Islamabad, September 16, 2025 – The Federal Board of Revenue (FBR) has explained how group taxation will work in Pakistan during the tax year 2025-26 under Section 59AA of the Income Tax Ordinance, 2001.
This provision allows holding companies and their wholly-owned subsidiaries to be treated as a single fiscal unit for taxation purposes.
According to the rules, companies within a 100 percent-owned group may choose to file their income and tax liability together. Along with this option, they must also prepare consolidated accounts under the Companies Act, 2017. This approach simplifies compliance and can allow businesses to make better use of resources, while also improving transparency in reporting.
However, the decision to opt for group taxation must be irrevocable once made, meaning companies cannot switch back to individual filing later. Importantly, this option is only available to companies incorporated locally in Pakistan, and any losses incurred before the creation of the group cannot be carried forward for relief.
To qualify, group companies must follow all corporate governance standards and rules issued by the Securities and Exchange Commission of Pakistan (SECP). Only those designated as eligible can benefit from this system.
The FBR has clarified that group taxation may also be further detailed through rules issued by the Board, ensuring proper regulation and compliance.
This mechanism is seen as a step to facilitate large business structures by treating them as one unit for taxation, creating efficiency and potentially reducing administrative costs.