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You might have heard the word non-resident, but you might not be sure what it means. So, who is considered a non-resident Pakistani? The definition is not very simple. It is essential to differentiate between a resident and a non-resident Pakistani for tax purposes.

Before Finance Act, 2022 a person was treated as a resident Pakistani taxpayer if they were present in Pakistan for a period of 183 days in a tax year (1 July to 30 June).

This means that a person had to stay abroad for more than six months to avoid becoming a resident Pakistani taxpayer. Many wealthy people in the country were misusing this by planning their taxation to avoid becoming a taxpayer of any country.

Now, the Income Tax Ordinance has been amended through Finance Act 2022. According to the Finance Act 2022, the new definition of a resident Pakistani taxpayer is” any individual shall be considered as resident for the tax year if they being a Pakistani citizen, is not present in any other country for more than 182 days during the tax year or who is not a resident taxpayer of any other country”.

This definition has created confusion among taxpayers about whether they have to stay in a foreign country for six months continuously or they could fly in or out of that foreign country. The answer to this question is straightforward: the taxpayer has to stay in the foreign country for 183 days to claim the status of a non-resident Pakistani taxpayer. This can be done by coming in and going out more than once.

This was the basic understanding regarding who is considered a non-resident Pakistani taxpayer. Now we are going to discuss the question that is in the mind of almost every overseas Pakistani national living in a foreign country. If they are considered non-residents for tax purposes, whether they are required to file their income tax return in Pakistan or not?

The answer to this question is every nonresident Pakistani who is earning money in Pakistan or in other words you can say that who is making a taxable income in Pakistan are required to pay income tax on their income generated in Pakistan and filer their income tax return.

Generally, the non-resident person who does not have any Pakistani source of income is not required to file their income tax return in Pakistan. However, they can still avail the status of tax filer in Pakistan by doing so; they can avail themselves of the benefit of paying lower taxes on multiple transactions in Pakistan. It is also essential to know that if you are planning to buy an immovable property or a vehicle in Pakistan, you can save a lot of money by withholding taxes by just filing your income tax return.

How overseas Pakistanis can file their tax return with Befiler?

1. Sign Up on the Befiler through any medium.

• Select your requirement from our range of services.

• Gather all the required information.

• Enter all the required information.

• Reach out to our tax consultant in case you need any help.

• Review your entered information.

I wouldn’t be wrong in saying that two things in life are for sure … death and taxes. Unfortunately, taxes are not easy to understand very few people can truly understand what taxes are, the different types of taxes, how they are used, and how to pay them.

Since the government of any country cannot operate without revenue. So, they impose mandatory levies on individuals and corporates in the name of taxes. The primary use of this revenue is for government expenditure, although they also serve other purposes.

What are taxes?

Taxes are obligatory fees imposed by the country’s government on the increase in income or property or added to the cost of goods or services. Money collected from taxes is often used to provide public goods and services that help society to maintain its living standard.

Why we need to learn about taxes

Most people pay taxes without understanding why or how it benefits them. However, understanding taxes can make paying your share much easier for you. Understanding the tax will make you an empowered citizen by making you aware of how the government uses your tax money. Secondly, understanding of tax will also make you aware of the deductions and credits available to you that can reduce your tax liability. So it is very important to understand tax-related matters as ignorance is no excuse, and taxes are a fact of life, so by understanding them, you will be able to make them work in your favor.

The Taxation system of Pakistan

Federal taxes in Pakistan is like any other tax system in the world. They are broadly categorized into two categories, 1) Direct Taxes and 2) Indirect Taxes.  Direct taxes are the tax imposed directly on a taxpayer and must be paid to the government. Direct taxes include taxes directly collected from Salaries, interest on securities, property income, and business income. In contrast, indirect taxes are levied not on the income, profit, and revenue but the goods and services. Indirect tax is collected by one entity in the supply chain, and they pay it to the government, but it is passed on to the consumer as part of the purchase price of goods and services. Ultimately, the consumer pays the tax by paying more for the product.

Importance of Taxes for Economy

Without taxes, the government would not be able to meet society’s demands. Governments impose taxes on citizens and businesses to raise revenue. Which is then used to meet budgetary demands. Taxes are considered to be very crucial for the economy of any country to finance its social projects.

Without taxes, it would not be possible for the government to contribute to the health and education sectors. Taxes go to fund health services such as health care and medical research. Education is also one of the most deserving recipients of tax money. The government of any country focuses on human development, and education plays a vital role in human development.

The government also uses tax money collected to fund sectors that are very important for the well-being of its citizens, such as security, research, and the protection of the environment.

The collection of taxes helps to raise the standard of living in a country. With a higher standard of living, businesses would be assured of higher domestic consumption, eventually resulting in the country’s economic growth.

The deadline for filing the income tax returns for the fiscal year 2021-2022 is just a few weeks away. 30 of November 2022 is the last date for submitting the income tax returns within the due time. 

According to the FBR officials’ statement, they said that “all the taxpayers other than corporate taxpayers (Company) are required to file an annual return of income for the tax year 2022 by November 30, 2022.” 

They further added that “taxpayers including salaried persons, business individuals, the association of persons (AOPs) and companies other than those who are having accounting year July to June are required to file the return of income.”

Those Companies that have their financial year between July 01 to June 30 must file their Income Tax Returns by December 31 every year.

In case of non-filing the tax returns within the due date, taxpayers would have to pay the penalty. Further, taxpayers would be liable to pay ATL Surcharge Challan to update their status in the Active Taxpayers List which will be updated on March 1, 2023, and their name will be listed upon the timely submission of TY 2022 returns.  Individuals will pay a late filing challan of Rs 1,000, AOPs / Partnership will pay Rs 10,000 and companies will pay Rs 20,000 respectively.    

Therefore, taxpayers are requested to file their income tax returns for the tax year 2022 at their earliest because the mentioned deadline may not be extended further.  

Hurry up, if you have not already submitted your income tax returns then you have the golden opportunity left to obtain. You can now file your income tax returns conveniently and hassle-free, while resting at your home, filing online at the comfort of the Befiler mobile app or web app, and with the help of an expert consultant.