Overseas Pakistanis refuse to pay withholding tax, payments in dollars to purchase plots in Islamabad

ISLAMABAD: In a recent development, Overseas Pakistanis are refusing to pay the withholding tax and Federal Excise Duty for their first-time plots purchased in the newly approved sectors of the federal capital. 

The demands started surging following recent news and developments regarding the Capital Development Authority (CDA) and balloting in Sector C-14.

The CDA had earlier indicated that payments to purchase plots are to be remitted in US dollars through the banking channel within 30 days of sending the notification which was dispatched on January 15.

However, many overseas Pakistanis are reportedly facing difficulties with this requirement given the extremely high banking fees for remittance abroad.

Therefore, the government is facing demands from successful overseas applicants for Sector C-14 to make payments in Pakistani rupees instead of US dollars. This will not only reduce the burden but also make payment easier for them. 

Shahid Jami, a tax expert, also mentions that overseas Pakistanis face difficulties in recovering withholding tax refunds. Since they usually don’t have taxable income in Pakistan, they face problems in claiming refunds, which is a major challenge.

The problem has compelled the federal government to constitute a task force to suggest changes for the real estate and housing sector. The task force has submitted over 40 recommendations, which are going to be discussed in the meeting chaired by the Prime Minister today. 

The key consideration that would be recommended is the exemption of withholding tax and Federal Excise Duty for the first-time purchase of a plot, much-needed relief to overseas Pakistanis.

It should be noted that many countries have adopted the waiver of tax on the first home purchase, and Pakistan has not. By implementing such a policy, the government can also encourage overseas Pakistanis to invest in the real estate sector, which would help boost economic growth and provide much-needed stimulus to the housing market.