Foreign Investors Flag FBR Delays in Cross-Border Share Registration

Foreign investors have called on the Federal Board of Revenue (FBR) to simplify procedures for obtaining tax exemption certificates and clarify the implementation of Rule 19H of the Income Tax Rules, citing delays in registering cross-border share acquisitions with the State Bank of Pakistan (SBP).

Stakeholders said certification requirements introduced after amendments to Section 37 of the Income Tax Ordinance have created uncertainty around transactions involving Pakistani assets, particularly share transfers between non-resident investors.

Under the current framework, a non-resident acquiring shares in a Pakistani company from another non-resident may be required to deduct withholding tax. If the seller is entitled to an exemption or a reduced tax rate under domestic legislation or an applicable tax treaty, a certificate must be secured from the Commissioner Inland Revenue.

However, investors have reported significant delays in obtaining these certificates. In some cases, tax authorities have reportedly treated transactions between non-residents as falling under Section 101A of the Ordinance, leading to certificates being withheld.

As a result, some foreign investors have been unable to complete the SBP registration of their shareholdings, even after finalising the underlying acquisitions.

Stakeholders said the issue has become more pressing as SBP registration procedures increasingly require proof of compliance with Rule 19H, making investors reliant on FBR approvals to complete the necessary formalities.

Investors have also requested confirmation that Rule 19H will not be applied retrospectively to share transfers completed before the rule was introduced, particularly in cases where only SBP registration remains outstanding.

They have urged the authorities to introduce a fixed timeline for issuing certificates and establish clear guidelines for historical transactions and cross-border share transfers between non-residents.

Stakeholders warned that persistent administrative delays could undermine investor confidence, discourage foreign investment and create further uncertainty surrounding shareholder rights and the registration of investments in Pakistan.