Karachi, May 7, 2024 – Pakistan Telecommunication Company Limited (PTCL) has unveiled a comprehensive report on its tax contingencies for the fiscal year ending December 31, 2023.
The document outlines a series of ongoing legal challenges and appeals, underscoring the complex tax landscape the telecom giant is navigating.
The PTCL report disclosed multiple high-stakes interactions with tax authorities, highlighting the tension between corporate tax responsibilities and regulatory interpretations. The primary contention revolves around the classification and tax obligations on various service fees and the applicability of Federal Excise Duty (FED) and sales tax to PTCL’s operations.
Key Tax Disputes:
Federal Excise Duty (FED) Issues:
• PTCL faces a Rs 365,098 thousand FED imposition on Technical Services Assistance fees from 2008-09 & 2010-11, classified by authorities under a franchise arrangement. The Islamabad High Court has currently stayed the imposition while appeals are pending.
• An audit revealed a further demand of Rs 1,289,957 thousand due to alleged improper apportionment of input tax, with the case also under appeal and a stay order from the Islamabad High Court.
Sales Tax on Services:
• The Punjab Revenue Authority (PRA) and the Sindh Revenue Board (SRB) have also targeted the company with substantial tax demands based on similar service fee assessments. PTCL contests a Rs 461,629 thousand demand from PRA and a Rs 702 million assessment by SRB, with both cases currently stayed by respective high courts.
• International service charges have also been contentious, with the SRB and Khyber Pakhtunkhwa Revenue Authority (KPRA) imposing demands totaling over Rs 6.7 billion. These are contested in various appellate courts.
Customs and Additional Duties:
• Customs disputes include a staggering Rs 932,942 thousand in additional duties stayed by the Sindh High Court, alongside another case involving Rs 1,685,884 thousand in duties under appeal at the Customs Appellate Tribunal.
Income Tax Controversies:
• PTCL reported historical income tax disputes stretching from 2007 to 2022, involving disallowed expenses and tax credits, with a potential tax impact amounting to Rs 59,269,818 thousand. Notably, the case for the tax year 2007 remains sub judice before the Islamabad High Court.
• For the tax year 2020, PTCL successfully contested a Rs 2,855,907 thousand demand related to its quarterly advance tax calculation based on group taxation, which was resolved in its favor by the Islamabad High Court.
Looking Ahead:
Amid these legal entanglements, PTCL remains resilient, with management and tax advisors expressing confidence in a favorable outcome for the majority of these disputes due to substantial evidence and legal precedents. The company’s proactive legal strategy underscores its commitment to safeguarding shareholder interests and ensuring compliance with Pakistan’s complex tax regulations.
This detailed report not only illuminates the fiscal and regulatory challenges faced by major corporations like PTCL but also underscores the broader implications of tax policy and enforcement in shaping the business environment in Pakistan. As PTCL continues to defend its stance, the outcomes of these cases will be closely watched for their potential impact on the telecommunications sector and the precedents they may set for tax and regulatory policies nationwide.
