Non Residents Wealth Statement

Question

Dear Sir,

As non residents are not bound to submit their Wealth Statements, kindly need advice over this. I am sending remmitance to my wife account and sometimes on my own account. I am also going to purchase some properties this year, although im a filer and have nothing to worry about tax rates.
Issue is, im filing nil return since 2 years, thus my wealth is showing zero assets. Should i have to declare my assets ? If yes, then how can i suddenly show assets at my wealth when opening is zero. Or should i keep the wealth zero and mark my return as non residents, (As im doing so since last two years), will it has some consequences in future?

Regards,

Answer 1

Based on Income Tax Rules and Ordinances in Pakistan, here is a summary of the advice regarding your situation as a non-resident filing nil returns and planning property purchases:

Wealth Statements for Non-Residents: You are generally not required to submit a wealth statement as a non-resident individual, unless specifically requested by the Commissioner through a written notice [Section 116(1)].

Foreign Income and Assets Statement: This statement, which details foreign assets and liabilities, is explicitly required only for resident individuals who meet certain foreign income or asset thresholds [Rule 36A(2)(a), Section 116A(1)]. Since you maintain non-resident status, this specific requirement and its associated penalties for non-compliance generally would not apply to you [Rule 36A(3)].

Implications of Nil Returns and Property Acquisition: While you may not be required to file a wealth statement as a non-resident, the acquisition of new properties in Pakistan when your past returns show "zero assets" and are "nil returns" can raise questions regarding the source of funds used for these purchases [Section 111(1)(a)].

• Unexplained Income/Assets: The tax authorities have the power to inquire into the nature and source of any amounts credited to your accounts, investments made, or expenditures incurred. If a satisfactory explanation for the source of funds cannot be provided, these amounts could be treated as "unexplained income" [Section 111(1)(a), (b), (c)].
• Foreign Remittances (Key Exemption): A crucial provision states that any amount of foreign exchange remitted from outside Pakistan through normal banking channels, not exceeding Rupees 5 million in a tax year, is generally not treated as unexplained income, provided it is encashed into rupees by a scheduled bank and a certificate from that bank is produced [Section 111(4)]. This means foreign remittances are a legitimate source of funds, but proper documentation is essential.

Consequences of Previous "Zero Assets" and New Acquisitions: If your property purchases in Pakistan significantly exceed the documented foreign remittances, or if the remittances are not adequately proven to be through official banking channels, the disparity between your declared "zero assets" and new acquisitions could trigger scrutiny by the tax authorities. While being a "filer" provides certain benefits like lower tax rates on property transactions, it does not exempt you from explaining the source of funds for assets acquired in Pakistan.

Recommendations:

• Verify Residency Status: Ensure your non-resident status is consistently maintained according to the criteria defined in the Income Tax Ordinance [Section 82].
• Document Remittances: Meticulously keep all records of foreign remittances, including bank certificates confirming the conversion of foreign currency into Pakistani Rupees. This is vital evidence for the legitimate source of your funds [Section 111(4)].
• Be Prepared to Explain Funds: Always be ready to substantiate the source of funds for your property acquisitions with clear, verifiable documentation.
• Seek Professional Advice: Given the complexities, it is highly advisable to consult a qualified tax professional in Pakistan. They can provide tailored guidance, help ensure compliance, and address any specific concerns regarding your tax profile and planned investments.