Supreme Court rejects FBR’s attempt to impose 35% tax on dividend income, ruling that only the 10% final tax applies and upholding companies’ stance.
ISLAMABAD: (UrduPoint/UrduPoint/Pakistan Point News-july-20,2026) The Supreme Court of Pakistan has delivered a major ruling in a tax dispute, rejecting the Federal board of Revenue’s (FBR) stance seeking a 35% tax on dividend income and upholding the decision in favor of companies.
According to the verdict, the Supreme Court maintained the decision of the Islamabad High Court and dismissed all civil petitions filed by the FBR. The tax authority was also denied permission to appeal further.
The two-member bench, headed by Chief Justice Yahya Afridi, announced the decision, which was authored by Justice Aqeel Ahmed Abbasi.
The Supreme Court ruled that only Section 5 of the Income Tax Ordinance, 2001 applies to dividend income, not Section 39. The court stated that the 10% tax on dividends is the final and legally applicable tax liability.
The dispute arose when the FBR sought to impose a 35% corporate tax on dividend income, while companies argued that dividends fall under a separate tax regime and are subject only to the final tax rate.
The court observed that dividend income cannot be treated as ordinary income and rejected the FBR’s interpretation of the law. It ruled that a separate tax system applies to dividends and dismissed all FBR appeals for lacking merit.
The case was initially brought by several companies, including Saudi Pak Industrial and Agricultural Investment Company, Fauji Foundation, Fauji Fertilizer, and K-Electric Gas, against the FBR’s decision.
