ISLAMABAD – Telecom giant Jazz has agreed to pay $158 million to Pakistan’s tax authorities, ending a long-running legal dispute over a multi-billion-rupee intra-group asset transfer. The settlement was finalized on June 27, 2025, through the country’s Alternate Dispute Resolution Committee (ADRC), following a decisive ruling by the Islamabad High Court (IHC).
High Court Backs FBR in Tower Asset Taxation Case
The legal battle centered around Jazz’s 2018 internal restructuring, during which the company offloaded its entire nationwide tower infrastructure—valued at Rs98.5 billion (around $940 million)—to a wholly owned subsidiary. Jazz had recorded an accounting gain of Rs75.9 billion on the transaction and claimed the move qualified for tax exemption under Section 97(1) of Pakistan’s Income Tax Ordinance, which shields certain intra-group transfers from taxation.
However, a division bench of the IHC, headed by Justice Babar Sattar, rejected Jazz’s interpretation. In its landmark judgment delivered on June 13, 2025, the court ruled that the transfer didn’t meet the exemption criteria. The bench noted that because the assets were transferred at fair market value and resulted in real economic gains, the deal could not be shielded from tax under Section 97.
The court further upheld the Federal Board of Revenue’s (FBR) stance that the commissioner has the authority to consider accounting income when evaluating tax obligations in such transactions. This affirmed FBR’s ability to assess tax liability even in intra-group dealings, provided they result in tangible financial benefits.
Rs22 Billion Tax Bill at the Core of Dispute
As a consequence of the IHC verdict, Jazz was deemed liable for approximately Rs22 billion (around $78 million) in taxes stemming from the asset gain. The $158 million settlement—which includes additional dues and resolution costs—closes the chapter on what was one of the most high-profile corporate tax disputes in recent years.
Jazz’s move to resolve the matter through the ADRC rather than pursue prolonged litigation signals a strategic pivot aimed at regulatory compliance and financial certainty, especially as Pakistan’s tax authorities tighten scrutiny over large corporate restructurings.
A Broader Message for Corporate Pakistan
This case sets a significant precedent for similar intra-group asset transfers in the country. By upholding the taxability of fair-market-value transactions within corporate groups, the court’s ruling reinforces the FBR’s mandate to prevent tax avoidance via internal reorganizations.
For large companies considering similar moves, this decision may serve as a legal benchmark—highlighting that substance, not just structure, will determine tax exposure.
