The Pakistan Tax Bar Association (PTBA) has called for the formation of a larger bench to address inconsistencies in rulings on the taxation of foreign property income, a matter affecting Pakistani tax residents with properties in the UAE and the UK.
In a letter to the chairman of the Appellate Tribunal Inland Revenue (ATIR), the PTBA highlighted contradictory decisions by different divisional benches of the tribunal. While the Lahore Registry ruled in 2022 and 2024 that income from UAE and UK properties is not taxable in Pakistan, the Islamabad Registry decided in November 2022 that similar income from UAE properties is taxable.
“This divergence in rulings has created significant legal uncertainty for taxpayers, impacting proper tax compliance and administration,” the PTBA stated, urging swift action to clarify the matter.
To resolve the issue, the PTBA has formally requested the formation of a larger bench under Rule 3(2) of the ATIR (Functions) Rules, 2023. The association cited a 1997 precedent where conflicting decisions by benches of equal strength led to complications and confusion in tax administration.
Last month, the Appellate Tribunal Inland Revenue ruled that rental income and capital gains earned by resident Pakistanis from the UAE and the UK are not taxable in Pakistan under the tax treaties with these countries.
The tribunal upheld that taxing rights for such income rest exclusively with the country where the income originates.
The PTBA emphasized the urgency of resolving this matter, noting that an increasing number of Pakistani tax residents now own properties abroad, particularly in the UAE and the UK. Clear guidelines, it said, are essential to ensure taxpayers can meet their obligations without ambiguity.
