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LAHORE: Starting July 1, 2025, the Punjab government has implemented a 16% sales tax on commercial property rental, following the enactment of the Punjab Finance Act, 2025.
The new tax framework marks a shift in policy, moving away from the previously followed “positive list,” where only specified services were taxable, to a “negative list” model. Under this system, all services are presumed taxable unless explicitly exempted in the First Schedule of the Act.
As commercial property rentals do not appear on the exemption list, they are now officially categorized as taxable services.
Impact on Businesses and Property Managers
With this change, all Fixed Fee Invoices related to renting non-residential properties will be subject to a 16% Punjab Sales Tax. This tax will be enforced by the Punjab Revenue Authority (PRA). The tax does not apply to residential property rentals intended for personal use.
Property owners, real estate companies, and lessees involved in renting commercial spaces must now ensure full compliance. The collection and remittance of the sales tax has become their legal responsibility.
Packages Real Estate (Private) Limited has notified its clients and partners through a formal letter, emphasizing the importance of aligning with the revised tax regulations. The company also noted that its guidance reflects the current legal understanding and added:
“Any future amendments or clarifications from the PRA could further impact the tax treatment.”
This new tax update has a major impact on commercial leasing in Punjab. Businesses and property managers must review their invoicing and compliance processes. It’s advised to consult tax professionals. Stakeholders should also stay updated with any changes from the Punjab Revenue Authority.
