How Property Distributions and Withholding Tax Work: A Simple Guide
When a pooled property earns rent or is sold, the money does not go straight to investors. It passes through a fixed order of steps called a distribution waterfall. Knowing the steps tells you exactly why the amount in your wallet is smaller than the rent the tenant paid.
The waterfall, step by step
- Gross income. Rent received for the period, or the sale price on exit.
- Property expenses. Maintenance, utilities, taxes on the property, insurance, agent fees.
- Management fee. A small percentage for running the property. Read the fee schedule.
- Return of capital (exit only). On a sale, investors first get back the capital they contributed, in proportion to units.
- Preferred return and performance fee (where the property has one). Investors receive up to a hurdle first; above it, a share of the surplus goes to the platform.
- Residual. What is left is shared in proportion to units held on the record date.
The record date matters
Your share is based on the units you held on the record date, not the payment date. Buy units after the record date and you do not take part in that distribution; sell before it and you do not either. Holdings are read from the ledger as at that date, so the result can be reproduced later.
An example
Suppose a floor earned PKR 120,000 rent, and expenses and management fee came to PKR 10,000, leaving PKR 110,000. An investor with 1% of the units has a gross share of PKR 1,100. If withholding tax of 15% applies, PKR 165 is deducted, and PKR 935 goes to the wallet. The rate that applies depends on tax law on the record date and on your filer status, so your figure can differ.
Withholding tax in simple terms
Tax can be deducted before money is paid out and paid to the tax authority on your behalf. Rates are set by law, change from time to time, and can depend on whether you are a filer or non-filer. WIZ resolves the rate in force on the record date and shows it on your distribution statement and certificate. This is general information, not tax advice; ask a tax adviser how your own income is treated.
Rounding without losing a paisa
Payouts are computed in whole paisa. When shares do not divide evenly, the leftover paisa are given out by the largest-remainder method, so the total paid always equals the amount to be distributed. Nothing is created or lost.
Two people sign off
A distribution run is prepared by finance and approved by a different officer before any money moves. Approved runs are paid to investor wallets, from where you can reinvest or withdraw (withdrawals are approved before the balance is reduced).
Related reading: segregated accounts and units and dilution.
Frequently asked questions
What is a record date?
The date on which your units are counted for a distribution. Units bought after it do not share in that payout; units sold before it do not either.
Why is my payout lower than my share of the rent?
Property expenses, management fees and withholding tax are deducted before money reaches your wallet. The distribution statement shows each step.
Does filer status change the tax withheld?
It can. Withholding rates are set by law, change over time and can differ for filers and non-filers. WIZ applies the rate in force on the record date.
