Karachi, March 2, 2025 – The Federal Board of Revenue (FBR) has raised a tax demand of Rs 1.22 billion against Bank Alfalah, citing discrepancies in the bank’s tax payments for multiple years. The demand pertains to various issues, including the default on payments of the Workers Welfare Fund (WWF), allocation of expenses related to dividend and capital gains, and the classification of dividend income from mutual funds. The tax authorities also highlighted the disallowance of leasehold improvements, which contributed to the substantial demand of Rs 1,217.274 million.
According to Bank Alfalah’s 2024 annual report, the bank has finalized its income tax assessments for all years up to and including 2024. However, the FBR has raised concerns regarding the tax years 2008, 2014, 2017, 2019, and from 2021 to 2024. In response, the bank has filed an appeal against the tax demand, which is currently pending before the Tribunal. Despite the raised demand, the management of Bank Alfalah remains optimistic about the outcome and, as such, has not made any provision for this liability in its financial statements. The bank is confident that the appellate process will lead to a favorable ruling.
In addition to the Rs 1.22 billion demand from the FBR, Bank Alfalah is also dealing with tax orders from a provincial tax authority concerning the period from July 2011 to December 2020. The provincial authority has demanded sales tax on banking services, along with a penalty totaling Rs 763.312 million (excluding default surcharge). The tax authority cited disallowed exemptions and alleged short payments as the basis for the claim. Bank Alfalah has appealed these orders, and the appeals are currently under review by the Commissioner Appeals and the Appellate Tribunal. Once again, the bank has opted not to make provisions for these claims, as it believes the appellate process will resolve the matter in its favor.
Additionally, Bank Alfalah has faced smaller tax demands related to specific transactions. One such demand involves an alleged non-payment of sales tax on transactions in the accounting year 2016, amounting to Rs 5.191 million (excluding default surcharge). A similar demand of Rs 8.601 million was also issued for the same year. These cases are currently under appeal with the Commissioner Appeals. Moreover, the bank received a new order for tax years 2017 and 2018, raising a tax demand of Rs 11.536 million (excluding default surcharge), which is also under appeal.
Beyond these individual cases, Bank Alfalah is involved in multiple appeals related to other tax matters across various assessment years. These issues are still under legal proceedings and are being reviewed by the Commissioner of Inland Revenue (Appeals), the Appellate Tribunal Inland Revenue (ATIR), the High Court of Sindh, and the Supreme Court of Pakistan. The bank remains actively engaged in these legal processes and is confident that the tax disputes will be resolved in its favor.
Despite the substantial tax demands, Bank Alfalah continues to maintain a strong legal stance, bolstered by its belief in the merits of its cases. The bank’s management is confident that the outcome of these ongoing appeals will not only resolve the disputes but also ensure that the tax matters are concluded in a favorable manner, aligning with the bank’s commitment to legal compliance and transparent business practices.