Government Waives PIACL Tax Penalties to Support Privatisation

The Federal Government has approved the waiver of default surcharges and penalties on Rs4.293 billion in outstanding income tax liabilities of Pakistan International Airlines Corporation Limited (PIACL) as part of the ongoing process to facilitate the airline’s privatisation.

According to SRO 1129(I)/2026, issued on July 16, 2026, the relief applies only to accumulated default surcharges and penalties. The underlying income tax liabilities remain fully payable to the Federal Board of Revenue (FBR) and have not been written off.

Under the revised arrangement, PIACL will benefit from a one-year grace period following the First Completion of the transaction. Thereafter, the outstanding principal tax amount must be settled in four equal annual instalments.

For the purpose of the notification, First Completion will be determined in accordance with the Share Purchase and Subscription Agreement executed between the Government of Pakistan and the successful bidder(s).

The tax liabilities covered under the notification include Rs263.822 million in withholding tax—excluding salary-related withholding tax—for the period from April to December 2024.

The relief also covers Rs4.029 billion in advance income tax liabilities relating to the period from May 2024 to June 2025, bringing the total principal amount covered by the arrangement to Rs4.293 billion.

The FBR has clarified that these liabilities remain subject to final determination in accordance with applicable tax laws.

The notification states that the exemption has been granted to facilitate the successful completion of PIACL’s divestment, enable the timely execution of transaction documents, and ensure compliance with conditions attached to the privatisation process.

The waiver has been issued under Section 183 of the Income Tax Ordinance, 2001, which authorises the Federal Government to grant relief from default surcharges and penalties in specified cases.

The latest notification supersedes SRO 799(I)/2026, issued on May 4, 2026, and implements the Federal Cabinet's decision taken on June 15, 2026.

Under the revised framework, the accumulated surcharge and penalty amounts have been separated from the principal tax liability. While the additional charges have been waived, PIACL’s outstanding tax obligations must still be discharged in accordance with the prescribed payment schedule.