KARACHI: The Large Taxpayers Office (LTO) Karachi has launched a major scrutiny exercise targeting 174 high-profile taxpayers over their foreign assets under Pakistan’s Automatic Exchange of Information (AEOI) framework, as the Federal Board of Revenue (FBR) intensifies efforts to detect undisclosed offshore wealth and strengthen tax compliance.
According to sources, the AEOI Zone of LTO Karachi has initiated a comprehensive review of the foreign assets and overseas financial holdings of the selected taxpayers. The tax authority will also seek information from partner jurisdictions through international information-sharing arrangements to verify whether foreign assets and income have been properly declared under Pakistan’s tax laws.
Audit teams assigned
Sources said LTO Karachi has assigned the selected cases to Assistant Commissioners and Deputy Commissioners Inland Revenue for detailed audits and investigations.
The officers will conduct proceedings under Sections 108 and 165B of the Income Tax Ordinance, 2001, which empower the tax authority to obtain information and exchange financial account data with foreign jurisdictions under international agreements.
In addition, the taxpayers will be monitored under Sections 182(1A), 182(7), 182(17), 182(25), 182(26), 182(27) and 182(28) of the Income Tax Ordinance, 2001, which prescribe penalties for various forms of non-compliance with tax documentation and reporting obligations.
Focus on multinational reporting
Tax officials have also been directed to examine compliance with Chapter VIA (Documentation and Country-by-Country Reporting Requirements) of the Income Tax Rules, 2002.
The chapter sets out documentation standards and reporting obligations for multinational enterprises and other qualifying taxpayers involved in cross-border transactions.
According to sources, many of the taxpayers selected for scrutiny are linked to the fund management, securities, real estate investment trust (REIT) and financial services sectors, where overseas investments and foreign financial assets are relatively common.
Strengthening tax transparency
The investigation forms part of the FBR’s broader strategy to utilise information received through the Automatic Exchange of Information (AEOI) framework to identify undeclared offshore assets, improve voluntary tax compliance and combat cross-border tax evasion.
Under the AEOI mechanism, Pakistan exchanges financial account information with partner jurisdictions in accordance with internationally recognised tax transparency standards, enabling tax authorities to verify offshore financial holdings and foreign income reported by taxpayers.
