FBR tax form lacks treaty-rate option for foreign income

Taxpayers declaring foreign-source income are facing difficulties filing their income tax returns for tax year 2026 because the Federal Board of Revenue’s individual return form does not provide a facility to apply reduced tax rates available under double taxation avoidance treaties, tax experts said.

M. Amayed Ashfaq Tola, president of Tola Associates, said the “Attribute” tab available in the previous year’s income tax return form had been removed from the individual return form on the FBR’s IRIS portal for tax year 2026.

Why are taxpayers with foreign income facing filing problems?

The missing facility prevents taxpayers from applying reduced treaty rates to eligible foreign-source income through the tax year 2026 return form. Tax experts say affected filers may otherwise have to report the income as exempt or apply normal tax rates, neither of which necessarily reflects the treatment available under the relevant treaty.

Tola said the missing facility was preventing taxpayers from correctly reporting foreign-source income subject to reduced tax rates under applicable double taxation avoidance treaties.

In previous years, taxpayers used the tab to apply reduced tax rates to certain categories of foreign income, including dividends and profit on debt, where such treatment was permitted under relevant tax treaties.

Without the option, taxpayers are left with two alternatives when declaring the income: report it as exempt or pay tax at normal tax rates, Tola said.

Neither option necessarily reflects the treatment provided under the law and relevant tax treaties. Reporting the income as exempt could result in incorrect disclosure, while applying normal tax rates could increase taxpayers’ liabilities beyond the reduced rates allowed under applicable treaties, he said.

Tax practitioners seek change to return form

Tax experts have urged the FBR to restore the facility to enable taxpayers to report foreign-source income accurately and calculate their tax liabilities in accordance with applicable law and double taxation treaties.

In a representation to the tax authority, tax practitioners said the tax year 2026 return form on the IRIS portal lacked a separate column or section for foreign-source income subject to separate taxation or reduced rates.

They said the omission was making it difficult to report such income in the manner prescribed by law and could result in incorrect declarations.

The practitioners requested the FBR to amend the online return form by adding an appropriate column or tab for foreign-source income subject to separate taxation or reduced rates.

They also urged the authority to make the change promptly ahead of the October 15 filing deadline, saying the facility was necessary for taxpayers to submit accurate returns within the prescribed time.