FBR to bring foreign firm representatives into tax net

KARACHI: The Federal Board of Revenue (FBR) has geared up efforts to bring unregistered individuals and companies representing foreign companies in Pakistan into the tax net after a change in definition of a liaison office in Finance Act 2017, sources said on Thursday.

The sources said companies and individuals have been promoting products of foreign companies in the country without registration with the tax authorities for a long time. The registration entails a nominal tax on their services. 

“Through the Finance Act 2017 the definition of liaison office has been amended to bring persons/companies promoting products into the definition,” said an official at Large Taxpayers Unit (LTU) Karachi.

The LTU Karachi had proposed this amendment into Income Tax Ordinance 2001, but the proposal was not incorporated in Finance Bill 2017. Yet, it was added when the bill was made into law.

The FBR official said a place of business would not be treated as liaison office if it engages in activities, including commercial, trading or industrial or negotiation and conclusion of contracts.

The FBR, however, said that a place of business would be treated as a liaison office, if it undertakes activities, including an exploratory or preparatory nature to investigate the possibilities of trading with or in the country; exploring the possibility of joint collaboration and export promotion; promoting products where such products are yet to be supplied to or sold in the country; promoting technical and financial collaborations between its principal and taxpayers in the country; or provision of technical advice and assistance.

At present a number of famous foreign brands are available in the country without having physical presence of those companies within the territory. Such brands are marketed and sold through local dealers or agents. “All incomes generated through sales of such brands will be taxed after redefining of the law,” said the FBR official.