Updated Sales Tax Act links active taxpayer status to sales tax, income tax and withholding tax compliance
ISLAMABAD: The Federal Board of Revenue (FBR) has explained the definition of an “active taxpayer” under Pakistan’s sales tax laws for Tax Year 2027, outlining the compliance requirements that registered persons must meet to retain active status.
The FBR has issued the updated Sales Tax Act, 1990, incorporating amendments up to June 30, 2026, which sets out the circumstances in which a registered person can lose active taxpayer status.
Who qualifies as an active taxpayer?
Under the Sales Tax Act, an active taxpayer is a registered person who does not fall within any of the categories specified under the law for exclusion from active taxpayer status.
The definition therefore makes continued compliance with sales tax and income tax filing requirements an important condition for maintaining active status.
Conditions that can end active status
A registered person will not be treated as an active taxpayer if the person falls into any of the prescribed categories.
These include cases where the registered person has been blocked or had their registration suspended under Section 21 of the Sales Tax Act, 1990.
A person can also lose active taxpayer status by failing to file a sales tax return under Section 26 by the due date for two consecutive tax periods.
The law further links active taxpayer status with income tax compliance.
A registered person will not qualify as an active taxpayer if they fail to file an income tax return under Section 114 or a statement under Section 115 of the Income Tax Ordinance, 2001, by the prescribed due date.
Withholding tax compliance also required
The definition also covers compliance with withholding tax reporting requirements.
A registered person may lose active taxpayer status if they fail to submit a quarterly or annual withholding tax statement under Section 165 of the Income Tax Ordinance, 2001.
This means that active taxpayer status under the sales tax regime is linked not only to sales tax return filing but also to relevant income tax and withholding tax obligations.
Compliance important for Tax Year 2027
The updated Sales Tax Act provides the legal framework for determining whether a registered person qualifies as an active taxpayer for Tax Year 2027.
Registered persons should therefore ensure that their sales tax returns, income tax returns or statements, and applicable withholding tax statements are filed within the prescribed deadlines to avoid losing active taxpayer status.