Pakistan-AJK cross-jurisdictional deals: FBR decides plea over alleged double taxation

ISLAMABAD: The Federal Board of Revenue (FBR) formally disposed of a representation filed under Section 7 of the FBR Act, 2007, concerning allegations of double taxation on certain cross-jurisdictional transactions involving Pakistan and Azad Jammu & Kashmir (AJK).

The FBR cited its lack of administrative control over the CBR Azad Jammu and Kashmir as the basis for its decision.

According to an official letter issued by FBR, the applicant had approached the FBR seeking relief from what they described as duplicative sales and withholding tax deductions being applied to transactions conducted across different jurisdictions, including Pakistan-administered regions and AJK. The matter was reviewed in consultation with the IR-Litigation, who examined the jurisdictional and administrative aspects of the claims. The report concluded that the issues raised fell outside the jurisdiction of FBR Headquarters, and emphasized that taxation concerns specific to the regions involved must be addressed through the respective tax authorities operating there.

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When contacted, tax lawyer Waheed Shahzad Butt, representing the affected parties, explained that the matter highlights a serious jurisdictional conflict between the FBR and the AJK Council Board of Revenue (CBR Kashmir) regarding sales and withholding tax on transactions with AJK-based customers.

We approached the FBR seeking relief on the grounds that sales and withholding tax deductions were being applied twice for transactions conducted across different jurisdictions,” Butt said. “Although the taxpayer already deposits all taxes with the FBR, AJK authorities are also demanding that withholding tax under Section 236H and related statements be filed with them through what we consider an improper mechanism.” Butt warned that this dual regime creates significant risks for compliant taxpayers, including double taxation, inconsistent enforcement, data mismatches, and potential adverse inferences by tax authorities.

Based on this assessment, the FBR stated that it lacks the mandate to intervene in the matter. Consequently, the representation has been disposed of without further action, and applicants have been advised that their concerns do not fall within the FBR’s administrative authority.

The decision leaves taxpayers operating across these jurisdictions in a state of uncertainty, with no clear resolution to the conflicting tax demands from separate revenue authorities, Waheed added.

Copyright Business Recorder, 2026