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Taxes play a crucial role in shaping investment decisions, property transactions, and business strategy. At Chakor, our Taxes section demystifies Pakistan’s tax landscape as it relates to real estate, construction, and investment, covering policy updates, filing obligations, and the financial implications of every major change.

Stay ahead of your obligations and make decisions that are as tax-smart as they are financially sound.

CategoriesNews Property Laws Property Taxes Real Estate

LHC Voids Cantonment Tax Demands Against LUMS Issued in 2011 and 2017

LAHORE: The Lahore High Court has set aside property tax demands raised by the Military Lands and Cantonments Department against the Lahore University of Management Sciences, ruling that the university is exempt from the levy for the period before a 2023 amendment to the Cantonments Act.

A division bench of Justice Hassan Nawaz Makhdoom and Justice Khalid Ishaq allowed a petition filed by LUMS and the National Management Foundation, the non-profit society under which the university was established. The petition challenged orders of the Director General, Military Lands and Cantonments, Rawalpindi.

The Cantonment Board first issued a tax notice on the university’s buildings in 2007, 14 years after LUMS began operating from its Lahore campus in 1993. LUMS claimed exemption under Section 99(2)(b) of the Cantonments Act, 1924. Its appeal was dismissed in 2011, and a revision petition in 2017.

The university told the court it has over 5,000 students across five schools and has provided about Rs13.3 billion in financial aid since its founding. The respondents argued that LUMS earns substantial income from fees and investments and lets out some buildings and halls, which they said amounted to commercial activity.

In the judgment, Justice Ishaq held that the 2023 amendment made a substantive change that cannot be applied to earlier assessment periods. He ruled that charging fees and retaining a surplus does not establish a profit-making purpose, provided no funds are distributed to promoters, trustees or controllers.

The court declared the 2011 and 2017 orders void and barred recovery of any pre-amendment demand. For the later period, it said the amended law gives the Cantonment Board discretion to grant or refuse exemption. Any future assessment must be made through a reasoned order examining the use, income and public access of each building concerned.

 

CategoriesNews Property Taxes

Property sale NOCs in Punjab now hinge on sanitation fee clearance

LAHORE – The Punjab government has made sanitation fee payment mandatory for obtaining a no-objection certificate (NOC) for property sales, introducing the condition before it completes the distribution of bills across the province.

The new requirement binds property owners to clear outstanding sanitation charges before receiving a property transaction NOC. Previously, only property tax clearance was required. The condition has reportedly affected property transactions, particularly for owners who have yet to receive their bills.

The government has begun distributing bills to around five million residential and commercial properties in urban areas under the Suthra Punjab programme, with distribution expected to be completed this month. The Excise, Taxation and Narcotics Control Department has been tasked with billing and collecting the charges, with an annual revenue target of approximately Rs40 billion.

Owners will receive two bills over six months for their annual sanitation fee liability and must pay within 60 days of receiving them. Penalties will be applicable for delays.

For residential properties, monthly sanitation charges range from Rs300 for properties measuring up to five marla to Rs5,000 for those exceeding 40 marla. Commercial properties face monthly charges ranging from Rs500 to Rs3,000, depending on size.

The government has completed data integration between the excise department and Suthra Punjab, linking sanitation fee records with property ownership data and enabling the new NOC requirement.

Excise inspectors are responsible for delivering bills within their respective circles, while sanitation fee collection will occur alongside property tax payments.

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CategoriesNews Economy Property Laws Property Taxes Real Estate Investment

World Bank Presses Pakistan to Move Property Tax onto Market Valuations

ISLAMABAD, October 3, 2026: The World Bank has urged Pakistan to tighten enforcement of agricultural income tax and overhaul how provinces tax property, Business Recorder reported today.

The recommendations came up during a meeting between Finance Minister Muhammad Aurangzeb and a World Bank team led by Country Director Bolormaa Amgaabazar.

On agriculture, the Bank wants provinces to implement their amended tax laws, set up digital registration, filing and payment, and share more data with federal authorities. The sector accounts for about 24 percent of GDP, yet most of it sits outside the tax net.

Property was the other focus. Pakistan collects only about 0.13 percent of GDP in property tax, against 0.3 to 0.6 percent in many comparable economies. The Bank called for a single, harmonised valuation approach, better digital systems, and a gradual move away from outdated administrative valuations toward market-based values.

The discussions went beyond tax. The Bank also raised GST harmonisation, closer coordination between Islamabad and the provinces, stronger revenue-policy modelling and delivery of the Medium-Term Revenue Strategy. 

On business conditions, it pointed to simpler regulation, SME financing, insolvency reform, factoring legislation and export-finance products through EXIM Bank. Capital-market reforms were also on the table, aimed at widening financing options and encouraging investment.

The report presents all of this as proposals under discussion. It does not mention a new property-tax rate, an immediate nationwide increase or a date for introducing market-value taxation.

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CategoriesNews Developments Property Laws Property Taxes Real Estate Real Estate Investment

Sindh Targets Five-Fold Jump in Property Tax Records to 2.15m Under $150m World Bank Plan

KARACHI: Sindh is preparing to widen its urban property tax records more than fivefold, from about 397,375 entries to roughly 2.15 million, through a World Bank-backed programme covering 20 local councils outside Karachi.

The Sindh Property Revenues Enhancement Program (SPREP) is valued at $150 million, comprising $110 million in results-based financing and $40 million in investment project financing. The Local Government Department will implement it to increase Urban Immovable Property Tax (UIPT) collection and improve municipal financial management.

According to the programme’s Stakeholder Engagement Plan, only about one-fifth of an estimated 2.1 million properties in the five targeted divisions are currently registered. Field teams will conduct a GIS-based, door-to-door survey of residential and commercial premises, geo-tagging each property into a new UIPT management information system. The plan stresses that the exercise is meant to build records, not issue tax demands.

The targeted councils are spread across Hyderabad (nine), Larkana (four), Sukkur (three), Mirpurkhas (two) and Shaheed Benazirabad (two), serving about 4.5 million residents. Wider institutional support will reach all 45 participating councils, including 25 in Karachi.

Beyond the survey, the programme will finance digitisation of Board of Revenue land records, a digital master plan linking land and tax systems, city surveys and a financial management information system for budgeting, accounting, payroll and expenditure.

To address privacy and accuracy concerns, the plan proposes advance notice of visits, identified enumerators and channels for residents to review and correct records. Monthly Town Citizen Committees and women-only consultations are planned to prevent exclusion of vulnerable groups.

The design draws on Karachi’s CLICK project, where the registered base reportedly rose from about 900,000 to 4.2 million properties after removing duplicates and out-of-mandate entries.

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CategoriesNews Property Laws Property Taxes Real Estate Real Estate Investment

FBR to Refund Section 7E Tax on Properties Above Rs25mn After Court Strikes Down Law

ISLAMABAD: The FBR has agreed to refund tax collected on deemed rental income from immovable properties under Section 7E of the Income Tax Ordinance, 2001, months after Pakistan’s FCC struck the provision down as unconstitutional.

The relief follows sustained advocacy by the Lahore Tax Bar Association’s Public Interest Litigation Committee, whose chairman, Waheed Shahzad Butt, had repeatedly petitioned the FBR since the FCC’s May 7, 2026 verdict voided Section 7E in its entirety, along with all notices issued under the clause since its introduction through the Finance Act 2022.

In a letter dated September 23 to all Chief Commissioners of Inland Revenue across large taxpayer, corporate, and regional offices, the FBR directed that it must not turn down revision requests filed in response to the court order and must process any refunds arising from such revisions without delay.

The reversal affects a wide pool of taxpayers, as Section 7E applied a 5% deemed-income tax on the FBR-assessed market value of properties worth more than Rs25 million.

Butt welcomed the move as a significant win for taxpayers, noting it would spare both the exchequer and litigants from prolonged legal battles. However, he clarified that the FBR’s directive is limited strictly to Section 7E and does not affect a separate, unresolved dispute over Super Tax under Section 4C, where the FCC upheld the levy but excluded certain exempt capital gains, including inherited property and long-held real estate.

Pending a broader refund mechanism, the LTBA-PILC has proposed adjusting amounts collected under both Section 7E and Section 4C against taxpayers’ FY26 liabilities, urging the FBR to extend similar expedited treatment to pending Super Tax claims.

CategoriesNews Property Taxes

FBR Initiates Regular Business Consultations to Address Tax Issues and Enhance Facilitation

ISLAMABAD: The Federal Board of Revenue (FBR) has initiated a structured engagement process with the business community to improve tax administration, address operational challenges, and promote a more transparent trade environment. In this regard, FBR Chairman Rashid Mahmood Langrial visited the Large Taxpayers Office (LTO) Lahore and met with a delegation from the Lahore Chamber of Commerce and Industry (LCCI).

Senior FBR officials and LCCI representatives attended the meeting, which focused on taxation matters, business facilitation, industrial concerns, and issues affecting the commercial sector.

The FBR Chairman emphasised the importance of regular communication with stakeholders and announced that similar meetings would be held monthly to ensure timely consideration of business-related concerns.

During the discussion, the LCCI delegation raised concerns about taxation procedures, digital invoicing, administrative responsiveness, industrial duties, and other operational matters. The delegation also appreciated FBR’s recent initiatives concerning areas such as real estate taxation, Super Tax, and advance tax measures.

The FBR Chairman said the department is working to resolve genuine taxpayer issues while focusing on expanding the country’s tax base and bringing eligible sectors into the formal tax system. He further directed relevant officials to prioritise resolving income tax refund matters and ensure timely responses to taxpayer concerns in accordance with legal procedures.

The initiative reflects FBR’s broader efforts to strengthen collaboration with businesses, improve compliance, and create a more efficient taxation framework. Regular dialogue between tax authorities and industry representatives is expected to support a stable business environment and enhance confidence among investors and commercial stakeholders.

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CategoriesNews Property Taxes

Rawalpindi Excise Opens One-Window Centre to Speed Up Property Tax Services

RAWALPINDI: The Excise and Taxation Department Rawalpindi has launched a new One-Window Facilitation Centre to make tax-related services more accessible and efficient for citizens.

The facility will initially handle matters related to property tax, professional tax, and motor vehicle tax, allowing applicants to submit complaints and requests through a single point instead of visiting multiple departments.

Dedicated staff have been deployed at the reception area to receive applications and forward them to the relevant sections. Officials have been directed to resolve complaints and applications within two days, a move expected to reduce delays and repeated visits to the Excise office.

Director Excise and Taxation Rawalpindi Nauman Khalid will oversee the initiative and monitor the timely handling of public cases. The department says the system is intended to improve transparency, accountability and overall service delivery.

Plans are also in place to fully computerise the facilitation centre after the initial phase. The digital system is expected to improve record management, application tracking and monitoring of complaint resolution.

For property owners and businesses in Rawalpindi, the inclusion of property tax services is particularly significant, as it could simplify routine tax-related procedures and provide a more organised channel for resolving issues.

The initiative does not introduce any new property tax rates or changes in taxation policy. Instead, it focuses on improving the administrative process and making existing services more convenient for taxpayers.

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CategoriesNews Economy Investment Property Laws Property Taxes Real Estate Investment

Faulty Formula in FBR’s New Tax Return Form Is Overcharging Taxpayers, Warns PTBA

ISLAMABAD: The Pakistan Tax Bar Association has urged FBR to urgently fix a calculation error in its new income tax return form, warning that it is charging some taxpayers more than the law actually requires.

In a letter to FBR Chairman Rashid Mehmood Langrial, the PTBA said the fault lies in how the IRIS system handles “minimum tax,” a baseline amount already deducted or withheld on certain kinds of income that the law says should count in full toward a taxpayer’s minimum tax obligation.

Instead, PTBA says, IRIS splits a person’s income across different sources and taxes the remainder at an average rate, effectively piling an extra, unjustified demand on top of tax already paid.

To illustrate the unfairness, the bar association pointed out that two taxpayers earning the exact same income could end up owing different amounts, with the one who had tax withheld in advance actually paying more overall than someone who didn’t, purely because of how the system calculates things.

PTBA noted that the law already deals with a similar scenario correctly under the Final Tax Regime, where income taxed at source is treated as a separate block and excluded from normal-rate calculations. It says IRIS fails to make the same exclusion for minimum tax cases, meaning the same income essentially gets taxed twice.

The association has shared sample calculations with FBR to back up its claim and argued that building such formulas into the software amounts to interpreting the law itself, something it says neither FBR nor its technology arm, PRAL, has the authority to do, particularly since taxpayers have no option but to accept whatever the system generates.

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CategoriesNews Property Property Laws Property Taxes Real Estate Investment

Property Tax Windfall Signals Capital Flight Reversal, But Experts Warn of Real Estate Bubble Risk

Withholding tax collected from immovable property transactions climbed 57 percent in FY26, even as the government slashed advance tax on property purchases by half in the FY27 budget to encourage investment. The concession followed a marked surge in real estate prices, with plots in parts of Karachi reportedly multiplying in value within six months.

Analysts link the trend to reversed capital flight from the Gulf, particularly the UAE, as regional instability tied to the US-Iran conflict prompted funds once parked abroad to return.

Stronger remittance inflows and higher dollar liquidity from exchange companies have reinforced this shift, bolstering forex reserves and domestic liquidity.

However, concerns are mounting that this capital is settling into largely unproductive assets- vacant plots rather than industry or the stock market- which remains less attractive given its risk profile and a plateauing outlook.

Pakistan’s investment-to-GDP ratio continues to languish near record lows, with high taxation, weak industrial competitiveness, and regulatory hurdles cited as key deterrents to formal-sector investment. Some inflows reportedly still move through informal hundi-hawala channels, avoiding documentation altogether.

Officials are said to be exploring an investment vehicle for overseas Pakistanis to help finance $6.5 billion in public-private partnership projects, though critics argue such measures should have been introduced earlier.

A historical precedent is being cited: after Pakistan’s 1998 nuclear tests triggered a freeze on foreign currency accounts, banks led by HBL used incentive schemes to keep the resulting rupee liquidity within the formal banking system.

With regional tensions unresolved and capital inflows expected to persist, policymakers, the central bank, and commercial banks face renewed pressure to channel this liquidity into productive sectors or government securities before speculative pressures in real estate deepen further.

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CategoriesNews Developments Economy Property Taxes Real Estate Real Estate Investment

SECP Proposes REIT Overhaul: Threshold Cut to 65%, Vacant Land Investment Allowed

ISLAMABAD: The SECP has presented a draft package of amendments to the REIT Regulations, 2022, designed to release fresh capital and extend participation in the country’s real estate investment trust sector.

As per the proposed changes, the minimum threshold for real estate income and assets for REIT portfolios would drop from 75 to 65 percent, giving REIT Management Companies (RMCs) greater latitude to structure holdings and qualify a broader range of projects. Investment-based REITs would also gain the right to invest in vacant land and plots, subject to conditions still to be finalised.

The reforms would extend REIT access to new categories of capital, permitting group-level trusts and employee funds to invest in unlisted REIT schemes. Separately, the borrowing window available to RMCs from sponsors, directors and associated entities would be lengthened from 24 to 36 months, though existing unitholder-approval safeguards would remain unchanged.

To ease execution timelines, RMCs facing delays beyond their control could receive up to a one-year extension to list Rental and Investment-based REITs. The draft also opens a path for RMCs to acquire property directly from government entities through binding agreements, under conditions set by the regulator. A further clarification addresses Hybrid REIT Schemes, confirming that vehicles combining investment-based and rental components may earn and realize rental income during their holding period.

SECP Chairman Dr Kabir Ahmed Sidhu said the measures are intended to build a more enabling framework for the sector, capable of drawing in long-term capital and expanding the investor base.

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