Only overseas Pakistanis can import cars under gift, residence schemes, clarifies FBR

Pakistan's tax collection authority—the Federal Board of Revenue (FBR)—clarified on Thursday that only overseas Pakistanis are eligible to import vehicles under the gift and transfer of residence schemes, both of which do not require any outward remittance of foreign exchange from Pakistan.

Chairman of the All Pakistan Motor Dealers Association (APMDA), H.M. Shehzad, also reiterated that used and old vehicles cannot be imported on a commercial basis. He told Nukta that only non-resident Pakistanis can bring in such vehicles under personal baggage, gift, or transfer of residence provisions, and the relevant foreign exchange must come from outside Pakistan.

All imports under these schemes require the importer to declare a value during the Vehicle Baggage Goods Declaration (VB GD) filing. However, due to the non-commercial nature of such imports, the declared values are primarily used for documentation purposes.

Customs places all VB GDs in the Red Channel for 100% physical inspection. For vehicles up to 1300cc, duties and taxes are levied at fixed rates under SRO 577(1)/2005. Those above 1,300cc are assessed based on CGO 14/2005 and Valuation Ruling No. 1051/2017.

"Income tax and other applicable duties are calculated based on the assessed value determined by customs officers, not on the value declared by importers," Shehzad explained.

Separately, the FBR added that internal audits and reviews of the FCA system—which it said were often quoted out of context—are being conducted to improve the system and close any gaps. A 2019 Sindh High Court ruling also upheld the legality of the indicative valuations declared under these import schemes.

In an official statement on Thursday, the FBR also rejected recent allegations regarding undervaluation in the clearance of luxury vehicles under its Faceless Customs Assessment (FCA) system. The tax authority confirmed that all such vehicles, including high-end imports, have been assessed at appropriate and higher values, ensuring no revenue losses to the national exchequer.

According to the FBR, the FCA—launched in December—was designed to streamline trade processes and reduce human interaction at ports. However, the agency noted that some stakeholders disadvantaged by the new system have attempted to malign it, including through claims of large-scale under-invoicing.

One such example cited an audit report claiming that a 2023 Toyota Land Cruiser was cleared at a value of just PKR 17,635. The FBR countered this by stating the vehicle was actually assessed at PKR 10.05 million, with PKR 47.2 million collected in duties and taxes.

"The FCA has not caused any loss of revenue. In fact, it has improved transparency and eliminated arbitrary practices," the FBR said.

Addressing concerns of trade-based money laundering, the agency emphasized that vehicles under the gift or transfer of residence schemes can only be imported by overseas Pakistanis, with the funds used for purchases originating from abroad. These rules have been in place prior to the FCA’s launch.