Jazz has concluded a major tax dispute with Pakistan’s tax authorities by paying $158 million under a settlement facilitated through the Alternate Dispute Resolution Committee. The resolution, formalized on June 27, 2025, comes in the wake of a key ruling by a division bench of Islamabad High Court that supported the position of Federal Board of Revenue. The case centers around a high-value internal restructuring carried out by Jazz in 2018, which involved the transfer of its nationwide tower infrastructure to a wholly owned subsidiary. The transfer was reported to be valued at Rs98.5 billion, resulting in an accounting gain of Rs75.9 billion. Jazz had previously claimed the transaction was exempt from taxation under Section 97(1) of the Income Tax Ordinance, arguing that it was an intra-group transfer.
The Islamabad High Court bench, led by Justice Babar Sattar, rejected this argument, noting that the transaction, conducted at fair market value and generating actual economic gain, did not meet the conditions for exemption under Section 97. The ruling confirmed FBR’s right to impose tax on such asset transfers and emphasized the authority of the tax commissioner to factor in accounting income when assessing tax liability. As a result of this decision, Jazz became liable to pay approximately Rs22 billion, or about $78 million, in taxes related to the gain from the tower asset transfer.
This legal outcome triggered Jazz’s decision to settle the broader dispute with FBR, with the total payment reaching $158 million. The additional amount likely covers related liabilities, penalties, or adjustments beyond the core tax amount highlighted by the court. The use of the Alternate Dispute Resolution Committee as a mechanism to resolve the case reflects a growing trend in Pakistan’s regulatory environment, where high-stakes corporate disputes are being resolved through structured dialogue instead of extended litigation.
Jazz’s 2018 restructuring marked a major shift in its asset management strategy, aiming to streamline operations by transferring key infrastructure into a dedicated subsidiary. While such reorganizations are often seen as internal and non-taxable under corporate tax law in several jurisdictions, Pakistan’s legal interpretation, as confirmed in this case, places emphasis on the economic substance and market valuation of transactions, even when executed within the same group. This case also highlights FBR’s enhanced scrutiny of intra-group transactions and its willingness to pursue tax claims where significant asset movements generate reportable gains. For the telecom sector, this outcome is likely to set a precedent for future internal restructurings and tax assessments involving high-value infrastructure assets.
