Income Tax Ordinance, 2001 has defined the meaning of liaison office of a company for the purpose of imposition and calculation of income tax.
The Income Tax Ordinance, 2001 updated up to June 30, 2020 issued by the Federal Board of Revenue (FBR) defined ‘liaison office’ as a place of business acting for the principal, head office or any entity of which it is a part, and
(a) its activities do not result in deriving income in Pakistan; and
(b) maintains itself out of any amount remitted from outside Pakistan received through normal banking channels.
Explanation,— It is clarified that—
(i) a place of business shall not be treated as liaison office if it engages in –
(a) commercial activities;
(b) trading or industrial activities; or
(c) the negotiation and conclusion of contracts;
(ii) the activities shall be treated to be commercial activities, if these include—
(a) providing after sales services for goods or services; or
(b) marketing or promoting pharmaceutical and medical products or services;
(iii) subject to clause (i), a place of business shall be treated as a liaison office, if it undertakes activities of—
(a) an exploratory or preparatory nature, to investigate the possibilities of trading with, or in, Pakistan;
(b) exploring the possibility of joint collaboration and export promotion;
(c) promoting products where such products are yet to be supplied to, or sold in, Pakistan;
(d) promoting technical and financial collaborations between its principal and taxpayers in Pakistan; or
(e) provision of technical advice and assistance.