Key Takeaways
- KTBA has requested the FBR to modify the IRIS system to ease tax compliance for returning Pakistanis.
- The existing system automatically carries forward the opening wealth balance, causing difficulties.
- KTBA cited a case where an individual faced issues due to the system's inability to edit the wealth balance.
The Karachi Tax Bar Association (KTBA) has written to the Federal Board of Revenue (FBR) urging modifications to the IRIS system to simplify tax compliance for individuals returning to Pakistan after a period of non-residence.
KTBA highlighted that the current system, which automatically carries forward the opening wealth balance from the last Wealth Statement, creates complications for taxpayers who resume residency.
According to the KTBA, the system retains the wealth balance reported before the period of non-residence, making it challenging for returning taxpayers to accurately reconcile their wealth for the relevant tax year.
KTBA provided an illustrative case of an individual who was a Pakistani tax resident up to Tax Year 2023, filed an income tax return, Wealth Statement, and Wealth Reconciliation Statement for that year, and subsequently remained a non-resident during Tax Years 2024 and 2025.
Upon returning to Pakistan and becoming a resident during the period relevant to Tax Year 2026, the individual was required to furnish a Wealth Statement and Wealth Reconciliation Statement under section 116(2) of the Income Tax Ordinance, 2001.
However, the IRIS system automatically carried forward the wealth balance as of June 30, 2023, into a non-editable opening balance field, creating difficulties in reconciling wealth for Tax Year 2026.
KTBA maintained that, under the self-assessment and declaration framework of income tax laws, taxpayers should be allowed to declare their opening wealth balance on the basis of relevant information and records, subject to applicable legal provisions.
The association urged the FBR to address the specific issue by modifying the relevant IRIS validation to allow returning individuals to enter an appropriate opening wealth balance for the relevant tax year.
KTBA further emphasised that the IRIS 2.0 filing utility should facilitate compliance with section 116(2) without extending the scope of the statutory obligation.
