Welcome Back! Tax Benefits for Returning Pakistani Expatriates

Pakistan welcomes its skilled citizens back with open arms, and the tax system reflects that. This article explores the tax exemption offered to returning Pakistani expats on their foreign-source income, making the transition home smoother financially.

Understanding Tax Residency:

Your tax residency status in Pakistan determines your tax obligations. You’re considered a resident for tax purposes if you:

  • Spend 183 days (or more) in a tax year (July 1st – June 30th) in Pakistan.

Tax Exemption for Returning Expatriates:

The Income Tax Ordinance offers a welcome tax break for Pakistani citizens returning home after working abroad. Here’s how it works:

  • Exemption Period: If you haven’t been a resident taxpayer in Pakistan for the four tax years preceding your return, any foreign-source income you earn in the year you become a resident (Year 1) and the following year (Year 2) is exempt from Pakistani income tax.


Let’s say Sarah, a Pakistani citizen, has been working in Dubai for the past five years. During this time, she wasn’t considered a resident taxpayer in Pakistan. In July 2024 (Year 1), she decides to return to Pakistan and takes up a job here.

  • Taxable Income: In Year 1 and Year 2, Sarah’s salary earned in Pakistan will be subject to income tax as she’s now a resident. However, any income she earns from her Dubai investments during these two years will be exempt from Pakistani income tax due to the returning expat exemption.

Benefits and Considerations:

  • This exemption applies to various types of foreign-source income, including salary earned abroad, interest from investments held overseas, or rental income from foreign properties.
  • It allows returning expats to focus on re-establishing themselves in Pakistan without the immediate burden of double taxation on their foreign income.
  • Remember, this exemption only applies for the first two years after returning. In Year 3 onwards, any foreign-source income will be subject to Pakistani income tax.

By understanding the tax system and taking advantage of this exemption, returning Pakistani expats can make a smooth financial transition back home and contribute their skills to the nation’s development.

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