If you are here to read this article, then there are two certain things, one is that you are Pakistani and second, you are living abroad.
If you are searching for a solution for how to file income tax returns in Pakistan then you should stop here as I am going to answer each and every question that might pop up in your mind and you would want to know.
So here are some common questions and their quick answers.
1. Why Should I file?
There is a wide spread believe that unless you earn from Pakistan you don’t have to file return of income. It makes sense but factually incorrect. There are two reasons for this, first that Pakistani Income tax law provides a list of person required to file Income Tax return believe me it covers almost every person (for list of persons required to file Income Tax Returns in Pakistan please click here).
Secondly, if everything else is kept aside, there remains ‘FILER Vs Non-Filers’ this disparity is intentionally created by the Government of Pakistan for documentation of economy.
Unfortunately non-resident Pakistanis have to bear the burden of being non-filer if they opt not to file their returns.
2. Why to Become Filer?
As mentioned above, non-residents remain non filers, in order to give you an example of how non filer status can hurt you in term of more taxes I am giving you some transactions so that you can see the benefit available to filers.
| Category | Tax rates
(1 July 2018- 30 June 19) |
||
| Filer | Non-Filer | Difference | |
| Dividend [other than dividend from Mutual Fund] | 15% | 20% | 5% |
| Profit from Bank accounts | 10% | 17.5% | 7.5% |
| Withdrawal or other banking transaction of Rs. 50,000/= in a day | – | 0.6% | 0.6% |
| Registration of new motor vehicle
-up to 850cc -851 to 1000cc -1001cc to 1300cc -1301cc to 1600cc -1601cc to 1800cc -1801cc to 2000cc -2001cc to 2500cc -2501cc to 3000cc -Above 3000cc |
7,500 15,000 25,000 50,000 75,000 100,000 150,000 200,000 250,000 |
10,000 25,000 40,000 100,000 150,000 200,000 300,000 400,000 450,000 |
2,500 10,000 15,000 50,000 75,000 100,000 150,000 200,000 250,000 |
| Buying selling of Property in Pakistan
Sale of property It means if you have sold a property worth Rs 10 lacs being non-filer then you would be paying Rs 10,000/= extra tax Purchase of property It means if you are planning to buy a property worth Rs 10 lacs being non-filer then you would be paying Rs 20,000/= extra tax |
1% of value Property
2% of value Property |
2% of value Property
4% of value Property |
1%
2% |
Above transactions are just to give you an idea there are so many transactions other than mentioned above.
3. Risk of unnecessary questions/ audit / inquiries for Filer?
Another widespread-believe is, once you file your return you should be prepared to answer investigative questions/ give bribe / inquires / audit from tax department.
This is in-fact opposite to the reality, in reality, when you don’t file your return of income but buy any asset in Pakistan for example car or properties or operate your bank account in Pakistan from remittances sent by you, tax authorities may call for the source of these transactions as they wouldn’t automatically know residential status unless you inform them by filing your return of income properly declaring your remittances to establish source of buying of properties etc.
Government of Pakistan just like any other Countries’ Government want to document the economy, by non-filing your returns you are giving them a reason to ask questions about you and your source of assets.
You can take it this way, Governments always appreciate foreign remittances, they will never ever make a policy to discourage foreign remittance, but how will they know that the property or car you just bought is not from any black money but from Foreign Remittances sent by you.
4. What is to be declared to become Filer?
I am intentionally keeping this article applicable to non-residents so that they can find all information relevant to them in one place.
For filing income tax return, first you need to be sure that you are NOT present in Pakistan for 183 days or more in any year starting from 1 July to 30 June.
For example
Mr. Aslam was present in Pakistan for 180 days from 1 July 2018 to 30 June 2019 he would be treated as Non-resident for tax purpose.
Please note that the stay of 183 days or more may be continuous or with gaps.
Once your non-residential status is checked and confirmed, you should determine whether you have any income from Pakistan for example
- Profit from bank accounts.
- Dividend Income.
- Rental property.
- Selling of property.
- Capital gains from investment in companies listed at Stock exchange etc.
- Any other taxable income.
If you have any of the above incomes, you just need to declare these incomes only, foreign source of income that you are earning outside Pakistan being non-resident is not required to be declared.
Mostly, tax on above income is already deducted /paid therefore no payment of tax is required at the time of filing of return.
In case you don’t have any income from Pakistan, then you can file Nil Income Tax return.
5. Can a Non-filer obtain NTN?
Yes a non-resident person may obtain National Tax Number (NTN) however any mobile number that is active in Pakistan is required for the registration process.
6. How much time is required to become filer?
The process generally completes within a once working day, however FBR updates its records of active Filers every Monday, therefore if you filed on Friday of any week, your name should appear as filer on First Monday after Friday.
Hearsay don’t work usually, if you are confused about any matter relating to tax, do contact us for advices.