Used by foreign missions: No additional duties on resale of locally purchased vehicles: FTO
ISLAMABAD: The Federal Tax Ombudsman Secretariat (FTO) on Wednesday conveyed to embassies and foreign missions that vehicles purchased from the local market and subsequently used by Foreign Missions are not subject to further duties upon resale.
The Federal Tax Ombudsman Secretariat (FTO) held the second session of the Diplomatic Grievances Redressal Cell (DGRC) at FTO Head office. This session brought together representatives from the embassies of South Africa, Philippines, United States of America, Poland, Ireland, Denmark, Qatar, Romania, and Kuwait.
Representatives from the United Nations World Food Programme were also in attendance. This event was chaired by Federal Tax Ombudsman of Pakistan, Dr Asif Mahmood Jah and featured briefings by senior officials of FTO Secretariat including Almas Ali Jovindah (Head of DGRC), Dr Arslan Subuctageen (Advisor Customs), and Khalid Javaid (Registrar).
Addressing a query from the representative of US Embassy, Dr Arslan confirmed that vehicles purchased in the local market and used by Foreign Missions are not subject to further duties upon resale, as taxes are already paid at the point of sale. In response to concerns from the Jordanian Embassy about challenges faced by outgoing officers in selling their vehicles, he advised contacting the 'International Customs' section of FBR. If the matter remains unresolved, he assured, the DGRC would assist further.
Dr Asif Mahmood Jah placed emphasis on FTO's mandate to provide a cost-free and efficacious forum for addressing tax-related issues, particularly those affecting foreign missions. He remarked that the DGRC was created in response to repeated concerns from the diplomatic community, pertaining to procedural delays and bottlenecks faced with FBR and Customs Authorities. With a 30-day resolution target, DGRC is designed to streamline communication and promote institutional accountability.
During his presentation, Almas Jovindah stated that the DGRC was established to formalize a consistent and responsive interface between taxation authorities of Pakistan and the diplomatic corps. Its mandate goes beyond administrative support as it aims to function as a dedicated mechanism to ensure that grievances of the diplomats are addressed with transparency and urgency.
Jovindah also shed light on the recent accomplishments of DGRC in which complaints from the embassies of Poland, Kuwait, Türkiye, and Belgium were resolved on a priority basis by FTO after facing considerable inaction.
While presenting performance statistics of FTO, Jovindah reported that as of May 2025, the FTO had received over 15,000 complaints, with an average resolution time of 34 days and a 96% implementation rate. In 2024 alone, 13,500 cases were handled, including 1,700 through informal Alternative Dispute Resolution (ADR). He also remarked that FTO is an autonomous body and works as a watchdog of FBR who intervenes in case of overreach or inaction of their officers.
Advisor (Customs), Dr Arslan Subuctageen provided a detailed briefing on the legal framework governing customs privileges for diplomats. Referring to SRO 578(I)/2006 and its amendment S.R.O. 649(I)/2017, he explained the duty-free import of vehicles by diplomatic missions under reciprocity, and the graduated duties applicable upon resale based on the vehicle's age and category. He also clarified that diplomats may shop at the designated duty-free diplomatic warehouse in Islamabad.
Dr Subuctageen also elaborated the distinction between diplomatic bags and diplomatic cargo. While diplomatic bags which are certified by the Sending State are exempt from inspection, cargo exceeding 500 kg is subject to scanning and requires documentation from the Ministry of Foreign Affairs (MOFA). In exceptional cases involving credible risk, inspections may be conducted in the presence of the mission and MOFA representatives.
FTO Secretariat's Registrar Khalid Javaid briefed participants on the legal framework governing zero-rated supplies and tax refunds for diplomats under Rules 51, 52, and 52A of the Sales Tax Rules, 2006 and S.R.O. 918(I)/2019. Javaid noted that exemption certificates from MOFA enable both pre-supply and post-supply zero-rating within a 180-day window. Refunds, processed manually via the STARR system under Section 66 of the Sales Tax Act, 1990 and Rule 38(5), are credited directly to mission accounts. He added that delays beyond one year can now be condoned up to three years per SRO 1444(I)/2024. On Petroleum Development Levy (PDL), refunds are granted under Rule 36 of the Federal Excise Rules, 2005, subject to MOFA certification and original receipts. He stressed the importance of proper documentation and clarified that while diplomats are exempt from certain taxes under Article 34 of the Diplomatic and Consular Privileges Act, 1972, Pakistan extends refunds as a reciprocal goodwill gesture, not as a blanket legal obligation.
Towards the end, an interactive Q&A session took place which provided an opportunity for diplomats to raise their concerns. A number of questions focused on procedural challenges, including confusion around the responsibility for verifying tax compliance when making purchases, especially from retailers who fail to deposit taxes with the national exchequer. In response, Khalid Javaid clarified that the obligation lies with the supplier, not the mission, and assured that diplomats retain the right to refunds even if the supplier is non-compliant. He added that FBR is empowered to take action against such retailers independently.
A participant from Embassy of Kuwait raised a query regarding delays in refund processing, particularly when documents are lost, rerouted, or caught between MOFA and FBR. Khalid Javaid acknowledged the bureaucratic gaps and clarified that once MOFA issues an exemption certificate, the responsibility to process the refund lies squarely with FBR. He encouraged missions to submit pending summaries directly to his office for coordinated follow-up and escalation.
Regarding older claims and refund eligibility, the participant from UN World Food Programme noted that UNWFP had accumulated unpaid refunds since 2016. Javaid explained that while there is a statutory one-year limit under Section 66 of the Sales Tax Act, condonation up to three years is now possible under SRO 1444(I)/2024. He invited missions to submit full case details to explore possible facilitation within legal bounds.
Diplomatic representatives expressed their appreciation to Federal Tax Ombudsman HE Dr Asif Mahmood Jah and his team for convening a solution-oriented seminar that directly addressed long-standing operational challenges. They acknowledged the objective of DGRC in providing sustained institutional support to the foreign missions in Pakistan. As a gesture of acknowledgment, certificates of participation were distributed by the Honorable FTO, Dr Asif Mahmood Jah at the end of the seminar.
Copyright Business Recorder, 2025
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