Tax Authority Begins Recoveries from Telecom Sector After Promulgation of Amended Law
Key Takeaways:
i) The Federal Board of Revenue (FBR) has immediately started recovery proceedings against companies based on recent court decisions favoring the tax authority.
ii) This action follows the implementation of the ‘Tax Laws (Amendment) Ordinance, 2025’.
iii) Initial enforcement efforts are focused on the telecom sector, with settlements reached for payment of significant tax amounts.
Islamabad, Pakistan – The Federal Board of Revenue (FBR) demonstrated immediate action following the enactment of the ‘Tax Laws (Amendment) Ordinance, 2025’, initiating recovery proceedings and enforcement measures late Saturday night against companies where legal rulings have been in the FBR’s favor. Sources within the FBR confirmed that the Large Taxpayer Office (LTO) Islamabad remained operational on Saturday to ensure the recovery of taxes, particularly from telecom companies, after the ordinance was officially put into effect.
Senior officials from the FBR were present at the LTO Islamabad on Saturday evening, actively overseeing the tax recovery process from the concerned telecom entities. The FBR had prepared for stringent measures, including the potential attachment of bank accounts belonging to two companies operating under the jurisdiction of the LTO Islamabad, to ensure compliance with outstanding tax obligations.
However, according to reports, a resolution was reached between the FBR and the involved companies, leading to an agreement for the payment of the amounts due as per the court’s directives. In one significant case involving a cellular company, the firm consented to remit billions of rupees to the FBR, adhering to an order issued by the Islamabad High Court (IHC). Another case involves a telecom-related joint venture and pertains to the settlement of withholding tax issues arising from mergers.
The IHC’s order against the mobile phone company clarified that the inclusion of telecommunication companies within the definition of “industrial undertaking” by the Finance Act 2021 does not impact the tax year currently under dispute. Consequently, the court affirmed the FBR’s stance in treating the tax collected under Section 148 of the Income Tax Ordinance on the import of plant and machinery as a minimum tax liability, thus disallowing the adjustment claimed by the company.
The company had contested the FBR’s assessment, arguing for adjustments related to initial depreciation, normal depreciation on fixed assets, and amortization on intangible assets. However, the assessing officer deemed these claims inconsistent with the Income Tax Rules, 2002, leading to their rejection. The IHC upheld the FBR’s decision to disallow an amount of Rs 868,089,293, affirming its legal justification.
This swift action by the FBR signals a firm approach towards enforcing tax compliance in light of the new ordinance and existing court orders, particularly within key sectors like telecommunications which contribute significantly to the national economy.
