Property Tax and Capital Gains Tax Explained
Last Update 3 months ago
Taxes are a mandatory part of any property transaction. Understanding them helps you avoid surprises and stay compliant with the law.
1. Property Tax
- Imposed annually by local governments or development authorities.
- Based on the property’s location, covered area, and use (residential or commercial).
- Payable by the property owner each year.
2. Capital Value Tax (CVT)
- Charged when a property is transferred.
- Typically 2% of the declared value of the property.
- Paid by the buyer to the government.
3. Stamp Duty
- Paid to legalize property registration.
- Usually 3% of the property value (rate may vary by province).
4. Withholding Tax
- Deducted at the time of sale.
- Paid by both buyer and seller, depending on filer status with the FBR (Federal Board of Revenue).
- Sellers who are non-filers pay higher tax rates.
5. Capital Gains Tax (CGT)
- Applicable when a seller earns profit on the sale of a property.
- The rate depends on the holding period:
- Sold within 1 year: higher rate
- Sold after 3–4 years: reduced or exempt (based on FBR policy)
Tip: Always request tax payment receipts and consult a tax advisor or lawyer for updated rates before finalizing your transaction.