Pakistan reintroduces capital value tax on motor vehicles

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KARACHI: Pakistan has reintroduced Capital Value Tax (CVT) at 1% of motor vehicle value on locally manufactured vehicles as well as imported vehicles.

According to PwC AF Ferguson & Co.’s interpretation of the Finance Act 2022 through Section 7 of the Finance Act 1989, CVT has been imposed on the transfer of immovable property, certificates of modaraba , listed shares and motor vehicles.

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The CVT has been phased out and effective April 19, 2020, the CVT has been removed on all assets.

The Finance Act 2022 again enacted CVT in respect of various assets including motor vehicles.

The CVT is chargeable from July 01, 2022.

The federal government has imposed CVT at 1% of the value of the motor vehicle owned in Pakistan when the engine capacity exceeds 1300CC or in the case of electric vehicles, the battery capacity exceeds 50kwh.

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The Customs Collector collects the CVT when vehicles are imported into Pakistan, the import value assessed by the Customs authorities plus duties and taxes due at the importation stage.

Similarly, the manufacturer or local assembler must collect the CVT at the time of sale (in the case of an installment sale, the CVT must be collected at the time of payment of the first installment) in the event that the vehicle is manufactured or assembled locally in Pakistan, ex-factory price including VAT.

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In addition, anyone conducting a public auction or bidding auction collects the CVT (in the case of an installment sale, the CVT is collected at the time of payment of the first installment) where the vehicle is awarded , the hammer price including all duties and taxes.

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