built beyond the city limits. There were 2 new taxes imposed and we shall look at them.

The first tax imposed was the GST Sales Tax. This is a one time tax and it is imposed on both residential flats and commercial shops. The one time means that if you are the current owner of a flat, FBR will send you a notice to pay the sales tax, if it has not been paid. You will submit that tax in any bank. Before it used to be submitted in National Bank of Pakistan only, but the PTI government of Imran Khan in order to reduce the long lines at NBP and save the people time, enabled the tax to be paid in all banks. Thus, even if you sell the flat, the new owner doesn’t have to pay the GST sales tax. This is a lifetime tax paid once. So, when you are about to buy a flat, you should check if the GST tax has been paid. If it hasn’t been paid, you should demand the seller to pay it and show you the payment receipt. Most of the time, the seller has friends inside and he makes a deal with the authorities to not impose GST Tax on him and that the new buyer will pay for it. One housing society that does this is Al Ghurair Giga. Their transfer department often waives GST Sales Tax for certain individuals and has the buyer pay for it. This is one thing that you should be careful of and confirm beforehand that it has been paid. The rate of GST Sales Tax is Rs. 50/sq ft for flats and Rs 100/sq ft for businesses.  If you have a 792 square feet flat, the GST Sales Tax on it will be 792*50=Rs. 39,600/–. If you have a 1092 square feet flat, then the GST Sales Tax on it will be 1092*50=Rs. 54,600/–. Money saved is money earned!

The second tax implied by the hungry government was the CPR transfer tax. This is to be applied at the time of transfer, and unlike the GST Sales Tax, it has to be paid every time a flat or shop is bought or sold. This means that when you buy a flat, you will have to pay the CPR tax. When you sell the flat, even if you have bought it for a month or 5 years, you will have to pay the CPR Tax again. Both the buyer and the seller have to pay the CPR tax. The only exception is for the seller under one condition. The condition is that the seller has to be the original buyer. If you brought a brand new flat direct from the company and it had no previous owner, than when you decide to sell it, you will be exempt from CRP Tax. Sometimes, people buy flats at low launching price. Then when the price gets high, they sell it at a profit. Since they are the original owner, they don’t have to pay the CPR Tax. But when you buy the flat from someone else, even if the building is still being constructed and not ready for possession, you will have to pay the CPR Tax. Even if you buy 2 to 3 flats a year and sell them at profit, you will have to pay CPR Tax every time you buy a flat and then again when you are selling it. The government has to make money from you and this is how they do it! The CPR Tax rate set by Nawaz Sharif was 0.5% of the selling price for tax payers and 1% of the selling price for non-tax payers. If you are a tax payer and buy a house for 2 Crore, you will have to pay the government 0.5% tax on 2 Crore. The government loves to punish non tax payers thus, if you are a non tax payer and you buy the same house for 2 Crore, you will have to pay 1% tax on the 2 Crore price. The tax rate is flat, it doesn’t depend on the selling price. Unfortunately, the new unpopular and unelected government led by Shahbaz Sharif, has decided to punish the people for supporting PTI government. They have decided to raise the CPR Tax rate to 5% for Tax filers and 10% for non-tax files. So, when you now go to buy or sell a house, don’t be surprised if you have to pay higher taxes.

Believe me, there is no escape from taxes. I have witnessed FBR going to housing societies and collecting the record of sellers and buyers from 2015 onwards. They  gather the data which includes your CNIC number and then send a Tax challan to your address. It is very easy for them to track you down through your CNIC number and mobile location. You will have to pay or face the risk of getting arrested. We can only pray that a new government that cares about the people quickly comes and reduces the economic burden on the people.

FBR Tax
FBR Tax on Flats

3 thoughts on “FBR Tax on Flats

  1. Hello would you mind sharing which blog platform you’re working with?

    I’m going to start my own blog in the near future but I’m having a difficult time selecting
    between BlogEngine/Wordpress/B2evolution and Drupal.
    The reason I ask is because your design and style seems different
    then most blogs and I’m looking for something unique.
    P.S Apologies for getting off-topic but I had to ask!

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