Summary of Withholding Tax Rates

In Pakistan, property transactions are subject to withholding taxes, which vary based on the filer status of the buyer and seller. While property transactions may have different tax rates depending on the property’s value, we will focus on deals under the 5 crore rupees threshold, as this encompasses most transactions. There are different withholding tax rates for the sale and purchase of property, which we will break down in this post.
Withholding Tax on Sale of Property (Section 236C)
When selling a property, the seller is required to withhold tax based on their status as a filer, late filer, or non-filer. The rates for the sale of property under Section 236C are as follows:
- Filer: 3% of the sale price
- Late Filer: 6% of the sale price
- Non-Filer: 10% of the sale price
Withholding Tax on Purchase of Property (Section 236K)
Similarly, when purchasing a property, the buyer must also pay withholding tax, which varies based on their status. The rates for the purchase of property under Section 236K are:
- Filer: 3% of the sale price
- Late Filer: 6% of the sale price
- Non-Filer: 12% of the sale price
Other Taxes to keep in Mind
While withholding tax is the main concern for most property buyers and sellers, it’s also essential to be aware of other taxes that may apply:
- 7E: 1% Tax of Fair Market Value (FMV) on the seller, if they don’t have exemption certificate
- Capital Gains Tax (CGT): This tax applies to the profit earned from the sale of property.
- Stamp Duty: A provincial tax paid during property registration, typically ranging from 2-3% of the transaction value.
- Property Tax: An annual tax paid by property owners, based on the property’s value and location.
Conclusion
For most property deals under 5 crore rupees in Pakistan, the primary taxes are withholding tax, which applies to both the sale and purchase of property. The tax rates depend on whether the parties involved are registered filers, late filers, or non-filers. Understanding these withholding tax rates and other potential taxes helps ensure compliance with Pakistani tax laws and a smoother transaction process.
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