Soneri Bank Limited has disclosed substantial tax contingencies in its 2025 annual report submitted to the Pakistan Stock Exchange (PSX), outlining a series of ongoing disputes with the Federal Board of Revenue (FBR) that could expose the bank to potential liabilities amounting to billions of rupees. The detailed disclosures highlight the scale of tax litigation faced by the banking sector and reflect the growing regulatory complexities shaping financial reporting in Pakistan.
According to the annual report, Soneri Bank has filed income tax returns up to tax year 2024. However, amended assessments issued by tax authorities for multiple years have resulted in additional tax demands. While the bank has complied with legal requirements by making certain payments, it has simultaneously pursued legal remedies by filing appeals before relevant appellate forums to challenge the assessments.
The report notes that assessments for tax years 2003 to 2010 have already been adjudicated at the Lahore High Court level. Petitions concerning tax years 2003 to 2005 and 2008 to 2010 are currently pending before the Supreme Court of Pakistan. In the event of unfavorable rulings, the bank could face additional liabilities totaling Rs. 277.12 million. Further matters, including tax references for tax years 2011 and 2012, carry a potential exposure of Rs. 639.57 million, while pending assessments for tax year 2001 may result in an additional Rs. 1.225 million.
For more recent years, assessments from tax years 2013 to 2021 have been addressed at the Commissioner Inland Revenue (Appeals) level. These ongoing appeals represent a significant potential financial impact, with additional liabilities estimated at Rs. 6,493.68 million if decisions do not favor the bank. Separate appeals relating to tax years 2014, 2015, 2016, 2018, 2019, and 2024 could result in liabilities ranging from Rs. 16.63 million to Rs. 7,308.32 million depending on the outcomes.
A key area of contention outlined in the report is the windfall tax imposed under Section 99D of the Income Tax Ordinance, 2001, following the Finance Act 2023. The FBR issued a recovery notice amounting to Rs. 1,021.891 million in relation to foreign exchange income. Soneri Bank has paid the demanded amount under protest while challenging the legality of the relevant SRO through a constitutional petition filed before the Lahore High Court. The outcome of this case is expected to have implications not only for the bank but potentially for the broader financial sector.
The annual report also references penalties totaling Rs. 30 million and Rs. 0.06 million imposed on bank staff under Sections 182 and 140 of the Income Tax Ordinance. These penalties are currently under appeal. Despite the scale and duration of the disputes, Soneri Bank’s management has expressed confidence that the majority of these matters will ultimately be resolved in its favor, potentially reducing or eliminating additional tax exposure.
The disclosures provide insight into the legal and regulatory challenges confronting financial institutions in Pakistan, particularly as evolving tax interpretations and enforcement measures intersect with financial sector operations. For investors and market observers, the case underscores how tax litigation and regulatory scrutiny continue to shape balance sheet risk, capital planning and corporate governance across the banking industry.
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