Bank Alfalah Limited has disclosed significant tax contingencies for the calendar year ended December 31, 2025, in its annual financial statements submitted to the Pakistan Stock Exchange, highlighting ongoing legal and regulatory matters related to both income and sales tax. These disclosures provide insight into the bank’s tax position and the active steps being taken to resolve disputes with authorities.
For income tax, the bank has finalized assessments up to tax year 2025. However, for the years 2008, 2014, 2017, 2019, and 2021 to 2025, tax authorities have raised multiple issues, including alleged default in Workers’ Welfare Fund (WWF) payments, allocation of expenses to dividends and capital gains, treatment of dividend income from mutual funds, and disallowance of leasehold improvements. These challenges have resulted in a cumulative tax demand of Rs. 2,844.103 million, which is a marked increase from Rs. 1,217.274 million at the end of 2024, after accounting for relief obtained through appeals. The bank has filed appeals with the Commissioner Appeals and the Appellate Tribunal and remains confident of favorable resolutions, and consequently has not made provisions in its financial statements.
In addition to income tax matters, Bank Alfalah is facing sales tax disputes from a provincial tax authority covering the periods July 2011 to December 2020. The authority has demanded sales tax on banking services along with penalties totaling Rs. 763.312 million, excluding default surcharge. Appeals for the period July 2011 to June 2014 are pending with the Commissioner Appeals, while disputes from July 2014 to December 2020 have been filed before the Sindh High Court. These cases have been remanded to the adjudicating authority after the year-end, and the bank expects favorable outcomes, therefore no provisions have been made.
The bank also received multiple tax orders for accounting years 2016, 2017, and 2018, demanding sales tax, additional tax, and penalties exceeding Rs. 25 million. These matters remain pending before the Commissioner Appeals and the Appellate Tribunal.
Further addbacks and assessments raised by tax authorities for various assessment years are under appeal at different levels, including the Commissioner of Inland Revenue (Appeals), Appellate Tribunal Inland Revenue (ATIR), the High Court of Sindh, and the Supreme Court of Pakistan. Bank management emphasizes that it is actively contesting all matters and remains confident that these disputes will ultimately be resolved in its favor.
Through its disclosures, Bank Alfalah underscores its commitment to transparency and compliance while managing complex legal and regulatory matters. The bank continues to pursue resolution of these tax contingencies through legal and regulatory channels, ensuring adherence to statutory obligations while maintaining confidence in favorable outcomes.
The bank’s proactive approach to handling these matters highlights the evolving complexities of corporate taxation in Pakistan’s banking sector, as institutions navigate multiple assessments, appeals, and judicial proceedings, while continuing operational and financial stability.
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