The Federal Board of Revenue (FBR) has been requested by the Pakistan Tax Bar Association (PTBA) to modernize its system in order to prevent letters from being sent to deceased individuals as part of the ongoing campaign against income tax return non-filers.

A Standard Operating Procedure (SOP) for the deregistration of dead taxpayers’ National Tax Numbers (NTNs) and Sales Tax Registration Numbers (STRNs) was recently released by the FBR.

The Federal Tax Ombudsman (FTO) has suggested that the FBR review the entire deregistration program for deceased individuals and create a special SOP for this purpose, with the aim of eliminating any systemic errors that prevent the deletion of NTN/Registration even when the relevant IR authority has made legal orders in IRIS.

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Referring to Section 114 of the Income Tax Ordinance, which gives the Commissioner the authority to notify a non-filer who has not submitted his income tax return for the current tax year or any prior tax year, is what the PTBA said in a communication to the FBR Chairman. 

Following “IRIS” installation, some compliance obligations are solely system-based. A person quitting their business must provide the Commissioner notice in accordance with Section 117 of the Ordinance within 15 days after the discontinuance.

Therefore, following the implementation of “IRIS,” the system has generated auto-generated notices for future tax years, which is causing hardship for the taxpayers who, in one way or another, had complied with the provisions of the Ordinance. Even in such cases, if the taxpayer submits such notice under section 117 of the Ordinance and files their tax return for that tax year, it is treated as a separate tax year for this Ordinance.

In light of the aforementioned, we suggest that the system be upgraded. Additionally, if notice under section 117 of the Ordinance has been submitted along with the tax return (in the event of an individual’s death, the winding up of a company, or the dissolution of an AOP), then no further notice for the filing of tax returns should be issued. In addition, if the department needs to request any information pertaining to the disclosure under Section 117 of the Ordinance, they may do so by issuing a notice under Section 117 of the Ordinance, as applicable.

According to PTBA, this should be taken into account in order to remove hardship and spare the field officer’s time and energy from this pointless effort.

Status modification in IRIS to “verified as Deceased” per commissioner’s declaration:

• Following the concerned commissioner’s verification of the required paperwork, the taxpayer’s registration form will be modified to reflect his status as “verified as deceased,” and the next measures for recovering unpaid debts will then be taken.
• Clearing the deceased taxpayer’s outstanding debts and liabilities: In accordance with section 87 of the income tax ordinance of 2001, the responsible CIR will assess any unpaid taxes, fines, or other obligations that the deceased taxpayer may have owing and take appropriate action to recover them. According to Rule 11(4) of the Sales Tax Rules, 2006, the outstanding sales tax liabilities of the deceased taxpayer may be ascertained and recouped.
• Order for cancellation of NTN/STRN registrations: Following verification of the death certificate and other pertinent documentation, the concerned CIR shall issue an order for the cancellation of the NTN and STRN registrations of a deceased person in IRIS in accordance with Rule 82(5) of the Income Tax Rules 2002 and under Rule 11 of the Sales Tax Rules 2006.
• Changing the taxpayer’s status in relevant databases and IRIS: The concerned CIR will send the order of cancellation of NTN/STRN to the LRO (Local Registration Officer) in order to have the taxpayer’s information removed from active taxpayer lists and updated as “deceased” in the IRIS system and other relevant databases.
• Notifying the legal heirs or representatives of the deceased taxpayer of the deregistration: A copy of the “Order of cancellation of Registration” of NTN/STRN will be provided by the applicable CIR to the legal heirs or representatives of the deceased taxpayer, along with a formal notification of the deregistration.

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