Tax Exemption for NGOs Revoked; FBR to Monitor Their Activities

ISLAMABAD: The Federal Board of Revenue (FBR) has ended tax exemptions for non-profit organizations (NGOs) involved in welfare activities across Pakistan. This decision was announced during a meeting of the Senate’s Finance Committee, chaired by Senator Syed Naveed Qamar, where FBR Chairman Rashid Langrial provided a briefing to the participants.
Langrial explained that while NGOs will no longer receive tax exemptions, they will still be eligible for 100% tax credits. However, he emphasized that NGOs are now under the scrutiny of FBR, as the country cannot function without the tax system. He added that FBR will monitor the documentation of these NGOs to ensure the tax credits they claim are accurate.
The FBR Chairman further revealed that a self-assessment declaration system has been introduced for NGOs, which will allow the tax authority to validate their claims. He also pointed out that the concept of tax exemptions for NGOs is not ideal for the economy, and globally, such exemptions are being phased out.
Langrial confirmed that tax exemptions granted to Special Economic Zones (SEZs) will expire by 2035. He clarified that any SEZs whose exemptions are set to end by 2023 will not have their tax relief extended. Additionally, new SEZs will not be eligible for tax exemptions, in line with the terms agreed with the International Monetary Fund (IMF). He mentioned that while the IMF initially insisted on ending tax exemptions by 2027, Pakistan had managed to negotiate an extension until 2035.
On a different note, Langrial introduced a new rewards system within FBR, where eligibility is tied to 60% integrity share, with various strategies in place for different sectors. He shared that prior to joining FBR, he worked in the private sector and believed that corruption was primarily an issue within the FBR. However, upon his tenure, he realized that the majority of issues stemmed from external and business sectors.
Langrial also highlighted the country’s tax gap, noting that out of Pakistan’s population of 240 million, only 1.2 million people have declared assets worth over 10 billion rupees in their income tax returns.