The Federal Board of Revenue (FBR) has granted a major tax relief to PIA by exempting Rs. 4.293 billion in default surcharges and penalties linked to the airline’s current income tax liabilities. The decision is aimed at supporting the successful completion of the airline’s privatization process.
The exemption was announced through SRO 1129(I)/2026, issued by the FBR. According to the notification, the relief applies to Pakistan International Airlines Corporation Limited (PIACL), which recently entered a new phase after the transfer of management control to an Arif Habib Corporation-led consortium.
The latest decision comes nearly two weeks after Lt Gen (retd) Anwar Ali Hyder was appointed as the first chairman of the newly privatized PIA. His appointment followed the transfer of management responsibilities under the privatization agreement.
According to the FBR notification, the exemption includes Rs. 263.82 million in default surcharges and penalties related to withholding tax, excluding salary-related taxes. These liabilities cover the period from April to December 2024.
The relief package also includes Rs. 4.03 billion in default surcharges and penalties connected to advance income tax. This portion covers the period from May 2024 to June 2025.
Together, these exemptions amount to Rs. 4.293 billion. However, the FBR clarified that the airline’s current tax liabilities remain subject to final assessment and determination under applicable tax laws.
Officials said the exemption was approved to facilitate the smooth completion of the PIA divestment process. The move is also intended to support the timely execution of bid documents and meet commitments agreed upon with the successful bidder.
The notification states that the exemption is subject to specific conditions. The airline must pay its outstanding current income tax liabilities over a four-year period after receiving a one-year grace period.
Under the approved arrangement, the payments will be made in equal annual installments. The repayment schedule will begin after the “First Completion” stage, as defined in the Share Purchase and Subscription Agreement signed between the Government of Pakistan and the successful bidder.
The FBR believes the arrangement will help ensure financial stability during the ownership transition while allowing the privatization process to move forward without unnecessary tax-related obstacles.
The government has been pursuing the privatization of PIA as part of broader economic reforms aimed at improving the performance of state-owned enterprises. Officials expect the latest tax relief to support the implementation of the transaction while ensuring that the airline fulfills its tax obligations under the agreed payment plan.
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The exemption does not cancel the underlying tax liabilities. Instead, it removes default surcharges and penalties while giving the airline additional time to settle its dues according to the agreed schedule. This approach is expected to provide financial flexibility as PIA enters its new phase under private management.
