FBR deducts tax from Kuwaiti diplomat

ISLAMABAD: Despite enjoying impunity from payment of taxes in Pakistan, one Kuwaiti diplomat has approached the Federal Tax Ombudsman (FTO) to launch a complaint on the deduction of Income Tax by declaring him as a non-filer.

The FTO has ordered the Federal Board of Revenue (FBR) to refund the deducted amount. The tax was deducted against the law, which falls under maladministration. A similar case refund of withholding tax involving the Brazilian ambassador had already been processed by the Regional Taxpayer Office (RTO), Islamabad, where withholding tax was refunded as he had no Pakistan source taxable income.

The Kuwaiti complainant stated that he was posted as counsellor for the State of Kuwait in the Embassy of Kuwait, Islamabad, and deriving income from his home country, and had no local source of income. He is neither liable to register himself with the FBR for income tax, nor does he qualify as a ‘Resident Individual’ under the relevant law, as the Embassy of Kuwait is excluded from the Territory of Pakistan under International Law. The complainant further stated that no liability arises against him under the Income Tax Ordinance, 2001 or any other tax law in Pakistan. The FBR failed to provide him protection against the unjustified taxes charged from his bank account on the basis of being the “non-filer”.

The complainant further stated that the bank continued to deduct tax on all his banking transaction which is in violation the spirit of Vienna Convention Treaty and his privileges as a diplomat in Pakistan.

The complainant requested the FRO to direct FBR’s relevant commissioner to issue instructions to the bank not to deduct taxes, and full refund of all unlawful deducted amounts from his account along with appropriate compensation for damages incurred. In addition, such instructions are passed on by the FBR to all banks in Pakistan for the future transactions of all the diplomats.

The RTO, Islamabad, in its written comments, stated that the complainant is a career diplomat who enjoy exempt status and was not required to get registered and file returns. Furthermore, diplomatic category has been deliberately/ intentionally excluded by legislature from the same. In addition, the complainant has neither filed request through Iris nor made written request of exemption. His contention that FBR has failed does not merit consideration. It is pertinent to mention that such taxes may apply by default unless exemption is declared and documented. The department further stated that the diplomat may be requested to seek exemption from their department regarding exemption from relevant withholding section along with required letters from Ministry of Foreign Affairs or Embassy concerned. The FTO has given direction to the FBR to refund the due tax to the complainant within 20 days, and report compliance within 30 days.