Presidential Order Enforcing Implementation of ATIR Decisions:
Recently, President Asif Ali Zardari denied eight arguments submitted by the Federal Board of Revenue (FBR), mostly from the Corporate Tax Office, Islamabad, which attempted to contest instructions from the Federal Tax Ombudsman (FTO). These arguments challenged the Appellate Tribunal Inland Revenue (ATIR) ruling execution. Such appellate rulings, the President said, must be carried out until explicitly reversed by a qualified High Court. He underlined that making a referral does not absolve one of their responsibility to implement appellate decisions. The decision also pointed out that the FBR cannot permanently stop implementation even if surety bonds may help it to protect its interests. This sequence upholds administrative responsibility, supports the binding character of ATIR rulings, and validates the FTO’s jurisdiction to correct misbehavior by revenue officials neglecting to behave within recommended guidelines.
Rise in Property Tax Collection Against Falling Transaction Count:
Reflecting a 24 percent rise from Rs136 billion in the same period of the previous fiscal year, the FBR gathered Rs169 billion in withholding tax from the sale and purchase of immovable property in the first nine months of FY2024–25. Although the amount of property sales reportedly dropped 15 percent, this increase suggests that increased withholding tax rates stimulated income growth. Under section 236K the rates are 3 percent for filers and 10.5 percent for non-filers on purchases; under section 236C the relevant rates under section 236C are 3 percent for filers and 6 percent for non-filers on property sales. Citing their little contribution to total income, the government is debating eliminating the Federal Excise Duty (FED) on property transactions. This possible legislative change fits more general initiatives to streamline real estate sector taxes and lessen their negative effect on market activity.
PSX proposals for REIT incentives and real estate reform:
Aiming to record the real estate industry and drive investments through controlled platforms, the Pakistan Stock Exchange (PSX) has released thorough suggestions for the 2025–26 government budget. Under sections 236A, 236C, and 236K of the Income Tax Ordinance the PSX has advised excluding Real Estate Investment Trusts (REITs) from advance income taxes. It has also suggested eliminating the June 2023 sunset clause to guarantee REITs keep gaining from tax benefits. The PSX also advises changing the word “immovable property” in tax laws to “real estate,” in line with the 2022 REIT Regulations and to reflect the changed regulatory scene. Furthermore, promoted is equal tax treatment under REIT structures for Special Purpose Vehicles (SPVs). These steps are meant to boost institutional investment, improve openness, and include big real estate assets into the official economy.
Taxation Challenges Faced by the Salaried Class:
Though the most tax-compliant and well-documented group, the salaried class nonetheless suffers unfairly high taxes. This category made around Rs370 billion during FY2024–25, more than in the property and export sectors combined. Though recommendations for its rise to Rs 1.2 million, the tax-free income ceiling is fixed at Rs 0.6 million. One major problem is the hefty 35 percent flat tax levied on yearly incomes beyond Rs 4.1 million, which used to apply above Rs6 million. The sudden change produces a cliff effect and deters upward mobility. Inconsistencies in marginal rates significantly tax middle-class workers. The present system does not provide normal deductions for costs connected to work. Under section 149 reform suggestions call for the implementation of parallel tax regimes, increased deductions for dependents’ education and healthcare, audit exemption for complying persons, and automated refund systems. These adjustments are required to bring Pakistan’s tax policy into line with international norms and therefore lower inequality.
Rollout of E-Invoicing and Digital Sales Tax Compliance by FBR:
By means of consecutive SROs targeted at real-time e-invoicing, the FBR has made notable progress in digitizing the sales tax system. The most recent, SRO 709(I/2025), requires by June 1, 2025 integration of every sales tax-registered company with the FBR’s e-invoicing system. Earlier, SRO 69(I/2025) sent data via licensed integrators using sales invoices that had QR codes and unique FBR identities. These criteria are linked with a six-year record keeping duty. But recent unanticipated modifications have caused major problems for companies. New eight-digit HS code reporting rules and Annexure C-1, which calls for thorough payment proof for transactions over Rs50,000 under section 73, have thrown off return files for February and March 2025. To reduce unnecessary compliance loads, stakeholders are demanding transitional relief, better procedural rules, and longer compliance deadlines.
Proposed Implementation of Section 114C to Restrict Non-Filers:
Section 114C of the Tax Laws (Amendment) Bill, 2024 is supposed to be included by the government into the Finance Bill for FY2025–26. This clause seeks to limit non-filers’ capacity to participate in economic activities, especially with regard to moves involving immovable property. FBR’s lack of digital preparedness caused previous delay in implementation; nevertheless, a demonstration system is presently being development in line with Nadra and provincial tax agencies. The FBR Chairman clarified that public corporations or non-resident persons would not be subject to these limits. The intention is to widen the tax network without raising rates and force non-filers into compliance by excluding them access to significant economic activities. Once put into effect, the provision combining compliance with transactional rights could dramatically alter the terrain of tax enforcement.
Supreme Court Hears Constitutional Challenge to Section 4B: Super Tax on High-Income Entities:
Currently under review by the Supreme Court of Pakistan are a large number of petitions contesting the constitutional legitimacy of the super tax regime: 354 against Section 4B and 182 against Section 4C of the Income Tax Ordinance, 2001. Arguing on behalf of many petitioners, senior attorney Makhdoom Ali Khan asked the Court to reconcile the term of “income” across several Ordinance clauses, claiming that the assessment of super tax on enterprises without real taxable revenue violates the concept of equality. He underlined that the tax, applied on gross revenues without deductions for obligations, depreciation, and amortization, produces taxing notional earnings which could not fairly represent actual income. He further argued that taxing for social welfare purposes its declared goal should be under provincial authority and that the super tax is discriminatory and lacks constitutional support under Article 25. While the judge questioned the extent of tax application and whether its imposition conforms with constitutional limits under Entry 47 of the Fourth Schedule, other counsels embraced Makhdoom’s views. Another related issue emerged on the usage and disclosure of money gathered under Section 4B as to whether their distribution matched declared welfare objectives.
SC Maintaining Prospective Use of Tax Laws Affecting Vested Rights:
The Supreme Court has decided in a major ruling that tax changes impacting vested rights must run prospectively without clear retroactive wording. Under Section 100C of the Income Tax Ordinance, the decision addressed the eligibility of a welfare society to tax credit. The conflict started when tax officials rejected credit based on a retroactive interpretation of SRO 754(I/2016), citing lapsed approval under Section 2(36) in 2010. Maintaining the perspective of the Lahore High Court and the Appellate Tribunal, the Supreme Court decided that the SRO—issued in 2016—could not retrospectively influence clearances given as far back as 2007. The Court clarified that the changed Rule 214 of the Income Tax Rules applied prospectively and that its use of the term “subsequent three years” implied a forward-looking impact. As so, the tax credit claim was maintained and the taxpayer’s permission was regarded as valid through 2019. This ruling supports the idea that retroactive implementation of tax rules has to be based on clear legislative wording.
FBR Specifies Cement Minimum Retail Price to Reduce Under-Invoicing:
In a significant compliance-driven action, the Federal Board of Revenue (FBR) has set the minimum retail price (MRP) for cement, beginning May 1, 2025, for aims of sales tax collecting. By means of SRO 746(I/2025), the FBR asserted its jurisdiction under clause (46) of section 2 of the Sales Tax Act, 1990, to tie MRP to the average national retail price as reported biweekly by the Pakistan Bureau of Statistics (PBS). By matching stated prices with market reality, the approach seeks to stop under-invoicing and income leakage. Under the new law, cement producers must figure their sales tax burden using the average national retail price released prior to the first and sixteenth of the month. This measure is supposed to lower discretionary assessments, harmonize price standards throughout the sector, and boost cement sector revenue collecting.
Sales Tax Return Filing Slows Nationwide Amid New Technical Requirements:
Recent modifications in the sales tax return filing system have greatly slowed down return filings from all throughout Pakistan. Widespread problems persist even if the FBR extended the deadlines for February and March 2025 returns. Especially, the implementation of required eight-digit H.S. code reporting in Annex C has presented compliance difficulties for companies without technical knowledge. Leading tax adviser Arshad Shehzad pointed out that although the reform seeks to improve system checks and reduce false invoicing, actual application is difficult. Accounting errors result from the system’s logic error in computing stock movements by removing sales value instead of cost of goods sold from stock. Furthermore imposed without stakeholder input were recently added annexures needing monthly production and inventory data. Many practitioners are advising the FBR to explore less frequent posting of stock data—such as on a quarterly or annual basis—to relieve the compliance load without losing openness, as these fast changes raise the danger of unintended non-compliance.
OICCI Budget 2025–26 Proposals: Broader Tax Base, Lower Corporate Rates, Gradual Phase-Out of Super Tax:
For the 2025–26 federal budget, the Overseas Investors Chamber of Commerce and Industry (OICCI) has turned in a comprehensive slate of recommendations. These include lowering the corporate tax rate to 28 percent and then progressively cutting it to 25 percent over five years to bring Pakistan into line with regional economies. The chamber also advises lowering the 18-to- 17 percent basic sales tax rate, then progressively to 15 percent. Eliminating the super tax over a three-year period is a major demand; OICCI says this influences capital inflows and deters investing. Other main suggestions are taxing all petroleum items, integrating federal and provincial sales tax systems, stopping illegal cigarette trade, and releasing around Rs120 billion in outstanding refunds. Regarding personal taxation, OICCI advises raising the taxable income level to Rs1.2 million while keeping required return filing for incomes beyond Rs600,000. The ideas show a whole picture for building an investment-friendly, stable, fair tax structure.
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