Capital Value Tax (CVT) is a tax levied on the value of an asset, specifically immovable property and motor vehicles, in Pakistan. This tax is paid by the buyer of the property or vehicle and is calculated on the basis of the asset’s capital value.
In this article, we will discuss the concept of CVT in detail, its history, and how it works in Pakistan.
History of Capital Value Tax (CVT) in Pakistan
The concept of CVT was introduced through the Finance Act 1989 in Pakistan. At that time, the rate was set at 5%, and it was charged on modaraba certificates, motor vehicles, listed shares, and immovable property.
Over time, the tax on other assets was eliminated, and CVT was almost on the verge of becoming obsolete in 2020. However, the Finance Bill 2022 reintroduced the chapter of Capital Value Tax CVT for motor vehicles.
How Does Capital Value Tax (CVT) Work in Pakistan?
As mentioned earlier, CVT is a tax levied on the capital value of immovable property and motor vehicles. The capital value of the property or vehicle is determined by the Federal Board of Revenue (FBR) and is based on various factors such as location, market value, and other relevant factors.
| Sr. No. | Category of Asset | Rate of CVT | Basis of Valuation | Person responsible to collect CVT |
| 1 | Motor vehicle held in Pakistan exceeds value of Rs. Five Million | 2% of the value | i where the vehicle is imported in Pakistan, the import value assessed by the Customs authorities as increased by customs duties | Collector of custom at the time of import |
| ii where the vehicle is manufactured or assembled locally in Pakistan, the value at which the motor vehicle is sold by the local manufacturer or assembler | Local manufacturer or assembler shall collect tax at the time of sale. In case of installment at the collection of fist installment | |||
| iii where the vehicle is auctioned, the auction price | Any person making sale by public auction or auction by tender (incase of sale on installment, the CVT shall be collected at the time of payment of first installment). | |||
| iv in any other case, the total consideration paid to acquire, alter or improve the vehicle; | Motor vehicle registering authority at the time of collecting motor vehicle tax except when such person has already paid CVT at time of import, purchase from local manufacturer or auction. | |||
| The value stated in (i) through(iv) above shall be reduced by 10% for each year provided that the value shall be treated as zero:- after 10 years from year of acquisition of vehicle; or – where the value after reduction as mentioned above is less than or equal to Rs. 5 million. | ||||
| 2 | assets of a resident individual, whether movable or immovable, held abroad where the value of such assets exceeds rupees one hundred million | 1% of the value | The value shall be higher of a) Higher of the total consideration paid to acquire, alter or improve the asset b)the fair market value of the asset | assets shall be liable to pay CVT at the time of filing of income tax return for the tax year. |
| 3 | such assets or class of assets as specified by the Federal Government through a notification in the official Gazette, at such rates and in such manner as may be specified. | Rate and manner of collection of CVT to be prescribed by FBR Notification | Federal Government to notify the manner in which CVT is to be collected. |
Conclusion
Capital Value Tax (CVT) is a tax levied on the value of immovable property and motor vehicles in Pakistan. It was introduced in 1989 and has undergone various changes over time. The Finance Bill 2022 reintroduced CVT for motor vehicles. The tax rate varies depending on the asset and is paid by the buyer of the property or vehicle at the time of registration.
