FBR Can Now Arrest CEOs, CFOs Over Tax Evasion

In a decisive move under the Finance Bill 2025–26, Pakistan's Federal Board of Revenue (FBR) has empowered Inland Revenue officers with the authority to arrest directors, CEOs, CFOs, and other senior executives of companies implicated in tax evasion or fraud. This marks a major shift in corporate accountability and signals stronger enforcement of tax laws in Pakistan.

• FBR officers can now arrest senior company executives involved in tax offences.

• Arrests require prior approval, except in urgent situations.

• Commissioner oversight ensures checks and balances.

• Executives may be held liable regardless of official title.

• Arrests do not absolve companies of remaining tax liabilities.

• Strict legal protections exist against misuse.

• Abettors of tax fraud can also face detention.

Under the enhanced powers, Inland Revenue (IR) officers may arrest, upon producing reasonable evidence:

• Directors of a company

• Chief Executive Officers (CEOs)

• Chief Financial Officers (CFOs)

• Anyone directly linked to the execution of tax fraud

• Abettors or accomplices aiding fraudulent activities
  

This represents a significant expansion of individual accountability for corporate tax compliance.

An arrest is allowed only if an IR officer believes, based on evidence, that an individual has committed or attempted tax fraud. 

If delay could enable the accused to evade justice, IR officers can arrest first, with the duty to report immediately to the Commissioner along with detailed grounds for arrest.

• If a Commissioner deems that an arrest lacked sufficient evidence or was made with malicious intent, they can:

• Order the immediate release of the accused.

• Refer the matter to the Chief Commissioner for a formal inquiry. All arrests must comply with the Code of Criminal Procedure, 1898, ensuring legal oversight and due process.

Prior rules held only the company entity responsible for tax violations. Now, individual responsibility is firmly in place:

• Executives cannot hide behind company structures.

• Lieutenants and abettors face real personal consequences.

• This shift aims to deter corporate tax evasion through high-level interception.

It sends a clear signal: tax compliance is not just an administrative matter—it is top-down accountability.

• Arrests target anyone “personally responsible” for a company’s fraudulent tax activity, regardless of their official designation. 

• Even if a senior executive is arrested, the company still owes all unpaid dues, penalties, and default surcharges. 

• Arrest authority may be exercised by IR officers, Assistant Commissioners and above, or those specially authorised by the FBR.

The Finance Bill 2025–26 has ushered in a new era of tax accountability in Pakistan. By allowing arrests of top executives, FBR is sending a firm warning against corporate tax evasion:

• Corporate leaders must prioritize tax compliance.

• Legal mechanisms are in place to prevent abuse, but clarity and restraint are key.

• IR officers now hold real powers, backed by strict legal standards.

Your company must stay compliant—executives now face criminal personal liability, not just corporate penalties