On 26 July 2023, the Federal Board of Revenue in Pakistan (FBR) issued Circular No. 2 of 2023, providing an explanation of the income tax amendments introduced through the Finance Act of 2023. The circular elaborates on the following measure:
Expanding the definition of “permanent establishment” (PE) by eliminating the term “fixed” from “fixed place of business,” incorporating “virtual business presence,” and including consultancy services. The circular also outlines the expansion of the “associate” definition, intended for anti-avoidance and arm’s length principal objectives, to encompass aspects like shared intentions, economic dependency, and transactions involving no-tax jurisdictions. An explanation has been added in the provisions relating to minimum tax under section 113 of the Ordinance. The changes will come into effect starting from 1 July 2023.
