If you’re a citizen of Pakistan residing in a foreign country, tax filing must be a confusing subject for you, with little-to-no information and guidelines available at hand. The truth is – you’re not alone, and everyone foreign living Pakistani seems to have major confusion regarding the tax filing process.
But not anymore – because we have put together all that information you might need regarding tax filing for overseas Pakistanis in this blog post. You can dive in deep to get all your queries answered without hassle.
Before we go around the tax filing process for overseas Pakistanis, let’s first cover the basic misconceptions that seem to prevail and make this process much more complicated.
Do Overseas Pakistanis Have to File Taxes?
Many overseas Pakistanis seem confused about whether they have to file taxes or not. The simplest answer is – yes. Even if you’re living abroad, you have to file taxes for all your Pakistan-sourced income even then, and there’s no ambiguity in that.
Taxation in Pakistan is pretty much the same as in other countries of the world, based on the residential status of each individual and not the nationality. While the previous policies would count an individual as a tax resident if they stayed in the country for at least 183 days during a tax year, i.e., July 1st to June 30th. The latest updates in Finance Act 2019 have reduced the time to four months.
Consequently, an overseas Pakistani has to stay for at least 8 months or more in a foreign country to attain tax-free status, or else they’ll have to file taxes in Pakistan. An important thing to be noted here is that while overseas Pakistani are taxed for their entire income (either earned domestically or internationally), they can only file tax returns on the income sourced from Pakistan.
What Is Considered As A Taxable Income In Pakistan?
Income earned in Pakistan is considered “Pakistan-sourced income” for tax purposes. This means that a Pakistani employer is required to withhold income tax from the salaries of any Pakistani citizen working abroad.
Not everyone who has income tax deducted from their paycheck files taxes. Your name must appear on the Federal Board of Revenue’s Active Taxpayers List to be officially recognized as a Pakistani taxpayer.
Furthermore, if an ex-pat in Pakistan has movable or immovable assets like a vehicle or a house, they must prove that the funds used to purchase these items came from a source outside of Pakistan. They must also provide evidence that the transfer followed all State Bank of Pakistan guidelines. Withdrawals from bank accounts will not be subject to withholding tax in 2018, according to an agreement reached by the Federal Board of Revenue (funds sent home by non-resident Pakistanis.)
The Federal Board of Revenue (FBR) and other related authorities in Pakistan are authorized to investigate any taxpayer’s assets and require an explanation of their origin.
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Tax Filing For Overseas Pakistanis – What Does the Process Look Like?
With the rising concerns of difficulties overseas Pakistanis face in filing their taxes and tax returns, an FBR spokesperson has recently tweeted a URL that provides easy and quick access to the IT IS for filing Income Tax Returns, i.e., https://iiris.fbr.gov.pk.
You may send in your tax return using the IRIS portal. When logged in, go to the top of the page and choose the ‘Declaration’ tab. suppose you do not make any taxable income in Pakistan. In that case, you may use form 114(1) (Return of Income submitted voluntarily by a Non-Resident Pakistan-origin Person having No Pakistan-Source Income) to report your income.
Based on the number of months you spent in Pakistan during the fiscal year, select ‘resident’ or ‘non-resident’ in the ‘Attributes’ box, and then fill in the draught with the necessary details. In addition to declaring your foreign income, you must also detail the Pakistani income you generated during the tax year under the relevant income category.
However, use the “Foreign Income” section to report any funds received from abroad. It is also worth noting that a Statement of Wealth is not required for Non-Resident Pakistanis or Overseas Pakistanis to get Filer status while filing their tax return.
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