KARACHI: The Large Taxpayers Office (LTO) Karachi has successfully recovered a record-breaking Rs4 billion in Capital Value Tax (CVT) from foreign assets during the 2024-25 fiscal year. This significant achievement represents a substantial increase from the Rs3.85 billion collected in the previous fiscal year, demonstrating a fortified commitment to cracking down on tax evasion.
AEOI Zone Drives Enforcement Success
A key driver of this fiscal success is the Automatic Exchange of Information (AEOI) Zone within LTO Karachi. This specialized division is responsible for identifying and pursuing Pakistani residents who own undisclosed foreign assets. Through the use of aggressive case management and detailed forensic audits, the zone has been able to precisely target individuals and entities with offshore wealth. This focused strategy led to a remarkable 77% increase in CVT collection in June alone, bringing in Rs137 million compared to Rs77 million in the same month of the prior year.
Understanding the Capital Value Tax (CVT)
The Capital Value Tax was enacted through the Finance Act, 2022, and is designed to tax high-value assets. It applies to:
Motor vehicles with engine capacities exceeding 1300cc (or electric vehicles with batteries over 50 kWh) at a rate of 1% of their assessed value.
Foreign assets owned by resident individuals with a value exceeding Rs100 million are subject to a 1% CVT, calculated using the State Bank’s official exchange rate.
Certain special assets can be designated by the Federal Government to attract a CVT of up to 5%.
The tax on foreign assets applies to wealth that is directly owned, indirectly held, or beneficially enjoyed abroad. In cases where original cost documents are unavailable, the tax is based on a fair market valuation. Unpaid CVT, along with any penalties, can be recovered by Inland Revenue officers, who have the authority to hold individuals personally liable under the provisions of the Income Tax Ordinance, 2001.
This ongoing initiative not only boosts the national treasury but also sends a clear message that offshore holdings are no longer a guaranteed safe haven for undeclared wealth.
