Overseas Pakistanis, who have Income from Pakistan, Business Income, Income from Taxable Property, Bank Profit or Capital Gains or who desire to become an active taxpayer/filer for lower rates of withholding tax may be required to file an income tax return in Pakistan. The return is submitted electronically via FBR’s IRIS system typically in conjunction with a wealth statement if applicable. FBR says that the process of online filing of return of income comprises Return of Income and Wealth Statement form and completed return once these forms are shifted from “Draft” to “Completed Task” in IRIS.
The biggest problem that many Pakistanis face while residing in Dubai, Saudi Arabia, the UK, USA, Canada, Australia or Europe is the question of a tax return: “I live abroad, why should I submit a tax return in Pakistan?” The answer deems dependent upon the residential status, source income (Pakistan) and assets of the respondent, Transactions on Properties, Profit earned in Bank, and if any notice is issued by the FBR. This guide covers the practical process in an easy-to-understand manner, along with some general tips and common pitfalls as well as legal matters.
Do Overseas Pakistanis Need to File Income Tax Return in Pakistan?
Yes, an overseas Pakistani should submit a tax return if he or she has income that is related to Pakistan. Rental income from Pakistan property, Capital gain on property Pakistan, Profit on bank, Shares, Dividend, Partnership income, Business income or Purchase or sale of property where filer status is important.
Filing might also be required when you get an FBR notice, desire to be on the Active Taxpayer List Pakistan, or you would like to have a clean tax compliance record. According to FBR’s ATL guidance, if an individual’s return concerns the tax year of the ATL then the individual’s name will appear in the relevant ATL.
When Foreign Income May Not Be Taxable in Pakistan
Foreign salary, foreign source income and remittances electronically transferred via proper banking system do not always constitute taxable income in Pakistan. The pertinent legal issue will be whether the income is Pakistan source income, foreign source income, whether the person is a resident or non-resident taxpayer under the Income Tax Ordinance 2001.
FBR’s non-resident provisions page contains a summary of the provisions of the Income Tax Ordinance, 2001, including the definition of resident and non-resident persons, geographical source of income, foreign source salary, foreign tax credit and double taxation.
Simple Example
A Pakistani person who is working in Dubai and earns salary in the UAE and is a tenant of a rented house in Lahore. While UAE salary may not be the primary Pakistan tax issue, the rental income from Pakistan housing, on the other hand, is Pakistan source income and is likely to be declared in the FBR tax return of overseas Pakistanis.
What Is an Income Tax Return for Overseas Pakistanis?
An annual income tax return is a legal document of all the taxable income of the individual, all the deductions, the tax already paid, withholding tax Pakistan and the final tax liability for a particular tax year Pakistan. Property income Pakistan, bank profit, capital gains or business income from Pakistan is an item in the return when filing overseas Pakistani taxes.
This is not an Income Tax Return Form. Return contains income & taxes. The wealth statement Pakistan displays the assets, liabilities, expenses, bank accounts, property, remittances, loans and closing wealth. In real-life terms, if there is a mismatch between income and assets, IRIS will not allow submission or will display a mismatch in wealth statement.
That’s why a professional to help you with the Income Tax Return Filing Pakistan can be helpful, particularly when it comes to property, remittances, bank in accounts or old undeclared assets are involved.
Resident vs Non-Resident Taxpayer Under Pakistan Income Tax Law
There is a difference between tax treatment of a resident individual and a non-resident individual. Typically, a non-resident Pakistani tax return will include reporting on income earned from sources within Pakistan and a resident tax return may include reporting of income earned from sources outside Pakistan, depending on the facts and applicable law.
The real estate rent of Pakistan, profits of Pakistan banks, business income from Pakistan and capital gain from Pakistan property are generally Pakistan source income. Income earned by the foreigner outside India can be foreign source income. If foreign income is taxed abroad and is also taxable in Pakistan, then there may be a problem of foreign tax credit and double taxation treaty in Pakistan.
In fact, from his extensive experience, Advocate Shahid frequently sees the overseas Pakistanis assuming that the FBR has no responsibilities after going abroad. This isn’t always true. But not only where you live, is your income, assets, property transactions, notices or compliance issues related to Pakistan.
Who Must File Income Tax Return in Pakistan?
Overseas Pakistani With Property in Pakistan
Overseas Pakistanis file their returns for property one of the largest reasons. In Pakistan, if you are the owner of a house, plot, commercial unit or agricultural land or have a rental property, then you should check your tax position. The tax on sale of property by an overseas Pakistani, tax on purchase of property by an overseas Pakistani, capital gains tax and withholding tax under sections 236C & 236K may apply.
FBR’s overseas Pakistanis section provides in detail information on the creation of PSID under section 236C or 236K and information as FAQs on filer rate for overseas Pakistanis.
Overseas Pakistani With Bank Profit, Dividends or Investments
Withholding tax certificates and bank profit tax deduction are applicable to bank profit, dividends, mutual funds, securities and investments. If the tax is already deducted, then it must be reported in the proper manner if the taxpayer is filing a tax return.
Overseas Pakistani Running Business in Pakistan
Registration for income tax and sales tax could be applicable to an overseas Pakistani who owns a business, AOP, company or import setup or taxable supply chain in Pakistan. STRN and Sales Tax Registration Number is not compulsory for all the overseas Pakhtuns, but it is important only where they are involved in undertaking any activity which is taxable. FBR says registration for sales tax will give an STRN (sales tax registration number) and password to open the online sales tax system.
Overseas Pakistani Who Received FBR Notice
If you get a notice under section 114, section 176 information notice, amended assessment under section 122 or audit under section 177, then do not ignore it. The Commissioner Inland Revenue notice may be a serious if there is no reply, a reply is late or for some other reason is not backed up by the documents.
Required Documents for Income Tax Return Filing From Abroad
Before beginning to fill out your IRIS income tax return abroad Pakistani, you will need the following information:
CNIC or NICOP, NTN or CNIC as NTN, IRIS login details, registered mobile, registered email, passport or overseas address (if any), rental agreements, bank profit certificates, dividend certificates, withholding tax certificates, business income details, documents of property sale/purchase and remittance documents.
In preparation of wealth statement, Pakistan detail out Pakistan property, foreign assets (if legally required), vehicles, liabilities, loans, household expenses, opening wealth, closing wealth and addition of assets throughout the year for wealth statement Pakistan.
Keep PSID tax payment Pakistan, FBR tax challan, CPR tax payment receipt and CPR challan verification details for tax payments.
How to Register on FBR IRIS From Abroad
The foundation is IRIS registration overseas Pakistani or IRIS e-enrollment Pakistan. FBR says that an individual/ company/AOP/ foreign national is registered if he/she is e-enrolled on the IRIS portal. It also says that in the case of e-enrollment, it gives e- NTN or e- Registration No and password and in the case of individuals, it gives e- CNIC (13 digits) as e- NTN or e- Registration No and password.
First, log-in to FBR IRIS and select “registration” or “e-enrollment”. Fill in your CNIC/NICOP, e-mail, mobile number and other personal information. Afterwards, set your password and PIN. In case your IRIS password recovery overseas Pakistani fails as a result of the mobile quantity / email is outdated, you can need profile correction.
A detailed FBR IRIS Login Guide will assist users who are new to the portal to understand what the login, password, PIN, draft return, wealth statement and submission status will mean.
Income Tax Return Filing for Overseas Pakistanis Through IRIS (Step-by-Step)
1: Login to IRIS FBR Portal
Enter password and your CNIC/NTN to log-in. IRIS assists taxpayers to file FBR returns including e-filing of income tax, income statement, wealth statement and income tax returns via its online system.
2: Select the Correct Tax Year
One of the common tax year Pakistan mistakes is selecting the wrong tax year. The wrong year will result in incomplete update of your ATL status overseas Pakistani.
3: Fill the Income Tax Return Form
In case any of the above applies, enter the salary income, property income Pakistan, bank profit, capital gain on property Pakistan, business income or withholding tax Pakistan. Please don’t simply reproduce last year’s totals.
4: Add Tax Deducted or Paid
Fill in Withholding Tax certificates, property withholding, bank deductions, PSID tax payment Pakistan and CPR tax payment receipt.
5: Prepare Wealth Statement
Include bank accounts, property, foreign assets (if legally allowed), vehicles, liabilities, expenses and remittance information. In line with the assets and liabilities mismatch IRIS error, do asset/liability closure by reconciling the income, expenses, asset additions, loans and closing wealth figures.
6: Submit Return and Wealth Statement
Drafted Returns are not Submitted Returns. Ensure that return and wealth change to completed. Next, follow How to Download Income Tax Return Copy instructions to save a copy of the return for your banking, real estate or personal records.
7: Check ATL/Filer Status
To check filer status Pakistan, after filing, check it with FBR’s ATL system or SMS. For individuals, FBR has an SMS check method which sends the “ATL” + 13 number of CNIC to 9966. Users can also check the status of their Income Tax Returns following the steps of Income Tax Return Status Check Pakistan for detailed checking.
How Overseas Pakistanis Can Become Filer in Pakistan
IRIS registration, proper return filing, filling of wealth statement and ATL inclusion are a few essential prerequisites that are normally required to become overseas Pakistani. The advantages are reduced withholding tax on property sales, where applicable, easier documentation and improved compliance.
The ATL might show with sometimes tax return submitted as it may be filed late, may be selected different year, or might not have been paid the surcharge or might not have been updated by FBR. FBR’s downloadable ATL page indicates that ATL is updated regularly, users should always refer to the current list.
Property Tax Issues for Overseas Pakistanis
Generally, foreign nationals who are interested in property transactions in Pakistan are the ones who are involved in searches of property tax returns overseas. Section 236K overseas Pakistani may apply for the buyers. Section 236C overseas Pakistani may be applicable for the sellers. The rate may be subject to filer and/or non-filer status and the type of transaction, as well as the current law.
Before picking up a plot for sale in Islamabad, UK residents of Pakistani (or any other nationality) should verify whether the land is ATL or not. The buyer or transfer authority can put pressure on him if his status is inactive. Delays can be minimised by filing the return, filling in the wealth statement and obtaining PSID from the appropriate section.
Foreign Income, Remittances and Overseas Salary
There is no uniformity in foreign salary. It will be based on the residence, source of income and provisions of the Income Tax Ordinance 2001. Remittances are not necessarily taxable income and the taxpayer can be exempt if he or she can show such source of funds, but must retain banking evidence and source-of-funds records.
The foreign bank accounts and foreign assets need to be carefully reviewed. In some instances, the foreign income/asset statement, foreign tax credit Pakistan, section 103 foreign tax credit or section 107 double taxation treaty Pakistan might apply. Where big numbers are concerned, don’t make estimates.
Fees, Charges, Penalties and Expected Costs
The amount of tax to be paid is determined by income, withholding, capital gains and current law. Normally payment is done through e-payment by FBR following PSID. FBR says the users log in to the e-Payments tab, make payment, choose Income Tax Annual Return, enter the tax amount, select the mode of payment and generate a PSID. FBR also said that it has introduced a new payment creation system, which creates a PSID and after successful payment sends a CPR via SMS and email.
Professional fee – varies according to complexity. The cost of a simple nil return is less than the cost of reply to an FBR notice, before the Commissioner Appeals or Appellate Tribunal Inland Revenue, of a Business return, a Wealth statement return or an appeal.
Common IRIS Problems Faced by Overseas Pakistanis
Some of the common problems are: IRIS login not working overseas Pakistani, IRIS account locked, IRIS password forgot overseas Pakistani, IRIS verification code not received abroad, FBR OTP not received overseas Pakistani, CNIC already registered in IRIS, NTN is not found in FBR, duplicate NTN problem Pakistan, IRIS return not submitting, and wrong tax year selected in IRIS.
The following is the practical solution: The correct tax year should be checked, wealth should be reconciled, income and expenses should be matched, email number should be confirmed, mobile number should be confirmed, it should be confirmed that submission has been made, it should be downloaded that it is CPR, and it should be confirmed that it is ATL after the FBR update. Don’t miss to read Income Tax Return Mistakes to Avoid before filing when the issue of property, remittances or notices are involved.
FBR Notices, Audit, Assessment and Legal Remedies
It is important that an FBR notice be taken seriously by an overseas Pakistani. Return may need to be filed with a section 114 notice. Information or documents may be requested on a section 176 notice. An amended assessment is a section 122 assessment which alters the declared income or tax liability. Records may be necessary for a section 177 audit.
The vast majority of appeals are due to disagreement between taxpayers and Inland Revenue regarding taxable income, tax liability, default surcharge, penalties and other related issues, FBR explained. There is also a right of appeal to any person against an order made by a Commissioner or Officer Inland Revenue, FBR says. The appeals time frame to the Commissioner Appeals is normally 30 days from the date of the demand notice or order to which the appeal is directed.
A tax lawyer for overseas Pakistanis can help prepare the reply, the evidence, the legal grounds and the appeal documents, in serious cases.
When Should Overseas Pakistanis Hire a Tax Consultant or Tax Lawyer?
If it is a simple return, it may be sufficient to file on your own. Only professional help is preferable in the case of rental income, property sale, capital gain, old undeclared assets, explanation for remittance, foreign income issue, error in reconciliation of wealth, FBR notice, audit, amended assessment or appeal.
A Tax Consultant Lahore can help with the routine filing of documents, with activating ATLs and documentation, while a lawyer is better equipped to deal with contested notices, assessment orders, recovery issues and appeals. Our Tax Consultancy Services can be a helpful next step when filing IRIS, registering NTN, activating ATL, correcting the wealth statement or handling FBR notices or tax appeals.
In case users are in need of basic registration assistance, they can also find IRIS Registration Services Lahore where they need to correct their IRIS profile, mobile number or email address.
Many of the Pakistanis living overseas derive professional, consultancy or digital income, which may be covered in any related professional guide, such as Income Tax Return for Doctors Pakistan, Income Tax Return for Lawyers Pakistan and Income Tax Return for YouTubers Pakistan.
FAQs
1. Do overseas Pakistanis need to file income tax return in Pakistan?
Yes, if they have any income from sources within Pakistan, property income, business income, bank profit, capital gains or they require to be filer/ATL.
2. Can overseas Pakistanis file FBR tax return online?
Yes. If they have valid FBR IRIS credentials and necessary documents they can file from outside the country via FBR IRIS portal.
3. Is CNIC enough for NTN registration?
After e-enrollment on IRIS, the CNIC (13 digits number) is employed as NTN or registration number for individuals.
4. Is foreign salary taxable in Pakistan?
It is based on the residential status, source of income, foreign tax paid and provisions of Income Tax Ordinance, 2001.
5. Are foreign remittances taxable in Pakistan?
Remittance is not necessarily taxable, but it is a good idea to retain a bank record and source of funds.
6. Why is my ATL status inactive after filing return?
Typically, this occurs due to late filing, due to the tax year, because the tax statement was not complete, due to errors on the tax statement, due to unpaid surcharge, and due to the timing of the FBR updates.
7. Can FBR issue notice to overseas Pakistanis?
Yes. Notices may appear in IRIS for requests by FBR for return of information or an audit record or an amended assessment if they are justified.
8. When should I hire a tax lawyer?
If you have received any of the following types of notices from the FBR, you should hire a tax lawyer: FBR notice, audit notice, amended assessment notice, tax demand notice, property dispute notice, appeal matter.
Conclusion
It’s more than just one income tax form overseas Pakistanis need to file. It includes FBR registration, getting access to IRIS, verification with NTN/CNIC, selecting the correct tax year, declaring income, reconciling wealth statement, checking whether the individual is in ATL or not, and legal compliance. In the event of such property, foreign income, remittances, notices and appeals, you must seek proper advice prior to filing. If you return a property on time and accurately, you will not have to pay any penalties, as well as avoid any property transaction issues, and safeguard your tax record in Pakistan.
