Tax relief aims to support airline’s privatisation while preserving underlying income tax liabilities
ISLAMABAD: The Federal Board of Revenue (FBR) has exempted Pakistan International Airlines Corporation Limited (PIACL) from paying more than Rs4.29 billion in default surcharges and penalties on its current income tax liabilities, a move aimed at facilitating the successful completion of the national carrier’s privatisation.
The exemption was granted through S.R.O. 1129(I)/2026, issued under Section 183 of the Income Tax Ordinance, 2001. The notification supersedes S.R.O. 799(I)/2026, issued on May 4, 2026, and implements a federal cabinet decision taken on June 15, 2026.
According to the notification, the relief applies only to default surcharges and penalties linked to PIACL’s current income tax liabilities. The government said the measure is intended to facilitate the execution of transaction documents with the successful bidder and ensure the timely completion of the airline’s divestment process.
The total exemption amounts to Rs4.292 billion and consists of two components.
The first covers Rs263.82 million in default surcharges and penalties related to withholding income tax, excluding salary, for the period from April to December 2024.
The second, and larger, component relates to advance income tax for the period from May 2024 to June 2025, with exempted default surcharges and penalties amounting to Rs4.028 billion.
Combined, the two categories total Rs4.292643 billion, according to the official notification.
Underlying tax liabilities remain payable
The FBR clarified that the exemption applies only to default surcharges and penalties and does not waive the airline’s principal income tax liabilities, which remain subject to final determination.
Under the approved repayment arrangement, PIACL will receive a one-year grace period following the First Completion, as defined in the Share Purchase and Subscription Agreement (SPSA) signed between the Government of Pakistan and the successful bidder.
After the grace period expires, the airline will be required to repay its outstanding income tax liabilities over the following four years through equal annual instalments.
The government said the structured repayment plan is designed to ease the airline’s immediate financial burden while ensuring that outstanding tax obligations are ultimately recovered.
Privatisation support measure
Officials said the tax relief forms part of broader efforts to remove financial hurdles that could delay the privatisation of Pakistan’s loss-making national carrier.
By eliminating accumulated default surcharges and penalties, the government aims to improve PIA’s financial profile and enhance its attractiveness to investors without compromising recovery of the underlying tax dues.
PIA has remained one of the government’s key privatisation priorities as authorities seek to reduce the fiscal burden of state-owned enterprises and improve operational efficiency through private sector participation.
The notification, signed by the Member (Inland Revenue Policy)/Additional Secretary of the FBR, takes immediate effect in accordance with the provisions outlined in the S.R.O.
The latest tax relief represents another step in Pakistan’s efforts to complete the long-awaited privatisation of PIA. While the government has waived Rs4.29 billion in default surcharges and penalties, the airline will still be required to settle its principal income tax liabilities under a structured repayment schedule, balancing investor confidence with the protection of public revenue.