Capital Value Tax Chapter-01

Chapter

1 CAPITAL VALUE TAX

(For CA MOD F AND ICMAP students)

SCOPE OF CAPITAL VALUE TAX (CVT):
The tax on the capital value of assets is called the Capital Value Tax. This tax is payable on acquisition of an asset etc. by
every individual, Association of persons, Firm or Company.
WHEN THE CVT IS PAYABLE:
The CVT is payable on:

 Acquisition on an asset;

 Acquisition of a right to use an asset for more than 20 years or renewal of the lease or any premium paid thereon;
and

 Acquisition of shares of a public company listed on a stock exchange in Pakistan.

 Purchase of modaraba certificate or a registered instrument of redeemable capital as defined in the Companies
Ordinance, 1984
The acquisition of an asset or right to use asset may be by purchase; gift; exchange; power of attorney other than revocable
and time bound (not exceeding 60 days) executed between spouses, father and son or daughter, grand parents and grand
children, brother and sister or surrender or relinquishment of rights by owner.
The acquisition may be effected orally or by deed or obtained through court decree. The acquisition should not be by
inheritance, or gift from spouse, parents, grand parents, a brother and a sister. In case of a bank, the capital value tax shall
be paid when general power of attorney is used to sell the mortgaged property offered as collateral other than traded
security for obtaining loan.
Provided that in case of a bank, the capital value tax shall be paid when general power of attorney is used to sell the
mortgaged property offered as collateral other than traded security for obtaining a loan.
ADDITIONAL TAX:
Where any person fails to collect or having collected fails to pay the CVT, as required, he shall be personally liable to pay
the tax along with additional tax @ 15% per annum.
WHO WILL COLLECT CVT AND WHEN:
1. The person responsible for registering or attesting the transfer of an asset, in respect of which the tax is payable,
shall collect CVT at the time of registering or attesting the transfer.
2. In case of motor vehicle purchased from a manufacturer in Pakistan, the manufacturer shall collect CVT before
making the delivery of the vehicle.
3. In case of motor vehicle imported into Pakistan, the collector of customs, at the time of Customs clearance collect
CVT on the value of such vehicle as increased by customs duty, sales, income and any other charges payable before
removal of the vehicle from custom area.

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Capital Value Tax Chapter-01

Description of Assets Rate of CVT (Percentage of the Capital Value)

1. IMMOVABLE PROPERTY
1.1 Residential immovable property, (other than
flats), situated in urban area, measuring at least of 500
square yards or one kanal (whichever is lower) and
more:
(i) Where the value of the property is recorded 2% of the recorded value or Rs.100 per square yard of the
landed area whichever is higher.
(ii) Where the value of the property is not recorded. Rs.100 per square feet of the landed area.
(iii) Where the property is a constructed property. Rs.10 per square feet of the constructed area in addition to
the value computed as above.
1.2 Residential flats of any size situated in an urban
area:
(i) Where the value of the property is recorded. 2 % of the recorded value or Rs. 100 per square feet of the
covered area whichever is higher.
(ii) where the value of the property is not recorded. Rs. 100 per square feet of the covered area.
1.3 Commercial Immovable property of any size situated
in an urban area :
(i) where the value of the property is recorded 2 % of the recorded value or Rs.100 per square yard of the
landed area whichever is higher.
(ii) where the value of the property is not recorded. Rs. 100 per square feet of the landed area
(iii) where the property is a constructed property. Rs. 10 per square feet of the constructed area in addition to
the value computed as above
2. OTHERS
2.1 (i) Purchase of modaraba certificate or 0.02% of the purchase value
(ii) Any instrument of redeemable capital as defined
in the companies ordinance, 1984
2.2 Purchase of shares of a shares of a public company 0.01% of the purchase value
listed on a stock exchange in Pakistan
2.3 motor vehicle not plying for hire
(i) Imported The landed cost as determined by the custom authorities,
(ii) Purchased from a manufacturer in Pakistan The price paid by the purchaser.
(iii) Others The value as declared by the transferee.

EXPLANATION.-" For the purposes of this section, the expressions—

(a) "development authority" means an authority formed by or under any law for the purposes of development of an
area and includes any authority, society, agency, trust, association or institution declared as development authority by
the CBR by a NOG; and
(b) "registration authority" means the person responsible for registering or attesting the transfer of the asset or of the
right to use thereof for more than twenty years, and in the case of a development authority or a co-operative society,
its principal officer.
(c) "Urban Area" means area within the limits of-
i. the Islamabad Capital Territory;
ii. a Cantonment Board;
iii. the rating areas as defined under the Urban Immoveable Act, 1958 as in force in Punjab NWFP, Sindh and
Balochistan except where rate u/s 117 of the respective provincial local government ordinance is zero and
iv. such areas the FG of revenue may, from time to time, by Notification in the Official Gazettee (NOG), specify.

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Capital Value Tax Chapter-01

OTHER PROVISIONS:
- The proceeds of the tax collected under CVT shall be credited to the Federal Consolidated Fund under the head
specified by the Federal Government.
- The Commissioner Inland Revenue, on an application by assesses may revise any order made for CVT.
- The CBR may, by Notification in the Official Gazette, make provisions relating to the collection and recovery of, any
other matter relating to the CVT.
- The Federal Government G may, by Notification in the Official Gazette, exempt, any person or class of persons or
asset or class of assets from the CVT subject to such conditions as may be specified in the notification.
Provided that with a view to facilitate to the process of privatization, the sale of assets of Kot Addu Power Station
shall be exempt from payment of CVT with effect from 27-06-1996.

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Capital Value Tax Chapter-01

ICMAP PAST PAPERS THEORECTICAL QUESTIONS

Q.6(c) Spring 2014 The tax on the capital value of the assets is called the ‘Capital Value Tax’. Identify the situations where
capital value tax would be payable.

732 Conceptual Approach to Taxes