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ISLAMABAD: Luxury cars in Pakistan are expected to become more expensive after Budget 2025-26, as the federal government prepares to raise advance taxes on high-end vehicles. The move is part of a broader effort to boost revenue and curb the import of premium fuel-powered cars.
The proposed increase follows last year’s shift from fixed tax rates to a value-based taxation model. Under this system, advance taxes are now calculated based on vehicle price rather than engine size. In Budget 2025-26, the government plans to expand this approach by including smaller engine models reclassified as luxury cars in Pakistan.
Officials from the Federal Board of Revenue (FBR) revealed that over Rs4 billion was collected from vehicle-related withholding taxes in 2024. With the revised tax brackets, the government aims to collect even more in the coming fiscal year.
Incentives for Eco-Friendly Vehicles Remain
While tightening the tax net around luxury cars in Pakistan, the government is continuing to support green technology. Authorities have decided to maintain reduced sales tax rates for locally assembled hybrid electric vehicles (HEVs) until June 2026.
Currently, HEVs up to 1,800cc are taxed at 8.5%, while those between 1,801cc and 2,500cc face a 12.75% rate. This policy is aimed at encouraging cleaner, fuel-efficient transportation options without adding financial strain on environmentally conscious consumers.
