Overseas Pakistanis Rates of Advance Tax Reduced on Property

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Overseas Pakistanis Rates of Advance Tax Reduced on Property

The Federal Board of Revenue (FBR) has issued a clarification regarding Section 100BA of the Income Tax Ordinance, which pertains to special provisions for individuals not listed on the Active Taxpayers’ List (ATL). Under this section, the computation of income, the determination of tax liability, and the application of advance income tax for non-ATL individuals follow the rules outlined in the Tenth Schedule.

To streamline processes for non-resident taxpayers claiming exemption under clause 111AC of the Income Tax Ordinance, the FBR is introducing updates to the IRIS System, the central online tax management platform. Non-resident taxpayers seeking this exemption will now be required to upload a valid Pakistan Origin Card (POC) or NICOP Card when generating a Computerized Payment Receipt (CPR).

This reduced rates applies to withholding taxes under Sections 236C and 236K of the Income Tax Ordinance. A circular issued to LTOs, RTOs, MTOs, CTOs on November 25th formalizes the exemption and provides clear instructions for its implementation.

Key Highlights of the Exemption

1. Reduced Withholding Tax on Property Transactions:
   Overseas Pakistanis, holding a Pakistan Origin Card (POC) or National Identity Card for Overseas Pakistanis (NICOP), are from taxes typically levied at the time of property purchase or sale.
   Section 236K: Tax payable when purchasing property.
   Section 236C: Tax payable when selling property.
2. Tax Rates Previously Applicable: With the exemption in place, overseas Pakistanis no longer have to bear these extra costs.
   For Filers: 3% of the transaction value. (Applicable to Overseas.)
   For Late Filers: 6%.
   For Non-Filers: 10%.

Conditions for Exemption

• Possession of a valid POC or NICOP.
• Completion of a simple verification process through the FBR’s online system.

Once the relevant identification document is uploaded, a provisional Payment Slip ID (PSID) will be automatically generated. This PSID will then be forwarded to the login of the concerned Chief Commissioner Inland Revenue (CCIR) for further processing.

Related Article: How to Create a Payment Challan for Property Tax for Overseas?

How to Claim the Exemption

Apply for exemption after logging into Iris account by filing application under 159(1) / 150A (Application for reduced rate of withholding u/s 150A)

The FBR has streamlined the process for availing the exemption for reduced rate:

1. Create a Payment Slip ID (PSID): At the time of property registration, instruct the relevant department to generate a PSID.
2. Upload Documentation: Update your NICOP or POC details in the FBR’s system using the PSID.
3. Verification: The information will be sent to the Commissioner Inland Revenue for approval. Once verified, the exemption is applied, and no tax payment is required.

FBR is updating the new payment system so that at time of creating the payment the reduced rate can be selected but this process is still under process now.

Addressing Practical Challenges

Many land registration authorities and housing societies were unaware of the rules, resulting in unnecessary tax deductions from non-resident Pakistanis. The FBR’s latest circular resolves this ambiguity by providing clear guidelines and a documented process.

Relief for Overseas Pakistanis

This exemption is particularly significant for overseas Pakistanis whose primary income is sourced outside Pakistan. Unlike residents who can adjust these withholding taxes against their local income or business profits, non-residents faced a financial burden without any scope for adjustment or refunds.

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