New legal definition places greater tax responsibilities on local representatives of non-resident shipping companies operating in Pakistan.
ISLAMABAD: The Finance Act, 2026 has introduced a formal definition of an “authorised shipping agent” under the Income Tax Ordinance, 2001, in a move aimed at strengthening tax compliance and enforcement for shipping operations conducted by non-resident ship owners, charterers and operators in Pakistan.
According to the Federal Board of Revenue (FBR), the amendment establishes a clear legal framework for identifying the local representative responsible for fulfilling tax obligations on behalf of foreign shipping companies operating in the country.
Under the amended law, an authorised shipping agent is defined as a person based in Pakistan who has been formally authorised by a non-resident ship owner, charterer or operator to act on its behalf in relation to a vessel or voyage.
The legislation assigns the authorised shipping agent responsibility for the receipt, collection, control and accounting of total freight and related receipts. The agent is also required to undertake documentation, file cargo manifests and comply with all other reporting obligations connected with the vessel or voyage.
In addition, the authorised shipping agent must file an income tax return under Section 143 of the Income Tax Ordinance, 2001 in respect of the relevant vessel or voyage.
The Finance Act, 2026 further provides that the authorised shipping agent will be treated as the representative of the non-resident under Section 172 of the Income Tax Ordinance. As a result, the agent will be jointly and severally liable for the payment of tax, along with all associated obligations, assessments, legal proceedings and recovery actions arising from the vessel or voyage.
Furthermore, the agent will also be regarded as a representative under sub-section (3) of Section 172, making the relevant provisions of the Income Tax Ordinance applicable to the local representative for tax administration purposes.
The FBR noted that the Finance Bill, 2026 had originally proposed extending the definition to include persons authorised “expressly or impliedly” by a non-resident shipping company. However, these words were omitted from the final version enacted through the Finance Act, 2026, thereby restricting the definition to persons who have been formally authorised by the foreign entity.
Tax experts said the amendment provides tax authorities with a clearly identifiable local point of accountability for shipping operations carried out by non-resident entities. They believe the measure will improve oversight of freight income, cargo documentation and financial reporting handled through local shipping agents, while strengthening tax enforcement and reducing the risk of compliance gaps in Pakistan’s maritime sector.