The Federal Board of Revenue (FBR) has clarified the definition of a “person” for income tax purposes for Tax Year 2027 under Section 80 of the Income Tax Ordinance, 2001, updated up to June 30, 2026.
The definition is important because determining who or what qualifies as a “person” affects the application of various provisions of Pakistan’s income tax law.
Who Is Considered a Person?
Under Section 80, the term “person” broadly includes:
- An individual
- A company
- An Association of Persons (AOP)
- The Federal Government
- A foreign government
- A political subdivision of a foreign government
- A public international organisation
The provision applies to entities and arrangements established or formed in Pakistan or elsewhere, where covered by the relevant provisions.
What Is an Association of Persons?
For income tax purposes, an AOP includes several forms of collective arrangements, such as:
- Firms
- Hindu Undivided Families
- Artificial juridical persons
- Limited Liability Partnerships (LLPs)
- Certain bodies of persons formed under foreign law
A company is separately classified and is excluded from the definition of an AOP.
What Qualifies as a Company?
The definition of “company” under the Income Tax Ordinance is broader than companies registered under the Companies Act, 2017.
It includes certain:
- Bodies corporate
- Modarabas
- Foreign incorporated entities
- Cooperative and finance societies
- Non-profit organisations
- Trusts and other entities established under law
- Provincial and local governments
- Small companies as defined under the Income Tax Ordinance
This broad definition brings different legal structures within the income tax framework.
Why the Definition Matters for Tax Year 2027
The classification of an individual or entity as a “person” is fundamental to determining how various provisions of the Income Tax Ordinance, 2001 apply.
Businesses, organisations and individuals should therefore understand their legal and tax status when preparing for Tax Year 2027.
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Understanding tax classifications is an important part of maintaining compliance with Pakistan’s tax laws.
Xact Legal provides professional tax, corporate and legal services in Pakistan, helping individuals and businesses understand applicable tax obligations and regulatory requirements.
Need assistance with Tax Year 2027 or tax compliance? Contact Xact Legal for professional guidance.