The International Monetary Fund (IMF) has confirmed that all four provinces in Pakistan are preparing to introduce a unified property tax system starting in the fiscal year 2025-26. This initiative involves shifting from the current rent-based valuation to a capital value-based assessment framework.
In a major reform aimed at enhancing tax equity and expanding the revenue base, the provinces have also amended their Agriculture Income Tax (AIT) regimes. These reforms bring the provincial tax structures in line with the federal personal income tax regime for small-scale farmers and the corporate income tax regime for commercial agriculture, with full implementation expected by the end of October 2024.
The revised tax system will apply to income earned from January 1, 2025, and the corresponding tax payments for the latter half of FY2025 will be collected in September 2025.
With support from the IMF and the World Bank, provincial governments are crafting detailed implementation strategies to ensure proper enforcement of the new legal framework by June 2025. These strategies include compliance measures to identify under-reported income and public awareness campaigns to inform taxpayers.
Provinces are also advancing the shift in their General Sales Tax (GST) on services structure—from a positive list to a negative list system—which is set to be implemented at the beginning of FY2026.
While the negative list is not uniform across provinces due to local conditions, bilateral agreements, and pre-existing provincial policies, it primarily exempts essential services such as healthcare, education, and public sector provisions.
The harmonized property taxation plan and related tax reforms are expected to be key discussion points at the upcoming National Tax Council (NTC) meeting, scheduled for early April 2025.
