Filing of Income Tax Return by Non-Residents

This blog goes right into Importance of Filing Income Tax Return by Non-residents and Why Expats/ Non Residents Should File their Income Tax Return in Pakistan. 

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.

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 30^th 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.

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.

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.