FBR changes the rules for Pakistanis living outside of Pakistan who want to buy or sell property.
Pakistanis living outside of Pakistan will now need to obtain permission from the Commissioner of Inland Revenue (FBR) to demonstrate their non-resident status, in order to access the tax rates applicable to “filers” on real estate deals.
The Income Tax Ordinance’s sections 236C and 236K, as explained by the Federal Board of Revenue (FBR), permit the making of withholding tax challans.
Real estate experts have flatly rejected reports on social media that Pakistanis living outside of Pakistan have received new exemptions.
There was a shortfall of Rs. 166 billion in tax collections for FBR in November.
A tax expert made it clear that the rule was already part of FBR’s laws until June 30, 2024. Since then, the FBR has replaced the “non-resident” group on its page with a new category known as “late filers”.
Experts have repeatedly brought this issue to the government’s attention at various levels, but it remains unresolved.
The ordinance may exempt some Pakistanis who do not reside in Pakistan from filing income tax forms under the Finance Act, 2022. Because of this, they are not on the Active Taxpayers List (ATL) and must follow the rules in Rule 1 of the Tenth Schedule of the Ordinance. To fix this, the FBR made it clear that non-resident Pakistanis with a Pakistan Origin Card (POC) or National ID Card for Overseas Pakistanis (NICOP) will not have to follow the rules in section 100BA and Rule 1 of the Tenth Schedule for transactions where tax is due under sections 236C and 236K of the Ordinance. These rules cover the buying and selling of real estate.
FBR’s latest explanation
The FBR’s latest explanation has not made things easier for Pakistanis living outside of Pakistan. It now requires Pakistanis living abroad to obtain a license from the relevant Commissioner of Inland Revenue to prove they are not residents.
This new condition is likely to make it more difficult for foreign Pakistanis to obtain the already available waivers.
People who are not from Pakistan but have a Pakistan Origin Card (POC) or a National ID Card for Overseas Pakistanis (NICOP) do not have to follow the rules in section 100BA and Rule 1 of the Tenth Schedule for transactions that are tax-deductible under sections 236C and 236K of the Ordinance. This is how the law currently stands.
Section 100BA talks about special rules for people who aren’t on the Active Taxpayers List. Additionally, it mandates adherence to the Tenth Schedule’s rules for collecting or deducting advance income tax, as well as calculating income and tax due for individuals not on the ATL.
The FBR explains that they are making changes to the IRIS system. Anyone who is not a resident of Pakistan and wants to use the clause 111AC exemption must upload their Pakistan Origin Card (POC) or NICOP. Upon posting the file, the Chief Commissioner of Inland Revenue (CCIR) in charge will create a temporary PSID and forward it to their login. The CCIR will then send the case to the appropriate Commissioner Inland Revenue (CIR), who will confirm that the person is not a resident.
The FBR has told Chief Commissioners of Inland Revenue to do these checks as soon as possible and within one workday.
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