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Imposition of a Luxury Tax on properties, Stakeholders await for clarification

Islamabad: The federal government, during its Budget 2019-20 reveal on June 12, had announced the imposition of a Luxury Tax on properties located within the Islamabad Capital Territory (ICT).

However, in the time since, further reports have emerged claiming that the executive has scrapped the said tax category from the Finance Bill that was voted earlier this week — leaving stakeholders looking for further clarification on the matter.

According to the original Finance Bill 2020, the Luxury Tax was to be imposed on farmhouses and villas located within the federal capital. The following are details regarding the measures originally proposed in the bill:

The Luxury Tax will be imposed annually on the following categories of houses and farmhouses:

Category of Property Rate of Tax
Houses
2 to 4 kanal house with covered area of more than 6000 sq ft PKR 100,000 per kanal
5+ kanal house with covered area of more than 8000 sq ft PKR 200,000 per kanal
Farmhouses
Farmhouse with area up to 4 kanals including farmed area
Covered area between 5,000 and 7,000 sq ft PKR 25 per sq ft
Covered area between 7,000 and 10,000 sq ft PKR 40 per sq ft
Covered area exceeding 10,000 sq ft PKR 50 pe sq ft
Farmhouse with area exceeding 4 kanals including farmed area
Covered area between 5,000 and 7,000 sq ft PKR 60 per sq ft
Covered area between 7,000 and 10,000 sq ft PKR 70 per sq ft
Covered area exceeding 10,000 sq ft PKR 80 pe sq ft

The tax, however, is not to be imposed on the self-occupied homes of widows.

However, according to reports, the government — in addition to a number of other relief measures that have been added to the Finance Bill 2020 — has also withdrawn the Luxury Tax provision. To add to the uncertainty, the latest version of the Finance Bill available with the Federal Board of Revenue (FBR) has not been updated yet either — with several news sources claiming that the Luxury Tax has been imposed by the government.

The ongoing situation will become clearer when the latest version of the Finance Bill 2020 is made available to the general public, or when the government issues a formal notification regarding the imposition of a Luxury Tax.

 

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