Section 141 of the Income Tax Ordinance 2001 requires liquidators, receivers and trustees to notify the tax commissioner within 14 days and reserve funds for outstanding tax liabilities.
ISLAMABAD: The Federal Board of Revenue (FBR) has outlined restrictions and obligations for liquidators, receivers, trustees and mortgagees in possession to safeguard the recovery of outstanding tax liabilities during Tax Year 2027.
Under Section 141 of the Income Tax Ordinance 2001, updated up to June 30, 2026, specified persons handling assets in Pakistan must notify the relevant tax commissioner within 14 days of their appointment or taking possession of an asset, whichever occurs first.
The provision applies to liquidators of companies, receivers appointed by a court or outside court proceedings, trustees for bankrupt persons and mortgagees in possession.
Tax commissioner to determine amount for recovery
Under Section 141(2), the Commissioner Inland Revenue must notify the liquidator in writing, within three months of receiving the required notice, of the amount considered sufficient to cover tax that is or will become payable by the person whose assets are under the liquidator’s control.
Section 141(3) restricts the disposal or transfer of assets held by a liquidator. Unless the commissioner grants permission, the liquidator cannot part with any asset until receiving the written notification specifying the amount to be reserved for tax.
Liquidators must set aside funds for tax
Section 141(4) requires liquidators to reserve, from the proceeds of any asset sale, the amount specified by the commissioner or a lower amount subsequently agreed by the tax authority.
A liquidator is liable for the tax owed by the asset owner to the extent of the amount set aside. However, the provision allows payment of debts that have priority over the tax liability covered by Section 141.
The law also imposes personal liability on liquidators who fail to comply with these requirements. Under Section 141(5), a liquidator may become personally liable for the amount that should have been reserved for tax, to the extent of the non-compliance.
Where the proceeds from the sale of an asset are lower than the amount specified by the commissioner, Section 141(6) limits the application of these provisions to the actual sale proceeds.
Rules apply despite other laws
Section 141(7) states that the provision applies notwithstanding anything contained in any other law in force. Under sub-section (8), amounts due under the section are treated in the same manner as tax payable under an assessment order for the purposes of applying the Income Tax Ordinance.
The provisions establish a framework to protect the government’s tax recovery interests when company assets or other property are being administered, liquidated or dealt with by persons exercising control over those assets.
For liquidators and other covered persons, timely notification, compliance with the commissioner’s directions and appropriate reservation of sale proceeds are central obligations under Section 141 for Tax Year 2027, covering July 1, 2026, to June 30, 2027.