Written by Faisal Shahnawaz in Taxation FBR has outlined the tax, reporting and withholding requirements for gains arising from offshore disposals involving assets linked to Pakistan. The Federal Board of Revenue (FBR) has explained the tax treatment of gains arising from the disposal or alienation outside Pakistan of certain assets connected with Pakistan during Tax Year 2027. The FBR’s Income Tax Ordinance, 2001, has been updated up to June 30, 2026, for the relevant tax year covering July 1, 2026 to June 30, 2027. Section 101A covers offshore asset disposals Under Section 101A of the Income Tax Ordinance, 2001, any gain arising from the disposal or alienation outside Pakistan of an asset located in Pakistan and owned by a non-resident company is treated as Pakistan-source income. The gain is chargeable to tax at the rate and in the manner specified under Section 101A(10). Rules for shares in non-resident companies Where the asset being disposed of is a share or interest in a non-resident company, it is treated as being located in Pakistan when two conditions are satisfied. First, the share or interest must derive, directly or indirectly, its value wholly or principally from assets located in Pakistan. Second, shares or interests representing 10% or more of the share capital of the non-resident company must be disposed of or alienated. When assets are considered principally located in Pakistan A share or interest is considered to derive its value principally from assets located in Pakistan when, on the last day of the tax year preceding the date of transfer, the value of those assets: • exceeds Rs100 million; and • represents at least 50% of the value of all assets owned by the non-resident company. The value of the assets is determined according to their fair market value in the prescribed manner. The provision applies notwithstanding Section 68, while the fair market value is determined without reducing liabilities. Tax treatment where assets are partly in Pakistan Where only some of the assets of a non-resident company are located in Pakistan, the income arising from the offshore disposal of a share or interest in that company is treated as arising from…