The Federal Board of Revenue (FBR) has set a 15-day notification requirement for taxpayers who discontinue their business during Tax Year 2027.
Under Section 117 of the Income Tax Ordinance, 2001, a person who discontinues a business must notify the Commissioner in writing within 15 days. A separate income tax return may also be required for the period in which the business operated before discontinuation.
15-Day Notice Requirement
When a taxpayer discontinues a business, written notice must be submitted to the relevant Commissioner Inland Revenue within 15 days of discontinuing the business.
This requirement helps FBR establish the date on which business operations ended and determine the taxpayer’s remaining tax obligations.
Separate Tax Return for the Discontinued Period
Discontinuing a business does not eliminate the requirement to report income earned before the business closed.
The taxpayer must submit an income tax return covering the period:
First day of the tax year → Date of business discontinuation
This period is treated as a separate tax year for purposes of the Income Tax Ordinance.
For Tax Year 2027, the relevant tax year generally runs from July 1, 2026 to June 30, 2027.
What If the Taxpayer Does Not Notify FBR?
Section 117 also gives the Commissioner authority to take action where there are reasonable grounds to believe that a business has been discontinued or is likely to be discontinued.
The Commissioner may issue a notice requiring the taxpayer to submit an income tax return for the specified period within the prescribed timeframe.
The Return Is Treated as a Regular Tax Return
A return filed under Section 117 is treated as an income tax return for the purposes of the Income Tax Ordinance, 2001.
This means the return remains subject to the applicable provisions governing income tax returns, including the relevant assessment framework.
What Should Businesses Do After Closing?
Businesses that have discontinued operations should promptly:
- Notify the relevant Commissioner within 15 days.
- Determine the exact date of business discontinuation.
- Prepare the required income tax return for the discontinued period.
- Reconcile business income and expenses up to the closure date.
- Review outstanding tax liabilities.
- Maintain supporting financial and business records.
- Complete any other applicable tax and regulatory requirements.
Why Timely Compliance Matters
Closing a business does not automatically close its tax obligations. Income earned before discontinuation must still be properly reported, and required notices and returns should be submitted within the prescribed time.
Timely compliance can help businesses avoid unnecessary tax complications and ensure that their records accurately reflect the cessation of business activities.
Xact Legal – Business Closure & Tax Compliance
Discontinuing a business involves more than simply stopping operations. Taxpayers may need to address income tax returns, outstanding liabilities, financial records and regulatory compliance before concluding their tax affairs.
Xact Legal provides professional tax and legal assistance for businesses dealing with business closure, tax returns, compliance and related regulatory matters in Pakistan.
Closing your business? Get professional tax and compliance assistance from Xact Legal.