August 3, 2023
Being a tax filer is a dream of many people. It is because it comes along with a lot of advantages. The government offers tax filers at least 50% exemption compared to non-tax filers who don’t get any exemptions. Also, being responsible citizens of Pakistan, no matter if they have been living in Pakistan or not, they still hold the right and responsibility of filing tax returns.
It is not common for overseas Pakistanis to register themselves as tax filer in the Federal Board of Revenue. In this article, we will explain the complete procedure and everything it requires for an overseas Pakistani to become a tax filer in Pakistan.
As an overseas Pakistani who has never filed tax returns, you might be curious to clarify some of your queries. You might wonder how to become a tax filer in Pakistan as an overseas Pakistani. Or you want to know how to register in the Active Taxpayers List (ATL). We have got you covered.
If you have read one of our previous articles, you probably know the advantages of becoming a tax filer. But your question about becoming one remains unanswered. Worry not; we will go into detail about that one. But before that, you might want to know some basics, such as who is considered overseas Pakistani under the FBR law or what income is liable for tax. Let’s get directly to that.
Definition Of An Overseas Pakistani According To The Federal Board Of Revenue
You need to be living out of the country for a certain period to become an overseas citizen or non-resident of a country. Pakistan also has limitations on who to term as an overseas Pakistani and who does not. The Federal Board of Revenue (FBR) controls this limitation or law.
The law states that to be a non-resident, an individual must live out of the country for at least 120 days or more in a tax year. Not only this but during the four recent years, he should have lived out of Pakistan for at least 365 days to be granted non-resident status.
This limitation implies that for 2022 to 2023, a person should live somewhere in a far-off country for at least 8 months to get the status of an overseas Pakistani or a non-resident.
Do Overseas Pakistanis reserve the right to be Tax Filers in Pakistan?
The short answer is, Yes. Overseas Pakistani reserve both the right and responsibility to apply to become a tax filer in Pakistan and file their taxes. Living abroad does not exempt them from paying taxes to the government of their home country. The imposition of taxes on overseas Pakistanis is complex and would take a while for you to understand.
The Federal Board of Revenue and the government of Pakistan understand that Pakistani living abroad are already liable to pay heavy taxes to the government of the country they’re living in. Therefore, overseas Pakistanis only have to file taxes on their income generated in Pakistan. The income they earn from other countries does not make them liable to pay their income tax to the government of Pakistan instead.
Several Other Points
Like many other countries, Pakistan’s taxation depends on its citizens’ residential status instead of nationality. Not long ago, a person could be a tax resident if they had been living in the country for at least 183 days during a tax year. In Pakistan, the tax year starts on the 1st of July and ends on the 30th of June next year.
However, this wasn’t the same when the government introduced the Finance Act of 2019. The FBR reduced the period to 4 months at a minimum. This means that for the fiscal year 2019 to 2020, a citizen would have lived out of the country for at least 8 months to be granted the tax-free status.
Another important thing is that unlike non-residents or overseas Pakistanis who only have to pay income tax upon their income sourced in Pakistan, the residents of Pakistan have to pay income tax on both incomes; the one sourced in Pakistan and the other from abroad if there is some. Non-residents have another advantage here. They are not liable to file a wealth statement either.
What is Taxable Income in Pakistan?
Every income sourced in Pakistan is taxable regardless of where or by whom it’s being received. This also means that if a Pakistani citizen residing in a foreign country is getting their income from an employer who’s a resident of Pakistan, then income tax from their salary is very likely to be automatically deducted at the source. Another crucial point here is that being a resident of a foreign country, if income tax is deducted from your salary sourced in Pakistan, then it doesn’t mean that you are or have become a tax filer.
If you want to become a tax filer, register yourself in the Active Taxpayers’ List (ATL), which requires you to complete a procedure. Moreover, if an overseas Pakistani owns any assets, especially moveable or immovable properties such as a vehicle or house, bought from foreign income solely, they need to prove that the funds were transferred from outside the country.
They are also responsible for proving that their transaction was carried out through proper channels such as the State Bank of Pakistan. A few years back, in 2018, the government of Pakistan decided to exempt tax on the withdrawal of remittances, basically the funds sent home by non-residents of Pakistan.
According to the tax laws of Pakistan, Pakistani authorities, especially the Federal Board of Revenue, hold the authority to open an inquiry into the assets of any taxpayer and ask them to explain the source, if required.
How can Overseas Pakistanis become Tax Filers in Pakistan?
Becoming a tax filer in Pakistan as an overseas Pakistani is not as hard as people think. The process is easy and simple. You need to be careful not to enter any false information or fake documents. It can delay the registration process or result in rejection.
To become a tax filer in Pakistan, an overseas Pakistani must have an NTN (National Tax Number). You can get it by registering on the official website of the Federal Board of Revenue. However, before getting an NTN for yourself, you need to check your taxpayer status.
There are two ways by which you can check if you’re on the Active Taxpayers’ List of FBR. The first one is simple. Just type ATL[space]CNIC number and send it to 9966. Don’t add any dashes between the CNIC numbers. Shortly, you’ll receive a text message informing you of your taxpayer status.
The second method is to visit the official website of FBR and click on ‘Search Taxpayers’ in the navigation panel. A drop-down menu would appear. Here, select ‘Active Taxpayers (IT)’. It will open a new tab where you would have to type your CNIC and the verification code. Click verify, and you will immediately know if you’re on the Active Taxpayers’ List.
Now comes the step of NTN registration. It is also very easy. If you have never filed taxes before as an overseas Pakistani, you must obtain an NTN number. Go to the official website of the Federal Board of Revenue. Then, register by clicking on “Registration for Unregistered Person. An application form will appear where you must enter all the relevant information. Make sure that this data is factual and correct. Complete the registration form and then submit it to receive your NTN.
The Procedure Of Filing Tax Return For Overseas Pakistanis
The process is simple if you are a non-resident of Pakistan looking to register as an overseas tax filer. It is the same as registering as a local tax filer, except for a few things. Head to the IRIS Portal and proceed to the declaration menu at the top. There, you would have to complete a registration form.
Enter the relevant data and attach the required documents. Please mention your foreign income in the online portal’s ‘other sources’ section. Then, consider the number of months you have lived in Pakistan. Afterward, select your status as a resident or a non-resident in the Attributes section.
Lastly, submit the application form, and soon, you will be granted the status of a tax filer. Your name would be entered in the active taxpayers’ list.
In conclusion, we have explained every detail about becoming a tax filer in Pakistan as an overseas Pakistani. We are hopeful that you understand our every point. Thus, it would help if you had cleared out all your doubts and queries. There are numerous advantages of being a non-resident and becoming a tax filer.
The process that we have already explained should be enough for you to take as a guide. You should now register yourself in the Active Taxpayers List of the Federal Board of Revenue. If you have any further queries, feel free to contact us. We consistently add informational content related to taxation on our website daily.
A highly skilled tax consultant specializing in Pakistan’s intricate tax laws and regulations. With over a decade of experience in the field, he has helped countless individuals and businesses navigate the complexities of taxation. His expertise lies in optimizing tax strategies, ensuring compliance, and maximizing returns for his clients. John’s in-depth knowledge of Pakistan’s tax system and dedication to staying up-to-date with ever-changing laws make him a reliable and sought-after advisor. Whether it’s tax planning, filing, or resolving tax-related issues, clients trust John’s proficiency and commitment to achieving financial success while remaining fully compliant with the law.