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How Overseas Pakistanis can become Tax Filer in Pakistan?

Overseas Pakistanis who want to become tax filers in Pakistan can do so by filing their Income Tax Return. A Non-Resident person, who is generally a citizen of Pakistan, does not have to pay any Income Tax to the Pakistani government, but he can still file an Income Tax Return to get the status of a Tax Filer in Pakistan. Foreign Pakistani or non-resident Pakistanis who make taxable income in Pakistan are required to pay Income Tax on their income generated in Pakistan. Individuals in Pakistan are taxed based on their resident status, rather than the foreign country in which they reside. This means that there are several benefits to being a tax filer in Pakistan. For instance, if an overseas Pakistani becomes a Tax Filer, they can enjoy lower taxes on over 100 instances, including banking transactions, vehicle registration, and the transfer of immovable property. There are many benefits for non-resident Pakistanis who file taxes, especially if they're looking to invest in the real estate sector, stock exchange, mutual funds, saving schemes or prize bonds. One of the most important things for overseas Pakistanis to know is that if they're planning to buy any movable or immovable assets in Pakistan (like a vehicle or a house) using solely foreign income, they can save a lot of money in the form of withholding taxes simply by declaring themselves a filer. This can also help in declaring the entire assets acquired are from a foreign source and are not taxable in Pakistan. In this way, overseas Pakistanis can also avoid the hassle of an audit by Tax Authorities in Pakistan and are thus fully secured as per Pakistani laws.

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Who is Overseas Pakistani According to Federal Board OF Revenue (FBR)?

An individual is considered to be a non-resident for tax purposes if they live outside of Pakistan for 120 days or more in a single tax year, and if they have been living outside of Pakistan for 365 days or more cumulatively over the last 4 years. This means that, for the 2019-20 tax year, an individual must have been living in a foreign country for at least 8 months to claim the status of overseas Pakistani or non-resident.

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How Overseas Pakistanis can file Tax Returns in Pakistan?

In order to file Tax Return, foreign Pakistanis must register with FBR and get their NTN (National Tax Number). This can be done by getting registered online at IRIS portal.

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National Tax Number (NTN) Registration

If you're a Pakistani citizen living abroad and have never filed your taxes before, you'll need to register yourself on the FBR website first. Before starting the registration process, though, you should check to see if you're already registered with the FBR. You can do this by verifying your NTN on the FBR website. If there's no record of you, go to the IRIS portal and fill in your details by clicking on “registration of un-registered person”, then following the prompts to fill in the required information. You will receive verification pins via email and SMS. It's important to verify the pins right away as you will only have a limited time before the session expires and you'll have to start the process all over again.

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Procedure of Filing Tax Returns for Overseas Pakistanis

The Pakistani tax year is from 1st July to 30th June of the next year. An Income Tax Return (ITR) for a tax year must be filed by the 30th September of the next tax year. This means that for the tax year 2019, the ITR for 2019 must be filed by 30th September 2020. Tax Returns can be filed by logging in to the IRIS portal. After you have logged in, click on ‘Declaration’ showing on top of the screen. Open form 114(1) (Return of Income filed voluntarily by Non-Resident Pakistan-origin person having no Pakistan-source income) in case if you do not have any source of income from Pakistan but if you have a source of income from Pakistan or in other words you are making taxable income in Pakistan then you have to file normal Income Tax Return form of section 114.


FAQs

Answer: Overseas Pakistanis can become tax filers by following these steps:
1. Obtain a National Tax Number (NTN): Register with the Federal Board of Revenue (FBR) by applying for an NTN through the FBR’s online portal.

2. Gather Required Documents: Collect necessary documents such as a copy of your CNIC or NICOP, proof of overseas income (bank statements, employment letters), and any other relevant financial documents.

3. Create an FBR Account: Log in to the FBR’s e-portal and create an account using your NTN and other required details.

4. File Income Tax Return: Fill out the income tax return form relevant to your income sources, including overseas earnings, and submit it through the FBR portal.

5. Keep Records: Maintain records of your filings and correspondence with the FBR for future reference and compliance.

Yes, overseas Pakistanis are required to file taxes in Pakistan if they have income originating from Pakistan, such as rental income, dividends, or any other income. Additionally, if they are tax residents in Pakistan, they must file their income tax returns regardless of where their income is earned.

Overseas Pakistanis need the following documents to file their taxes:

o A copy of the Computerized National Identity Card (CNIC) or National Identity Card for Overseas Pakistanis (NICOP).

o Proof of income earned abroad (e.g., salary slips, bank statements).

o Details of any income earned in Pakistan (e.g., rental agreements, business income).

o Any relevant investment documents or tax credits applicable.

o Previous tax return documents, if applicable.

Filing taxes as an overseas Pakistani provides several benefits, including:
o Legal compliance with Pakistani tax laws, reducing the risk of penalties or legal issues.
o Eligibility for tax refunds if excess taxes are withheld.

Common challenges include:
o Navigating the complex tax laws and regulations in Pakistan.
o Time zone differences that can affect communication with the FBR.
o Limited access to local resources or assistance for tax filing.
o Difficulty in understanding the tax implications of overseas income.
o Language barriers or unfamiliarity with the FBR’s e-portal and filing procedures.

Overseas Pakistanis are generally taxed according to the same income tax rates applicable to residents. However, tax rates can vary based on the source of income and whether it is earned within Pakistan or abroad. Some income may be subject to exemptions or different treatment under tax treaties between Pakistan and other countries.

Yes, overseas Pakistanis can claim certain tax exemptions or deductions, including:
o Foreign tax credits for taxes paid in the country of residence.
o Deductions for allowable expenses related to earning income, such as business expenses or contributions to approved retirement plans.
o Specific exemptions provided under tax treaties or domestic laws. It’s advisable to consult a tax professional to maximize available deductions.

Overseas Pakistanis can file their taxes online by:
1. Visiting the FBR’s e-portal (https://e.fbr.gov.pk).
2. Creating an account or logging in with their NTN.
3. Selecting the appropriate tax return form and entering required information regarding income and deductions.
4. Uploading any supporting documents and submitting the return electronically.
5. Receiving a confirmation of submission from the FBR.

Yes, overseas Pakistanis can hire tax consultants or chartered accountants who specialize in Pakistani tax law. These professionals can provide guidance on tax planning, help in preparing and filing returns, and ensure compliance with local tax regulations. This can be particularly beneficial for those unfamiliar with the tax filing process.

If overseas Pakistanis miss the tax filing deadline, they should:
o File their return as soon as possible, even if it is late, to mitigate penalties.
o Pay any taxes due to avoid further penalties and interest.
o Consider consulting a tax advisor for assistance in handling any potential consequences and to understand how to comply with tax obligations moving forward.

Yes, there are penalties for not filing taxes in Pakistan, which may include:
o Fines for late filing or failure to file.
o Interest on unpaid taxes.
o Legal consequences that may affect future financial transactions or property purchases in Pakistan. It is crucial for overseas Pakistanis to stay compliant to avoid these penalties.

Overseas Pakistanis can ensure their tax information is secure by:
o Using strong passwords and enabling two-factor authentication for their FBR accounts.
o Avoiding public Wi-Fi when accessing sensitive financial information.
o Regularly updating their personal information and monitoring for unauthorized access.
o Consulting with professionals to ensure proper handling of sensitive data during the filing process.

Overseas Pakistanis are generally required to file taxes only if they have income sourced from Pakistan. If all income is earned abroad and they are not residents for tax purposes in Pakistan, they may not need to file. However, it is advisable to check with a tax consultant to confirm specific obligations.

If overseas Pakistanis have income from multiple countries, they must report all income when filing taxes in Pakistan. They may be eligible for foreign tax credits to avoid double taxation, depending on the tax treaties between Pakistan and the respective countries. Consulting a tax professional can help ensure proper compliance and maximize deductions.

Overseas Pakistanis can stay updated on tax laws by:
o Regularly checking the FBR’s official website for announcements and updates.
o Subscribing to newsletters from tax professionals or firms specializing in Pakistani tax matters.
o Joining expatriate groups or forums where tax-related issues and updates are discussed.
o Consulting with tax advisors to remain informed about changes that may affect their tax filings


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