Allowing the importation of second-hand vehicles up to 5 years old, subject to a 40% additional customs tariff.
Pakistan GovernmentBoldly Embraces Change with Car Import Policy Shift
Updated: 2025
Welcome to the new era in Pakistan's automobile sector! The government has made a bold move, unveiling a policy change that will see the commercial import of used vehicles up to five years old, starting September 2025. This marks a significant departure from the previous three-year limit under the baggage scheme.
According to a recent review of the Finance Bill (2025-26), the decision to extend the commercial import timeframe came after careful consideration by the Ministry of Commerce. Despite this change, the three-year restriction for vehicles imported under the baggage scheme by overseas Pakistanis remains unchanged[1].
*Upcoming Stages: A Deeper Dive into Time and Tariffs*
The policy is set to undergo further developments. By July 1, 2026, the limitations for importing used vehicles will be entirely lifted, allowing imports of any age vehicle, subject to quality standards[2]. Moreover, the government plans to offer this opportunity for imports of up to seven years old vehicles from as early as FY 2026-27[3].
Once in effect, an additional flat customs duty of 40% will be levied on every imported vehicle[1][3][4]. However, this heavy protection tariff is not permanent; it is part of a comprehensive tariff reform plan. Over the next four years, this 40% duty will be gradually reduced by 10% annually, leading to its complete elimination by 2029[2][3]. Once the additional duty is removed, standard import tariffs will be the only levies applied.
It's worth noting that this new duty structure does not apply to vehicles imported under the personal baggage scheme. This scheme mandates a minimum overseas stay of at least 700 days for an individual to be eligible[5].
*Moving Forward: Meeting Global Trade Standards and a Fresh Start for the Auto Sector*
This policy shift aligns with Pakistan’s commitments to the International Monetary Fund (IMF) as part of an ongoing economic reform plan. The IMF has voiced support for this proposal, acknowledging the gradual lowering of import duties on vehicles as a necessary step towards phasing out protective tariffs and promoting a more open and competitive auto sector[1][2][3].
In summary, the government's intention is clear: to increase consumer choice, enhance competitiveness in the automotive sector, relieve pressure on the domestic market, and ensure alignment with international trade norms. This liberalization of Pakistan’s vehicle import regulations signals a major shift that will impact the nation’s automobile landscape over the next few years.
| Aspect | Details ||--------------------------|-------------------------------------------------------------------|| Import Age Limit | Up to 5 years old from Sept 2025; limit removed from July 2026 || Tariff / Customs Duty | 40% additional duty initially; reduced 10% annually starting FY27; eliminated by 2029 || Personal Baggage Scheme | Exempt from 40% additional duty; requires 700+ days overseas stay || IMF Role | Approved policy; requires gradual tariff reduction for support || Policy Objectives | Consumer choice, revenue increase, trade alignment, auto sector competitiveness |
Stay tuned for more updates on Pakistan's evolving automobile policies!
[1] "Government allows import of up to five-year-old used vehicles", Geo News
[2] "Pakistan: Government to Allow Import of Vehicles up to 5 Years Old", ProPakistani
[3] "Budget 2025-26: Allow commercial import of 5-year-old cars", Dawn News
[4] "Pakistan to Impose Extra Import Duty on Used Cars", Associated Press of Pakistan
[5] "Finance Bill 2025-26: Changes in Vehicles Import Policy", The Express Tribune
- The new automobile policy in Pakistan, enacted in 2025, allows the commercial import of used vehicles up to five years old, marking a shift from the previous three-year limit.
- In the finance sector, the government's tariff reform plan includes a temporary 40% additional customs duty on imported vehicles, with an aim to ease it out gradually over four years to promote a competitive automotive industry and align with global trade standards.
- The forex index and transportation industry are likely to be impacted by the swift policy changes in Pakistan's automotive sector, as the government encourages the import of vehicles older than five years from 2026-27, subject to quality standards, thereby expanding consumer choices and driving competitiveness.
