ISLAMABAD: The government is contemplating the possibility of imposition of a luxury tax on certain high-value immovable properties and luxury vehicles in the coming budget (2022-23).

It is learnt that this type of wealth tax may be charged on certain high-value big houses or immovable properties and high cc vehicles to be paid on an annual basis.

This kind of wealth tax may be imposed annually on a specified value of immovable property or expensive vehicles.

If the proposal is approved, it would be the biggest revenue generating measure for 2022-23.

Meanwhile, another alternate proposal is that the Federal Board of Revenue (FBR) may propose a luxury tax on big residential properties and farmhouses located in the posh residential areas within the limits of the federal capital in the coming budget (2022-23).

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Sources told Business Recorder here on Monday that the FBR is analyzing the legal aspect of the proposal to impose a luxury tax on big houses located in the posh residential areas in the upcoming budget.

Sources said the FBR is examining whether the federal government can impose such luxury tax on immovable properties. If the proposal is finalised, a luxury tax shall be levied at the rates specified on residential houses of different categories located within the limits of the Islamabad Capital Territory (ICT).

When contacted, a tax expert stated that the Finance Bill, 2020 introduced a tax on luxury houses in the ICT, but later it was withdrawn. The Senate in its recommendations said “it should be omitted” without giving any reasons.

Under the Finance Bill 2020, the luxury tax was proposed to be imposed on farmhouses based on different sizes in kanal.

At that time, the luxury tax was not applicable on the self-occupied houses of widows and the Ministry of Interior was made responsible for the collection of tax through its attached departments and deposit in the Federal Consolidated Fund.

Under the Finance Bill 2020, the tax on luxury houses in the ICT was imposed on residential buildings: In case of two kanal to four kanal with a covered area of more than 6,000 square feet, the rate of tax was proposed to be Rs 100,000 per kanal.

In case of five kanal or above with a covered area of more than 8,000 square feet, the rate of tax was Rs 200,000 per kanal.

On farmhouses having four kanal including area under farming: A farm house with a covered area between 5,000 and 7,000 square feet, the tax rate was Rs 25 per square feet of the covered area per annum.

A farmhouse with a covered area between 7,001 and 10,000 square feet, the rate of tax was Rs40 per square feet of the covered area per annum.

A farmhouse with a covered area of more than 10,000 square feet, the tax rate was Rs 50 per square feet of the covered area per annum.

On farmhouses having more than four kanal including area under farming: A farmhouse with covered area between 5,000 and 7,000 square feet, the tax rate was Rs 60 per square feet of the covered area per annum.

A farmhouse with a covered area between 7,001 and 10,000 square feet, the rate of tax was Rs 70 per square feet of the covered area per annum.

A farmhouse with a covered area of more than 10,000 square feet, the tax rate was Rs 80 per square feet of the covered area per annum.

In the Finance Bill 2013-14, the Punjab government had levied a luxury tax on residential houses located in a part of the rating area of Punjab Urban Immovable Property Tax Act, 1958.

Later, the Lahore High Court (LHC) has cancelled the luxury tax notices that the Punjab government had served on the owners of two kanal or bigger houses.

Copyright Business Recorder, 2022