The International Monetary Fund (IMF) has advised the Federal Board of Revenue (FBR) to broaden the application of the Capital Gains Tax (CGT) by including cryptocurrencies in the tax system.
As reported by The News on Monday, this development occurs during the review discussions between the Fund and the Pakistani authorities, over the $3 billion stand-by arrangement (SBA).
If the four-day review is successful, started on Thursday, it will prevent a sovereign debt default by releasing the last tranche of about $1.1 billion that Islamabad secured under a last-ditch rescue plan last summer.
In addition to this, the IMF requested that property developers will be required by law to monitor and document any transactions made before the completion and registration of property titles.
There may be consequences for any real estate developers who disobey.
By means of this proposal, the IMF has requested the FBR to include the widely practiced practice of purchasing and reselling various plots within housing projects within the tax net.
These IMF proposals may be included in the next bailout package under the Extended Fund Facility (EFF), and FBR is likely to be included in the finance bill, which would include the next budget for FY2024–2025.
The IMF noted that taxing capital gains from real estate transactions presents difficulties since property interests are frequently not registered until the property is finished legally, leaving earnings from transfers made before to completion untaxed.
According to reports in the local media, a visiting team recommended imposing taxes on novel financial investments like cryptocurrencies.
It has also been suggested that regardless of the length of time held, capital gains on listed securities and real estate should be subject to taxation.
The global organization suggested expanding the definition of 'personal movable property' in Section 37(1) under the Income Tax Ordinance to encompass a wider range of items that can be kept as investments, rather than just assets that are depreciating or used as stock in trade.
