As a Pakistani resident, it’s important to have a basic understanding of taxation laws to ensure that you comply with the relevant regulations. Taxation laws in Pakistan apply to individuals, companies, and associations of persons who are residents in Pakistan.
If you are present in Pakistan for 183 days or more in a tax year, or if you are a citizen of Pakistan and not present in any other country for more than 182 days during the tax year, you will be considered a resident individual. You will also be considered a resident if you are an employee or official of the Federal Government or a Provincial Government posted abroad during the tax year.
A company will be considered a resident company if it is incorporated or formed under any law in force in Pakistan, or if the control and management of its affairs are situated wholly in Pakistan at any time in the year. It can also be considered a resident company if it is a Provincial Government or Local Government in Pakistan.
Resident Association of Persons
An association of persons will be considered a resident association of persons for a tax year if the control and management of its affairs are situated wholly or partly in Pakistan at any time in the year.
Taxation of Foreign Source Income of Resident
If you are a resident individual in Pakistan and receive foreign-source income, you will be subject to taxation laws. However, if you have paid foreign income tax in respect of the salary, the foreign-source salary received by you will be exempt from tax.
As a resident individual, you will be treated as having paid foreign income tax if the tax has been withheld from your salary by your employer and paid to the revenue authority of the foreign country in which the employment was exercised.
It’s essential to understand taxation laws in Pakistan as a resident to avoid any legal issues. As a resident individual, you will be taxed on your income, including foreign-source income, while resident companies and associations of persons are also subject to taxation laws. By complying with taxation laws, you can avoid penalties and ensure that you contribute to the development of your country.