The International Monetary Fund (IMF) has advised the Federal Board of Revenue (FBR) to broaden the Capital Gains Tax (CGT) base by including cryptocurrencies. This suggestion emerged amidst discussions on the $3 billion stand-by arrangement (SBA) between the IMF and Pakistan.
Starting last Thursday, the discussions aim to unlock a $1.1 billion tranche from last summer’s rescue package, potentially steering Pakistan away from a sovereign debt default.
The IMF also recommended reassessing taxation slabs for real estate and listed securities to ensure taxation on all gains. It is pushing for a regulation that mandates property developers record and disclose all transfers before property title completion and registration.
Non-compliant developers may face penalties, a move aimed at taxing the widespread trading of undeveloped property files within housing schemes. These changes are anticipated to feature in the upcoming Extended Fund Facility (EFF) bailout package and may be incorporated into FY2024-25’s budget via the finance bill.
The IMF’s technical assistance report highlights Pakistan’s struggle with taxing capital gains from real estate disposals. Often, real estate transactions aren’t formally recorded until completion, leaving gains from transfers of uncompleted properties untaxed.
To address this, the IMF suggests requiring developers to monitor and report all pre-completion property transfers and imposing penalties for non-compliance. This includes making developers secondarily liable for unpaid taxes if they can’t be recovered from the seller.
Moreover, the IMF proposes extending capital gains taxes to include investments like cryptocurrencies and ensuring all real property and securities gains are taxed, irrespective of ownership duration.
The lender seeks to amend the Income Tax Ordinance’s definition of “personal moveable property” to cover all investment-capable properties, aiming to tax capital gains on a broader spectrum of assets and remove the tax exemption on long-held assets.
 advises the Federal Board of Revenue (FBR) to expand Capital Gains Tax (CGT) to cryptocurrencies amid ongoing $3 billion SBA discussions. This move aims to address the taxation of digital assets and unregistered real estate transactions.){kind=link}