Regulatory updates - Pakistan

As previously reported by Pagero, Pakistan is gradually introducing mandatory e-invoicing in the clearance CTC model to modernize transaction controls.

On 18 April 2024, the Federal Board of Revenue (FBR) of Pakistan unveiled the updated version 1.3. of the technical specification for data sharing through API via FBR. This document aims to walk Supply Chain Operators through Digital Invoice Data sharing methods with FBR.

The technical specification document covers the PoS registration process, integration steps with FBR, invoice model details, web API functionality, sample codes, posting model in Postman, and annexures such as sale type codes, SRO/Schedule codes, UOM codes, and HS codes.

Obligation timelines

Starting from 1 February 2024, e-invoices must be submitted by tax-registered persons dealing with fast-moving consumer goods (FMCG).

The outline of the mandate

Registered persons notified by FBR will issue electronic sales tax invoices in JSON format for every taxable supply in real time. These persons must integrate their PoS, ERP, or any other invoicing system with FBR through a licensed integrator. Until the FBR approves the list of licensed integrators, registered persons dealing with FMCG have to integrate their e-invoicing system with the FBR system without licensed integrators.

Pagero closely follows the developments and will inform our customers once further guidance is announced.

FBR has embarked on a pioneering tax reform initiative by introducing the SWAPS. This digital transformation aims to boost tax transparency and combat evasion.

Through the Statutory Regulatory Order (SRO) 419(I)/2024, the FBR has amended the Income Tax Rules/2002, paving the way for SWAPS implementation to modernize withholding tax processes, transitioning them to the digital sphere.

Designated SWAPS Agents are required to align with regulatory standards, refine their profiles within the Integrated Risk Information System (IRIS) and adopt approved electronic devices for withholding tax transactions.

SWAPS mandates all specified transactions to occur through its platform, ensuring every digital invoicing aligns with critical withholder information. Failure to comply may lead to penalties outlined in the Income Tax Ordinance/2001.

As previously reported by Pagero, the Federal Board of Revenue (FBR) of Pakistan introduced new e-invoicing requirements to modernize transaction controls.

On 10 January 2024, the FBR announced its notification defining the scope of mandatory e-invoicing implementation in Pakistan.

According to this notification, as of 1 February 2024, e-invoices must be submitted by the following tax-registered persons dealing with fast-moving consumer goods[1]:

• All importers and manufacturers of fast-moving consumer goods;
• All wholesalers (including dealers), distributors;
• All wholesaler-cum-retailers engaged in bulk import and supply of fast-moving consumer goods on a wholesale basis to the retailers.

[1] "Fast-moving consumer goods" means consumer goods which are supplied in retail marketing as per daily demand of a consumer, excluding durable goods.

On 10 November 2023, the Federal Board of Revenue (FBR) announced the amendments to the Sales Tax Rules covering e-invoicing regulations.

A tax-registered person will be called an integrated supplier for the purposes of e-invoicing implementation.

Following the amendments, an integrated supplier shall:

• Install an e-invoicing system provided by a licensed person who is appointed and authorized by the FBR;
• Make any sale or supply through this e-invoicing system;
• Issue a real-time verifiable e-invoice for every taxable supply.

The retention period of the record and documents is prolonged to six years.

The provision allowing the integrated supplier to use any e-invoice format containing all the required information has been removed.

The integrated supplier will be able to apply for the extension of grace period for e-invoicing adoption. In case of such extension, the integrated supplier will be allowed to continue issuing paper invoices.

In an earlier press release, the Federal Board of Revenue (FBR) announced that since 2019 the number of Points of Sales (POSs) integrated with the FBR invoicing system had reached 5783 POSs as 286 retailers had integrated their systems with FBR and successfully reported the sales tax invoices in real-time.

Initially, the integration started as voluntary and went live on 1 November 2018. The mandatory integration, however, took effect as from 15 December 2019.

How does the POS invoicing system work in Pakistan?

It is a computerised real-time sales documentation system that records sales or purchase data transactions, manages inventory, and maintains customer data. The FBR has requested businesses to integrate their POSs with the system to make sure the tax paid by the end customers at the cash counter has been settled in the Board records. For integration, retailers need to install a software extension provided by the FBR on their system to ensure real-time sales tax reporting to the Board’s server.

Who is currently in the scope?

All Tier-1 retailers are required to integrate all their POSs with the Federal Board of Revenue’s invoicing system. Tier-1 retailers are identified, according to the Sales Tax Act 1990 section 2 (43 A), as any of the following categories:

• A retailer operating as a unit of a national or international chain of stores;
• A retailer operating in an air-conditioned shopping mall, plaza or centre, excluding kiosks;
• A retailer whose cumulative electricity bill during the immediately preceding twelve consecutive months exceeds PKR 1,2 million (ca. EUR 6500,00);
• A wholesaler-cum-retailer, engaged in bulk import and supply of consumer goods on a wholesale basis to the retailers as well as on retail basis to the general body of the consumers”; and
• A retailer whose shop measures 93 m2 in area or more.

Extension of the scope with the latest Ordinance

On 15 September 2021, the Pakistani Federal Board of Revenue has published the Tax Laws (Third Amendment) Ordinance 2021. One of the key measures of this ordinance is that the FBR may, by notification in the official Gazette, require any taxpayers or taxpayer groups to integrate their invoice issuing machines with the Board's system for real-time reporting at any point of time after the ordinance took effect.

Pakistan is not the only county that implemented a fiscalisation model. As we reported in one of our previous updates, Albania had already completed the implementation of its monitoring system with all taxpayers being in the scope.