Tuesday, 28 May 2024
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TAXATION

Resident and Non Resident status under tax laws of Pakistan

Non-resident Pakistani is exempt from payment of taxes, which a resident Pakistani is liable to pay. Prior to the Finance Act 2019, an individual was treated as a “resident individual” for a tax year. If the person was present in Pakistan for a period of 183 days (over six months) or more in a tax year. Now, this period has been reduced to only four months. Which means a person will have to stay abroad for eight months to claim tax-free status.

Resident and Non-Resident Persons Section 81 of the Income Tax Ordinance, 2001

A person shall be a resident person for a tax year if the person is —
(a) a resident individual, resident company or resident association of persons for the year; or
(b) the Federal Government.
(2) A person shall be a non-resident person for a tax year if the person is not a resident person for that year.

Taxation of non-residents, foreign remittances and expatriates under income tax law of Pakistan | ALSO READ

Resident individual Section 82 of the Income Tax Ordinance, 2001

An individual shall be a resident individual for a tax year if the individual —
(a) is present in Pakistan for a period of, or periods amounting in aggregate to, one hundred and eighty-three days or more in the tax year;
(ab) is present in Pakistan for a period of, or periods amounting in aggregate to, one hundred and twenty days or more in the tax year and, in the four years preceding the tax year, has been in Pakistan for a period of, or periods amounting in aggregate to, three hundred and sixty-five days or more;or
(c) is an employee or official of the Federal Government or a Provincial Government posted abroad in the tax year.

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Resident company Section 83 of the Income Tax Ordinance, 2001

A company shall be a resident company for a tax year if —
(a) incorporated or formed by or under any law in force in Pakistan. (b) the control and management of the affairs of the company is situated wholly in Pakistan at any time in the year; or
(c) it is a Provincial Government or Local Government in Pakistan.

Resident association of persons Section 84 of the Income Tax Ordinance, 2001

An association of persons is a resident association of persons for a tax year. If the control and management of the affairs of the association situated wholly or partly in Pakistan at any time in the year.

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