What Pakistanis Living Abroad Need To Know About Filing Taxes

What Pakistanis Living Abroad Need To Know About Filing Taxes

               You might have some concerns about filing your tax returns if you’re a Pakistani national living abroad. Or perhaps you want to know if you can actually file taxes in the first place. While the thought of paying taxes may seem overwhelming to some, becoming a tax filer for Pakistanis living abroad is a rather straightforward process.

Let’s clear up some common misunderstandings and answer any questions you might have before we go into how Pakistani ex-pats can file tax returns from the comfort of their homes.

DO PAKISTANIS WHO LIVE ABROAD HAVE TO FILE TAXES?

Yes, foreign Pakistanis must file taxes, to put it simply. However, they are only subject to tax on their income earned in Pakistan.

Finance Act 2019:

• Similar to other nations, taxation in Pakistan is determined by a person’s residency status rather than their nationality. A person was previously regarded as a tax resident if they stayed in the nation for 183 days or more during a tax year, which runs from July 1 to June 30. After the Finance Act of 2019, the duration was cut to four months.
• This means that in order to qualify for “tax-free status,” a person must go abroad for a minimum of eight months during the fiscal year 2019–20.

WHAT DOES PAKISTAN CONSIDER TAXABLE INCOME?

Pakistan-sourced income, which is taxable wherever it is received, is essentially income or a salary earned in Pakistan. This means that even if Pakistani ex-pats living abroad get compensation from an employer in Pakistan, their income tax will likely be withheld at source from their salary.

Another critical point to make is that you are not required to file taxes just because your income tax is withheld from your pay.

Policies Of FBR For Tax Payers:

To be acknowledged as a filer in Pakistan, you must be included in the Federal Board of Revenue’s Active Taxpayers List.

Aside from that, if an expat has any movable or immovable assets in Pakistan, such as a car or a house, that were bought with just foreign income, they must certify that the money came from outside Pakistan. They must also prove that the transaction was carried out via authorized State Bank of Pakistan procedures. In 2018, the Federal Board of Revenue made the decision to remove the withholding tax from remittances, or money sent home by Pakistanis who are not residents of the country.

According to Pakistani tax legislation, the FBR and relevant agencies are authorized to launch an investigation into any taxpayer’s assets and request an explanation of their source, if necessary.

Steps For Filing Tax Returns In Pakistan For Overseas Pakistanis

• First of all an overseas Pakistani have to obtain an NTN (National Tax Number) and to get an NTN number they have to register on the Federal Board of Revenue’s online portal.
• Then to start the process of tax filing for overseas Pakistanis, you need to check your taxpayer status.

CHECK YOUR TAXPAYER STATUS AND NTN:

There are two easy techniques to determine whether your name is already on the filer list.

1. Sending the ATL [space] CNIC number to 9966 by typing it. Make sure there are no dashes inserted between the numbers. You’ll soon get a notification letting you know whether or not you’re a taxpayer. You’ll need a Pakistani sim for this, though.
2. Go to the official FBR website and click the ‘Search Taxpayers’ button in the navigation column. Choose ‘Active Taxpayers (IT)’ from the drop-down menu. You’ll need to enter your CNIC number and verification code in the new tab that will open. If your name appears on the ATL, you can immediately tell by clicking verify.

If you are identified as a taxpayer but are unsure about your NTN, use your CNIC number to find it by clicking the “Online NTN/STRN Inquiry” link.

In the meanwhile, people who have an NTN but lack the login information for IRIS, the online platform for filing an income tax return, can get those details by clicking on “E-Enrolment for Registered Person.”

FILING A TAX RETURN FOR A PAKISTANI OVERSEAS

• Log onto IRIS and select the ‘Declaration’ menu at the top to file income tax returns if you are a non-resident Pakistani. Then, simply follow the instructions in our step-by-step tax return filing tutorial, making sure to note your overseas income in the “Other Sources” part of the web portal.
• Additionally, choose whether you are a “resident” or a “non-resident” in the “Attributes” section based on how many months you spent in Pakistan during the fiscal year, and fill out the appropriate areas.

Benefits Of Being A Tax Filer In Pakistan

• If Pakistanis living abroad register for taxes, they can benefit from cheaper financial transaction taxes. For non-resident Pakistanis who want to engage in the real estate market, stock market, mutual funds, savings plans, and even prize bonds, filing taxes is very advantageous.
• Before, overseas Pakistanis who did not file tax returns were not allowed to purchase real estate in the nation. Even if the present administration has relaxed this limitation, non-filers are still unable to purchase properties worth more than PKR 50 lakh. For filers, there is currently no specified upper limit.
• Additionally, active taxpayers only have to pay half the withholding tax in comparison to non-filers. Pakistanis living abroad who register for taxes might reduce their vehicle purchase tax by up to 50%.
• In addition, Pakistani tax filers only pay 15% tax on winnings from prize bonds, while non-filers pay 25% tax.