FBR to revise definition of non-resident Pakistanis to increase Tax collection
FBR brings non-resident Pakistanis in the tax net.
The stay period of Pakistanis has been reduced for tax collection purposes.
The decision has been taken as part of amendments being considered in Income Tax Ordinance 2001.
The Federal Board of Revenue (FBR) reduces the stay period of Pakistanis with an intention to increase tax collection. FBR issued a circular on Tuesday introducing amendments to the Income Tax Ordinance 2001. The amendments were initially made in the budget for 2019-20.
As per the circulars, FBR plans to change the definition of ‘resident individuals’. Before the Finance Act 2019, an individual was considered a resident if he/she was living present in Pakistan for a period of 183 days or over six months. Now it has been revised and changed to only four months. This means a person needs to be out of Pakistan for at least eight months to claim the tax-free status.
Non-resident Pakistanis are exempted from taxes but the stay period has been revised:
Non-resident Pakistanis are not required to pay the taxes that a Pakistani citizen is obligated to. However, with the new amendment, they will be brought in the tax net, as the stay period has been reduced from 182 days to 119 days. In the said act, FBR has also changed the aggregate stay period to 365 days over a period of four years. The illustration indicated that aggregate stay period of 365 days for four years will be effective from the tax year 2015.
According to the FBR sources, the law cannot be retrospectively made. It is expected to be challenged in the court as it will particularly impact the rich income bracket staying abroad for a certain period of time.
Speaking on the legal implications, the sources said that to make effective legal amendments, the previous tax year should be mentioned explicitly in the Finance Bill, which it lacks. The FBR has also included new concepts in the income tax circular. Legal definitions of offshore tax evasion, offshore asset, offshore enabler, and asset mover have also been introduced.
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