Pakistan Petroleum Limited (PPL) has disclosed that it is contesting tax demand notices amounting to billions of rupees issued by the Federal Board of Revenue (FBR), as detailed in its financial statements for the half year ended December 31, 2025. The latest filing outlines fresh tax developments during the reporting period while noting that there were no significant changes in the overall status of contingencies and commitments previously disclosed in its annual consolidated financial statements for the year ended June 30, 2025, apart from newly raised tax claims.
During the six-month period, PPL received multiple orders from tax authorities under the Sales Tax Act, 1990, resulting in a cumulative sales tax demand of Rs517 million for various tax periods. The company stated that it disputes the assessments and is in the process of filing appeals before the Commissioner Inland Revenue, Appeals (CIRA). Management indicated that it considers the demands contentious and has initiated legal recourse in accordance with statutory procedures.
In addition to sales tax matters, amendments to income tax assessments for tax years 2020, 2021, 2022, 2024, and 2025 have led to an aggregate tax demand of Rs6,058 million. According to the company’s disclosure, the principal issues cited by tax authorities include disputes over applicable tax rates, provisions linked to windfall gains, and the disallowance of depletion allowance associated with gathering and processing charges. PPL has paid the demanded amounts under protest, as required under the law, and has commenced the appeals process before the CIRA to challenge the revised assessments.
The financial statements further reveal that PPL’s tax return for the year 2023 was selected for an income tax audit. Following the audit, the company received an additional tax demand of Rs1,006 million, primarily arising from the disallowance of depletion allowance on gathering and processing charges. This amount has also been paid under protest, and an appeal has been filed. The combined exposure from the recently disclosed income tax and sales tax demands places the company’s contested tax liabilities well above Rs7.5 billion.
Subsequent to the reporting period, the Federal Constitutional Court of Pakistan issued a ruling concerning constitutional petitions related to super tax. The court held that certain provisions of the Income Tax Ordinance, 2001, would apply to exploration and production companies only if they do not exceed tax rates specified in the Fifth Schedule and the respective Petroleum Concession Agreements. PPL stated that it is currently reviewing the court’s decision in detail and, based on its preliminary assessment, does not anticipate any adverse financial impact arising from the ruling.
The company reaffirmed its intention to pursue all available legal remedies to safeguard its position and protect shareholder interests. The disclosures highlight the scale and complexity of tax disputes confronting major exploration and production companies operating in Pakistan, where regulatory interpretations and sector-specific fiscal regimes continue to shape financial performance and reporting obligations.
For market participants, the developments underline the importance of tax risk management and legal strategy in capital-intensive sectors such as energy. As proceedings advance through appellate forums, the outcomes may carry implications not only for PPL but also for the broader extractive industry navigating evolving fiscal and regulatory frameworks in Pakistan.
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