The Federal Government of Pakistan has recently updated the rate for Capital Value Tax on motor vehicles. In this article, we will discuss the new tax rates and how they may affect car buyers and sellers in the country.
What is Capital Value Tax?
Capital Value Tax (CVT) is a tax that is imposed on the transfer of ownership of immovable property, including motor vehicles. The tax is calculated on the fair market value of the property or vehicle being transferred. The rate of CVT varies depending on the value of the property or vehicle.
Revised Capital Value Tax on Motor Vehicles
Initially, in the budget speech on June 10, 2022, Capital Value Tax was announced at the rate of 2% on vehicles valued at 50 million and above. However, after the amendments in the Finance Bill, the government passed the Finance Act 2022 and revised the tax rates at 1%.
However, the Federal Board of Revenue pulled a twist by decreasing the rate of tax but omitting the limit for 50 million value. Now, Capital Value Tax is imposed on the basis of engine capacity. Any vehicle above 1300cc will be charged Capital Value Tax at a rate of 1%. Electric vehicles above 500kwh battery power also fall into this category.
Which Cars Fall Under the New Tax?
Following cars fall in the purview of the new tax:
- Toyota Yaris
- Toyota Corolla
- Changan Alsvin
- Honda Civic
- Honda City Aspire
- Kia Sportage
- Hyundai Tucson
- Kia Stonic
- and more.
Impact on Car Buyers and Sellers
The new tax rates will have a significant impact on car buyers and sellers in the country. The car manufacturers are already increasing prices due to the hike in the USD value. Now, the price rise will add the CVT factor as well, making it more expensive to buy a car in Pakistan.
Suzuki will be the only car manufacturer unaffected by the additional tax because it has no car above 1300cc engine value.
The revised Capital Value Tax on motor vehicles is a significant change that will affect car buyers and sellers in Pakistan. It is essential to keep these changes in mind when buying or selling a car. The government has revised the tax rates to increase revenue, and it is likely that there will be more changes in the future. Stay informed and keep up-to-date with the latest tax laws and regulations to avoid any legal issues.