Govt waives penalties, surcharge on PIA’s Rs4.29 billion income tax liabilities to facilitate privatisation

The federal government has waived default surcharges and penalties linked to Rs4.293 billion in current income tax liabilities of Pakistan International Airlines Corporation Limited (PIACL) as part of measures aimed at completing the airline’s divestment.

The exemption does not cover the underlying tax liabilities, which PIACL will remain required to pay to the Federal Board of Revenue (FBR), according to the Statutory Regulatory Order (SRO).1129(I)/2026 issued on July 16, 2026.

Under the notification, the airline will receive a one-year grace period after the transaction’s First Completion, followed by four years in which the outstanding principal amount must be cleared through equal annual instalments.

First Completion will be determined under the Share Purchase and Subscription Agreement between the Government of Pakistan and the successful bidders.

The liabilities covered by the decision include Rs263.822 million in withholding tax, excluding salary-related withholding tax, for the period from April to December 2024.

They also include Rs4.029 billion in advance income tax liabilities relating to the period from May 2024 to June 2025. Together, the two amounts total Rs4.293 billion.

The FBR said the liabilities remain subject to final determination.

According to the notification, the relief was granted to support the successful conclusion of PIACL’s divestment, allow timely execution of bid documents and facilitate compliance with the conditions attached to the transaction.

The government issued the exemption under Section 183 of the Income Tax Ordinance, 2001, which permits relief from default surcharge and penalties in specified circumstances.

The latest order supersedes SRO 799(I)/2026, issued on May 4, 2026, and gives effect to a federal cabinet decision taken on June 15, 2026.

The revised arrangement separates the airline’s principal tax obligations from the additional charges accumulated against them. While the surcharge and penalties have been waived, the buyer and the government will still have to ensure that the underlying tax amount is paid according to the prescribed schedule.