Double taxation is a situation where a person is taxed on the same income in two different countries. This can happen, for example, if a person lives in one country but works in another. To prevent double taxation, many countries have entered into tax treaties with other countries. These treaties typically provide for a number of relief measures, such as:
- Exclusion of income: The treaty may exclude certain types of income from taxation in both countries. For example, a treaty may exclude dividends paid by a company resident in one country to a shareholder resident in the other country.
- Tax credit: The treaty may allow a taxpayer to credit taxes paid in one country against taxes due in the other country. For example, if a person lives in Pakistan but works in the United States, the person may be able to credit taxes paid to the United States against taxes due to Pakistan.
- Exemption from withholding tax: The treaty may exempt certain types of income from withholding tax. For example, a treaty may exempt dividends paid by a company resident in one country to a shareholder resident in the other country from withholding tax.
To find out if Pakistan has a tax treaty with the country where you live, you can contact the Pakistani embassy or consulate in your country. You can also find information about tax treaties on the website of the Federal Board of Revenue (FBR).
How to Claim Double Taxation Relief
To claim double taxation relief, you will need to file a tax return with the FBR. You will need to include the following information on your tax return:
- The name of the country where you are a resident
- The name of the country where you earned the income
- The amount of income you earned
- The amount of taxes you paid to the other country
If you are claiming a tax credit, you will also need to provide the FBR with a certificate from the tax authorities of the other country.
Double taxation relief can be a valuable way to reduce your tax bill. If you are a Pakistani resident who earns income in another country, you should contact the FBR to find out if you are eligible for double taxation relief.