Pakistan proposes new rules to define active taxpayer status for AJK, Gilgit-Baltistan residents

Pakistan’s Federal Board of Revenue (FBR) has proposed amendments to the Income Tax Rules, 2002, aimed at clarifying and streamlining the recognition of active taxpayers from Azad Jammu and Kashmir and Gilgit-Baltistan, according to a notification issued this week.

The draft changes were introduced through Statutory Regulatory Order 2423(I)/2025 on Dec. 11. They focus on revising Rule 81B, particularly sub-rule (9), to ensure consistency in determining whether taxpayers from the two regions qualify for inclusion in Pakistan’s Active Taxpayers List under Section 181A of the Income Tax Ordinance.

Under the proposed amendments, individuals recognized as active taxpayers by the Azad Jammu and Kashmir Central Board of Revenue or the Gilgit-Baltistan Council Board of Revenue would be included in Pakistan’s Active Taxpayers List if they meet certain conditions. These include having either a temporary or permanent address in AJK or Gilgit-Baltistan, or having both temporary and permanent addresses in Pakistan, subject to additional verification.

For taxpayers with addresses in Pakistan, the amendments outline a two-stage verification process. First, the Commissioner Inland Revenue with jurisdiction over the taxpayer’s CNIC-linked temporary address would be required to verify that the individual has no employment or business activities in Pakistan. This would be conducted through the FBR’s IRIS system following inquiries and a formal undertaking from the taxpayer.

Second, the relevant commissioner of the AJK Central Board of Revenue or the Gilgit-Baltistan Council Board of Revenue would be required to confirm that the individual’s sole employment or business activities are confined to AJK or Gilgit-Baltistan. This verification would also be processed through IRIS.

The proposed rules also strengthen enforcement provisions. If a Commissioner Inland Revenue believes such individuals are required to file income tax returns under Section 114 but fail to respond to official notices, their names may be removed from the Active Taxpayers List in accordance with Section 181A.

Tax experts say the reforms are intended to enhance transparency, prevent misuse of taxpayer status and improve coordination between federal and regional tax authorities. The FBR has invited stakeholders to review the draft amendments and submit feedback before the changes are finalized.