How to know if you are a resident or non-resident

How to know if you are a resident or non-resident

How to know if you are a resident or non-resident: Prior to the Finance Act, 2019, an individual was treated as a “resident individual” for a tax year if the individual was present in Pakistan for a period, or for periods aggregating to 183 days or more in a tax year.

Through the Finance Act, 2019, in addition to the existing definition, an individual shall also be treated as a resident individual if the individual is present in Pakistan for a period aggregating to 120 days or more in a tax year and who was also present in Pakistan for a period aggregating to 365 days or more in the four preceding tax years. This is illustrated through the following examples.

Example 1

Mr. Waheed Ensari is in Pakistan for 183 days in Pakistan for the tax year 2020.

Status of Mr. Waheed Ensari for TY 2020: Resident

Example 2

Mr. Waheed Ensari is in Pakistan for 120 days in Pakistan for the tax year 2020 and he was also present in Pakistan for 90 days in TY 2019, 60 days in TY 2018, 50 days in TY 2017& 50 days in TY 2016.

The aggregate period of stay in Pakistan in the four preceding tax years is 250 days which is less than 365 days. Hence, he will be non-resident.

Status of Mr. Waheed Ensari for TY 2020: Non-resident

Example 3: How to know if you are a resident or non-resident

Mr. Waheed Ensari is in Pakistan for 120 days in Pakistan for the tax year 2020 and he was also present in Pakistan for 90 days in TY 2019, 130 days in TY 2018, 80 days in TY 2017 & 70 days in TY 2016.

The aggregate period of stay in Pakistan in the four preceding tax years is 370 days which is more than 365 days. Hence, he will be resident.

Status of Mr. Waheed Ensari for TY 2020: Resident

Example 4

Mr. Waheed Ensari is in Pakistan for 119 days in Pakistan for the tax year 2020 and he was also present in Pakistan for 90 days in TY 2019, 130 days in TY 2018, 80 days in TY 2017 & 70 days in TY 2016.

Although, the aggregate period of stay in Pakistan in the four preceding tax years is 370 days which is more than 365 days, his stay for the tax year 2020 is less than 120 days. Hence, he will be non-resident.

Status of Mr. Waheed Ensari for TY 2020: Non-resident

How to know if you are a resident or non-resident

These explanations have been issued by FBR after the Finance Act 2019 approved / passed from the parliament of Pakistan.

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