ISLAMABAD: To include those who spend more than six months of the tax year abroad in the tax net, the Federal Board of Revenue (FBR) has made yet another change to the definition of a resident Pakistani taxpayer.
Frequent flyers are uncertain as to whether they will be treated as Pakistani taxpayers or foreign taxpayers as a result of the most recent amendment implemented through the Finance Act 2022.
A person was considered a resident Pakistani taxpayer prior to the Finance Act 2022 if they were “present in Pakistan for a period, or periods, amounting in aggregate to 183 days or more in a tax year.”
This meant that in order to avoid becoming a Pakistani resident taxpayer, a person had to spend longer than six months abroad.
Many wealthy people would take advantage of this opportunity and arrange their personal taxation so they would not pay taxes to any country.
The government has since filled this gap by amending the Income Tax Ordinance through the Finance Act 2022.
The new definition states that “an individual shall be a resident… for the tax year if [they], being a citizen of Pakistan, is not present in any other country during the tax year for more than 182 days or who is not a resident taxpayer of any other country.”
This meant that in order to avoid becoming a Pakistani resident taxpayer, a person had to spend longer than six months abroad.
Many wealthy people would take advantage of this opportunity and arrange their personal taxation so they would not pay taxes to any country.
The government has since filled this gap by amending the Income Tax Ordinance through the Finance Act 2022.
The new definition states that “an individual shall be a resident… for the tax year if [they], being a citizen of Pakistan, is not present in any other country during the tax year for more than 182 days or who is not a resident taxpayer of any other country.”
This has also created confusion among the people about whether they would have to stay in a particular country for continuous six months to avoid becoming a Pakistani resident taxpayer or they could fly in and out of the foreign country.
The answer is that a person will have to stay in a foreign country for 183 days to claim the status of a non-resident Pakistani taxpayer, and this can be achieved by coming in and going out for more than one time.
For instance, Mr A travels to Dubai, stays there for four months and then leaves for Switzerland and also stays there for over two months. Then Mr A again comes back to Dubai and stays for two months and is entitled to claim the status of a non-resident Pakistani taxpayer.
