How can Overseas Pakistanis become tax filers

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How can Overseas Pakistanis become tax filers?

When you are a national of Pakistan and be present in a foreign country, you may have some queries within your mind regarding furnishing your tax return. Or maybe you wish to have knowledge about if you could become a tax filer to begin with. While the likelihood of dealing with so many types of taxes may appear overwhelming to someone. The process by which overseas Pakistanis can become tax filers is quite easy and simple.

Before moving forward into a detailed discussion regarding the main topic, it is necessary to elaborate the concept of overseas Pakistani.

WHO CAN BE OVERSEAS PAKISTANI AS PER THE FEDERAL BOARD OF REVENUE?

According to FBR, overseas Pakistani is defined as;

''A person shall be a non-resident individual for a tax year if the individual is living outside Pakistan for 120 days or more in the tax year and, in the last four years, he has been outside Pakistan for a period not less than 365 days. This means that a person must remain in a foreign country for at least 08 months to claim overseas Pakistani status or a non-resident status for the tax year.''

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Overseas Pakistani as Tax filler

Overseas Pakistanis can easily become tax filers in Pakistan and file their Income Tax Returns.
A Non-Resident person being a citizen of Pakistan, normally does not have any Income Tax liability to Government of Pakistan. However, for availing the rank of Tax Filer in Pakistan, he can also file Income Tax return.
Foreign Pakistani or a non-resident Pakistani whose income is taxable in Pakistan or in other words, who are earning income in Pakistan are liable to pay Income Tax on their income earned in Pakistan.

Pakistan-sourced income

Pakistan-sourced income is meant by any income which is earned in Pakistan that is taxable regardless of its receiving. This means that if Pakistani is receiving remuneration from an employer in Pakistan then his income tax at source will most likely be deducted from his salary even if he ex-pats residing in a foreign country.
It is essential to mention that just deduction of income tax from your salary does not mean that you have become a tax filer automatically. To be acknowledged as a filer in Pakistan, you are required to be added to the Federal Board of Revenue's Active Taxpayers List.
Furthermore, suppose an ex-pat has immovable or movable assets in Pakistan, such as a house or a motor vehicle which is purchased exclusively from foreign income. In this case, there is need to prove that the money was remitted outside the country. They need to apprehend that the said transaction was carried out via proper channels and as per instructions mentioned by the State Bank of Pakistan. In 2018, FBR decided to waive off the withholding tax applicable on the withdrawals of remittances, i.e. the funds sent to the home (Pakistan) by a non-resident Pakistanis.

FBR and other concerned authorities can inquire into any taxpayer's assets and elaborate the source, if needed as per the Pakistani tax laws.

HOW OVERSEAS PAKISTANI'S CAN BECOME TAX FILERS?

In order to file a Tax Return, foreign Pakistanis are required to register themselves with the Federal Board of Revenue and obtain their NTN.

This can be done by getting online registration at the IRIS portal.

Registration for National tax number

Foreign Pakistanis should get themselves registered on the Federal board of revenue website if they have not yet filed their taxes before. Before starting the process of registration, one must ensure if he is already registered with FBR. This can be ensured by inquiring the NTN on the FBR’s website. If no record is found there, go to the IRIS portal and fill out the details there by just clicking on "registration of an un-registered person" and follow the criteria by filling in the required details.

Before going to start online registration, A Taxpayer must have

Read the User Manual;
Cell phone with SIM that is registered with his own CNIC;
A scanner, computer and internet connection
An email address connecting to him
Personal bank account maintenance certificate in his own name;
Paid utility bills of business premises which should not be older than three months if running business.
If having a business then Proof of ownership or tenancy of business premises

Online registration is available at Iris.

After Processing

The second step in registering a Foreign Company is to search for the available name of the projected company from the registrar.
The proposed name of the said company should not be:

Pins will be received on your mobile and email address.
Pins are required to be verified quickly without any delay as the session goes to expire after some time and the whole process is to be repeated again.
After verification of pins, a password is generated and sent on both of your number and email address already given by you.
CNIC is used as an id and password as above discussed to log in to the IRIS Portal. Complete 'Registration Form' would be available on IRIS Portal, you can submit it again with your desired particulars.

Submitting a tax return for overseas Pakistanis

A tax return can be filed in the following way;

First step is to login into the IRIS portal.
After login in to the IRIS Portal, click the icon 'Declaration' appearing on the top of the screen.
If you have no any Pakistan source of income then select and open the form 114(1) (Return of Income filed voluntarily by a Non-Resident Pakistani person having no Pakistan-source income). However, if you have earned any Pakistan source income or in other words, you are earning income which is taxable in Pakistan then you are required to furnish the standard Income Tax Return form of section 114.
Your status or rank as a 'resident' or a 'non-resident' is to be selected in the 'Attributes' section accordingly on the basis of how many days you have spent in Pakistan during the relevant fiscal year and enter relevant information in the draft thereon.
Furthermore, when you are earning income which is taxable in Pakistan then you are required to declare the Pakistani source of income-earning in the relevant tax year in the respective head of income.
On other side, the foreign income is required to be declared in the "Foreign Income" section. This is significant to know that Non-Resident Pakistani or Overseas Pakistani are not required to file their Wealth statement and Tax Return to enjoy their Filer status.

What is the need of overseas Pakistanis to become tax filers in Pakistan?

There are numerous advantages of becoming a filer in Pakistan. For example, on becoming tax filers in Pakistan.

They can get the opportunity of bearing lower taxes on financial transactions involving tax. A status of tax filer is beneficial for non-resident Pakistanis who wish to have investments in real estate, stock exchange, saving schemes, mutual funds, and prize bonds etc.
Formerly, non-filer overseas Pakistanis were restricted from purchasing any property in Pakistan. Though the government has removed that restriction, a non-filer is restricted to purchase a property exceeding PKR 50 lakh. For the time being, there is no particular limit set for filers.
Additionally, as compare to non-filers, active taxpayers are only required to pay 1/2 of the withholding tax. On becoming tax filers by overseas Pakistanis, they will have to pay fifty percent lower tax on the purchase of motor vehicles.
Tax filers in Pakistan have to pay only fifteen percent tax on winning prize money through Prize bond, however, non-filers have to pay twenty-five percent tax on the same.
There are multiple advantages of being a tax filer in Pakistan. For example, if overseas Pakistanis become a Tax Filer, they can have an advantage of paying lower taxes on almost 100+ instances, including tax involved in banking transactions, vehicle registration, and transfer of immovable property, etc.
It is vital to consider for overseas Pakistanis that if they have a plan to buy movable or immovable assets in Pakistan, for example, a vehicle or a house exclusively by using foreign income, they have a chance to save a lot of money in the form of withholding taxes by just taking a status of filer.
Furthermore, it can also assist in declaring that Pakistan's total assets purchased from a foreign course are not taxable. By this way, the overseas Pakistani can also remove the burden of an audit by Tax Authorities in Pakistan and are therefore completely safe as per the Pakistani Laws.