Director Penalty Notice Template for Pakistan

A Director Penalty Notice is a formal warning issued by Pakistan's Federal Board of Revenue when company directors fail to meet their tax obligations. It holds directors personally responsible for specific company debts, including unpaid sales tax, income tax, and employee withholding taxes.

Under Pakistani tax laws, these notices give directors 21 days to take action - either by paying the debt, putting the company into administration, or starting its liquidation. If directors ignore the notice, they become personally liable for the outstanding amounts, meaning the FBR can recover the money directly from their personal assets.

Tax authorities issue Director Penalty Notices when companies repeatedly miss tax payments or file incorrect returns. The FBR typically sends these notices after multiple warnings and when standard collection methods have failed. Common triggers include unpaid GST, employee withholding tax defaults, or significant reporting discrepancies.

The notice becomes crucial when dealing with companies showing signs of financial distress or those with a history of non-compliance. Pakistani tax officials often use this tool to address cases where directors appear to be deliberately avoiding tax obligations or when company assets are being dispersed before tax debts are settled.

• Standard Recovery Notice: Issued for unpaid company tax debts, giving directors 21 days to act before personal liability applies
• Lockdown Period Notice: Used when directors face immediate liability without a grace period, typically for unpaid employee withholding taxes
• Compliance Warning Notice: Alerts directors to reporting violations or incorrect tax filings before penalties apply
• Asset Protection Notice: Specifically targets cases where company assets are being sold or transferred before settling tax obligations
• Payment Plan Notice: Offers directors a structured settlement option while maintaining the threat of personal liability

• Federal Board of Revenue Officers: Issue and enforce Director Penalty Notices, track compliance deadlines, and initiate recovery actions
• Company Directors: Primary recipients who must respond to the notice and are personally liable for unpaid tax obligations
• Tax Advisors: Help directors understand their obligations and develop response strategies to avoid personal liability
• Corporate Lawyers: Assist in reviewing notices, drafting responses, and advising on legal implications
• Company Accountants: Provide financial records and help resolve underlying tax issues that triggered the notice

• Company Details: Gather accurate business registration number, tax filing history, and registered office address
• Tax Assessment: Calculate exact outstanding tax amounts, including penalties and interest charges
• Director Information: Compile current and former directors' details, their tenure periods, and service addresses
• Compliance History: Document previous warnings, correspondence, and payment attempts
• Notice Timeline: Set clear response deadlines and payment terms aligned with FBR guidelines
• Supporting Evidence: Attach relevant tax returns, payment records, and compliance breach documentation

• Official Header: FBR letterhead, notice reference number, and date of issuance
• Director Details: Full legal name, NTN number, and current registered address
• Company Information: Business name, registration number, and registered office address
• Tax Liability: Detailed breakdown of outstanding amounts, tax periods, and calculation method
• Legal Authority: Citation of relevant sections from Pakistan's tax laws
• Response Timeline: Clear 21-day deadline and available compliance options
• Consequences: Explicit statement of personal liability and enforcement measures

A Director Penalty Notice differs significantly from a Notice of Default in both purpose and legal implications. While both are formal warnings, they serve distinct functions in Pakistan's legal framework.

• Legal Authority: Director Penalty Notices are issued specifically by the FBR under tax laws, while Notices of Default can be issued by various parties for any contractual breach
• Personal Liability: DPNs create direct personal liability for directors regarding company tax debts, whereas Notices of Default typically maintain the corporate veil
• Response Timeline: DPNs have a strict 21-day compliance window, while Default Notices often allow negotiable cure periods
• Enforcement Scope: DPNs focus exclusively on tax obligations and can directly affect personal assets, but Default Notices cover broader contractual obligations with primarily corporate consequences