Foreign investors urge FBR to remove tax certification hurdles delaying share registrations in Pakistan

Foreign investors have asked the Federal Board of Revenue to simplify tax exemption certificate processes and explain how Rule 19H of the Income Tax Rules applies, according to Profit by Pakistan Today. Their concern is that certification delays are holding up the registration of cross-border share purchases with the State Bank of Pakistan. Stakeholders said the certification requirements introduced after changes to Section 37 of the Income Tax Ordinance have left transactions between non-residents involving Pakistani assets in a state of uncertainty.

Under the existing rules, a non-resident buying shares from another non-resident may have to withhold tax. If the seller is entitled to a lower rate under local law or a double taxation agreement, a certificate from the Commissioner Inland Revenue is needed. Investors report that certificates are taking a long time to arrive, and certain tax officials reportedly treated deals between non-residents as falling under Section 101A, with certificates withheld in some cases.

Because of the holdups, some foreign buyers cannot yet complete SBP registration, even though their share deals have already been concluded. Stakeholders said the problem has worsened as SBP registration increasingly requires proof of Rule 19H compliance, leaving investors reliant on FBR approvals. Investors have asked for a time-bound certification process and a clarification that the rule should not reach back to earlier completed deals, while stakeholders warned that delays could discourage foreign investment.