FBR sets land, technology, machinery and approval requirements for new industrial projects seeking greenfield status in Tax Year 2027.
ISLAMABAD: The Federal Board of Revenue (FBR) will treat qualifying new industrial projects as greenfield industrial undertakings for Tax Year (TY) 2027, provided they meet the conditions prescribed under Pakistan’s income tax law.
The definition establishes a set of requirements that an industrial project must satisfy to obtain greenfield status, including conditions relating to land, existing infrastructure, machinery, technology and approval by the tax authorities.
Conditions for greenfield industrial undertaking
Under the applicable provisions, a greenfield industrial undertaking must be a new industrial undertaking that fulfils all prescribed criteria.
The project must be established on land that has not previously been used for any commercial, industrial or manufacturing activity and must be free from constraints arising from prior work carried out on the site.
The undertaking must also be constructed without demolishing, revamping, renovating, upgrading, remodelling or modifying any existing structure, facility or plant.
In addition, the new industrial undertaking must not have been created through the splitting up or reconstitution of an existing undertaking.
The project must also not involve the transfer of machinery, plant or buildings from an undertaking established in Pakistan before commencement of the new business.
Furthermore, the undertaking must not form part of an expansion project.
New technology requirement
A key condition for greenfield status is the use of a process or technology that has not previously been used in Pakistan.
The technology or process must also have approval from the Engineering Development Board (EDB).
The requirement is designed to distinguish genuinely new industrial ventures from projects that merely expand, modernise, restructure or upgrade existing operations.
Projects using technology already deployed in Pakistan would therefore not meet this particular condition for greenfield classification.
Commissioner approval mandatory
The FBR’s definition also requires the proposed greenfield industrial undertaking to obtain approval from the Commissioner.
An applicant must submit an application in the prescribed form and manner, together with the required documents and any additional information requested by the Commissioner.
Consequently, satisfying the physical, structural and technological conditions alone does not automatically grant greenfield status.
The undertaking must also complete the prescribed approval process before it can be treated as a qualifying greenfield project for tax purposes.
Definition applicable from July 2019
The relevant definition provides that the criteria apply from July 1, 2019 onwards.
For Tax Year 2027, industrial undertakings seeking greenfield status will therefore need to establish that their projects meet the prescribed conditions and secure the required approval from the Commissioner.
The classification is important for businesses because qualifying greenfield industrial undertakings may be eligible for tax incentives available under the relevant provisions of Pakistan’s tax laws, subject to fulfilment of all applicable requirements.