Laws & Taxes

The Federal Board of Revenue (FBR) has issued a Rs 406.23 million tax demand against Faisal Town Pvt. Ltd. for alleged failures in withholding tax compliance during Tax Year 2023. The Large Taxpayer Office (LTO) Islamabad claims the developer failed to properly deduct or deposit taxes on property transactions and broker payments, creating transparency gaps in the high-value real estate venture. In response, Faisal Town has formally appealed the order, labeling it unlawful and legally groundless. The company argues that the FBR failed to identify specific defaulted transactions or payees and denied them a fair hearing before finalizing the demand. The case is now pending before the Commissioner Inland Revenue (Appeals).

The federal government is set to unveil a major relief package for the construction and property sectors, featuring significant tax cuts aimed at revitalizing industrial activity. Finance Minister Muhammad Aurangzeb confirmed that Prime Minister Shehbaz Sharif will soon announce the measures, which prioritize lowering property tax rates to stimulate investment and support the dozens of allied industries linked to construction. This initiative is part of a broader economic pivot toward export-led growth, with a similar relief package for the textile industry expected within the next two weeks to bolster sustained industrialization and job creation.

Pakistan's banking sector voluntarily reduced the Export Refinance Facility (ERF) markup by 3%, lowering the end-user rate to 4.50% for exporters to boost foreign exchange earnings and economic recovery. This supports surging private sector credit (Rs 1.1T in FY25), SME/agriculture growth, and national efforts like circular debt reduction and PIA privatization. PBA Chairman Zafar Masud hailed it as backing exporters and the nation.

Pakistan's proposed power tariff reforms will stoke inflation by shifting IMF-mandated subsidy cuts to middle-class households, while cutting industrial prices 13-15% for export relief. Middle-class bills may rise 50%, with 100-300 unit users facing up to 76% hikes from new fixed charges; low-income households get PKR 400 fees. NEPRA's solar export rate cuts spark review to avert grid defection amid utility strains.

Pakistan met 3 of 5 IMF fiscal targets for its next $1B tranche, hitting primary surplus (PKR4.1T), provincial cash surplus (PKR1.18T), and tax revenue goals, boosted by SBP profits and PKR823B petroleum levy. FBR missed PKR6.49T collection by PKR330B and retail income tax target despite broader scope. Provinces led gains; federal spending hit PKR7.1T under $7B IMF program.

SBP Governor Jameel Ahmad prioritizes economic stability over aggressive rate cuts, citing Pakistan's post-crisis phase with 5-7% inflation, current account surplus, and recovering reserves. Focus shifts to sustainable growth via development finance, as sharp easing risks inflation rebound; exporter aids include tariff cuts and Export Finance tweaks amid $7B IMF EFF ending 2027.

The FBR has officially increased property valuations in Islamabad by 15% to 75% via a new notification (SRO.163), though DHA areas remain notably excluded. The updated framework sets building values at Rs3,000 per sq. ft. for structures up to five years old and Rs1,500 for older ones. While rural areas will still follow DC rates, the FBR clarified that the higher value will always apply in case of a conflict. This revised policy follows a brief suspension of previous, more aggressive rates to accommodate feedback from real estate stakeholders.

Saudi and Kuwaiti investors with a 30.7% stake in K-Electric filed a $2 billion arbitration case against Pakistan on January 16, 2026, alleging regulatory blocks on a $1.77B sale to Shanghai Electric, unpaid subsidies, tariff meddling, and fund diversions. The dispute, ongoing since 2016, claims breaches of OIC and bilateral treaties, risking Pakistan's investor trust.

Punjab orders strict enforcement of 2022 Building Safety Regulations province-wide, with legal action for violations. Minister Khawaja Salman Rafique chaired a Lahore meeting revealing surveys of 2,214 high-rises, Rs 2B fire service expansion, and Rescue 1122's feats (280K+ fires handled, Rs 768B saved). Upgrades align with CM Maryam Nawaz's vision; businesses urged to comply.