Overseas Pakistanis required to file tax return with FBR
Filing of Income Tax Return by Non-Residents
This blog goes right into Importance of Filing Income Tax Return by Non-residents and Why Overseas Pakistanis /Expats/ Non Residents Should File their Income Tax Return in Pakistan.
How this blog on filing of Tax Returns by Overseas Pakistan will help you?
Overseas Pakistanis required to file tax return with FBR and Overseas Pakistanis required to file tax return 2020 with FBR. This blog will discuss on how Overseas Pakistanis can become tax filer?
Who must file tax return as overseas Pakistani?
All overseas Pakistanis or we say Pakistan living outside are required to file tax return 2019, 2020 and tax years to come in future, if they meet conditions of the section 114 of the Income Tax Ordinance 2001.
The only exception overseas Pakistanis enjoy is if they have no taxable income inside Pakistan but such overseas Pakistanis falls under section 114 just on the basis of holding of property in Pakistan.
Overseas Pakistanis are sometimes confused whether they should file tax return or not, first of all there is no concept of overseas Pakistan. The only term that’s there is being resident or non-resident and most of the times the overseas Pakistanis are non-resident.
Criteria of filing of tax return by overseas Pakistanis
If you are an overseas Pakistani/ non-resident and have don’t have income, or vehicle of more than 1000c or any other requirements laid in section 114 of the Income Tax Ordinance, 2001 does not meet then you are no longer required to file tax return and if you hold property in Pakistan and you are an overseas Pakistani/ non-resident then you are not required to file tax return with FBR.
The only requirement to file tax return by a non-resident overseas Pakistanis is that you must have taxable income in Pakistan in addition to what’s said in section 114 of the Income Tax Ordinance, 2001.
Is it necessary to file wealth statement for overseas Pakistanis/ non-residents?
If the income of a non-resident/ overseas Pakistan is under normal tax regime (tax return to be filed under section 114 of the Income Tax Ordinance, 2001) then the filing of wealth statement is not mandatory for non-residents/ overseas Pakistanis.
In case where the income of a non-resident/ overseas Pakistani/ Expatriate is dealt under final tax (tax return to be filed under section 115(4) of the Income Tax Ordinance, 2001) regime then filing of wealth statement is a must, mandatory.
Which income of a non-resident / overseas Pakistani is taxable in Pakistan?
The income of a non-resident / overseas Pakistani earned outside Pakistan is not taxable in Pakistan as it is already taxed in foreign country so it will not be taxed or require declaration in Pakistan unless you buy something in Pakistan with that money.
The income earned by non-resident / overseas Pakistani in Pakistan is taxable in Pakistan, such income can be profit on debt, rent, business income, salary or any other income/ gain.
Are non-resident / overseas Pakistanis required to declare foreign assets?
The assets purchased in Pakistan, with the remittances from abroad and it is assumed that such funds are transferred to Pakistan through proper Banking Channel, are harmless even if the assets purchased in Pakistan and the funds used were not transferred to Pakistan through proper banking channel even then the case/ scenario is fight-able in FBR.
This very compliance comes with a lot of benefits of being a compliant taxpayer as non-resident person where you don’t have to pay any extra tax whereas you can save money on the other hand.
We provide tax return filing services for Non-residents, this help the expatriate Pakistanis to file their income tax returns and become tax filer in Pakistan. Non-residents enjoy same benefits of being a filer like any other taxpayer in Pakistan.
For your information Filing of Income Tax Return by Non-residents is not mandatory.
Who is Expatriate?
Expat tax in Pakistan is applicable on an individual’s residential status and it does not have anything to do with his/ her nationality.
If the total duration of stay by an Expatriates (in a tax year) in Pakistan is 183 days or more (01 July to 30th June). Then they are considered to be residents for tax purposes as per Tax laws in Pakistan.
Pakistanis (residents) are taxed on their global income regardless of where it is received or earned, while non-residents / expatriates are taxed on their income earned in Pakistan only.
- Return Filing: Expatriates Non-Resident Pakistanis
- Why it is important for expatriate Pakistanis to file their income tax return in Pakistan
- Foreign income is exempt in Pakistan. If a return is filed, such income can be declared as exempt income.
- What benefits a non-resident Pakistani/ Expatriate can get?
What benefits will non-resident get?
Some expats transfer their foreign remittance in Pakistan (bank accounts), this amount is invested in profit schemes with a goal of earning profits and so on.
For clarification, the expats are not exempt from taxes on income earned inside Pakistan as investments made in Pakistan are safest then anywhere else.
These investments made by expats earn profit/ interest and tax is deducted by the banks at a higher rate of expats/ non-residents being non-filers by virtue of recent amendments made in Income Tax Laws in Pakistan.
Non-resident Pakistanis tax return filing is not mandatory but if filed it can benefit the non-resident Pakistani to enjoy tax benefits.
So if you are a non-resident and at the same time a non-filer you will end up paying comparatively higher taxes then a filer. So a non-resident apart from enjoying exempt income (foreign remittance) also enjoys lesser rates of taxes applied on income earned inside Pakistan as being a filer non-resident.
Expatriate Pakistanis send foreign exchange and help improve economy. These Expatriates often invest in real estate, saving schemes, stock exchange, mutual funds and prize bonds.
Apart from these investment they also purchase vehicles and immovable properties. In order to make investments they also have to open bank accounts and make certain transactions.
As per tax laws in Pakistan (Income Tax Ordinance, 2001), any person who purchases a plot (he is not a filer), house or vehicle has to pay double amount of income tax at the time of purchase.
Moreover, if any person who invests in banking schemes, earns profit on debt and ends up paying comparatively more tax on such income as compared to “Filer”.
A “filer” is a person whose name exists on the Active Taxpayers List (ATL) by FBR.
How Do I Become a Tax Filer in Pakistan?
Benefits of Filing of Income Tax Return by Expats
Buying Property in Pakistan by Expatriate
If an expatriate/ non-resident files tax return and is included in ATL (Active Taxpayers List) by FBR.
So if you are a filer you will receive all the benefits of being a filer in Pakistan and tax will be reduced by more than 50% and in some cases totally removed.
For instance, if someone buys a plot valuing Rupees 6 million, in case you’re a not a filer you will have to pay tax of Rs.240,000, but if you’re a filer, you will only pay Rupees 120,000.
Pakistani tax laws clearly state that every owner of a plot/land measuring more than 500 sq. yard or property owner is required to file income tax return.
Given the requirements/ rules if the tax return is not filed, this stands violations of Pakistani Tax Laws.
To know more about non-resident tax filing write us at info@thebscon.com or call +92 321 8408828.
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