ISLAMABAD: The Federal Board of Revenue (FBR) has opened a Pandora’s Box for overseas Pakistanis and introduced a new requirement: They must obtain approval from the relevant Commissioner of Inland Revenue to confirm their non-resident status to qualify for tax rates applicable to filers in property transactions.
This clarification relates to withholding tax challans under sections 236C and 236K of the Income Tax Ordinance.
Real estate experts say this provision is effective until June 30, 2024. Recently, the FBR replaced the “non-resident” category on its portal with a “late filers” category, despite repeated appeals from experts to address the issue.
Under the Finance Act 2022, certain non-resident Pakistanis are exempt from filing income tax returns due to specific provisions of the Ordinance, meaning they are not listed as active taxpayers. This could subject them to higher tax rates under rule 1 of the Tenth Schedule of the Ordinance. To support non-resident Pakistanis holding a Pakistan Origin Card (POC) or a National ID Card for Overseas Pakistanis (NICOP), the FBR clarified that sections 100BA and rule 1 of the Tenth Schedule will not apply to property transactions taxed under sections 236C and 236K.
Experts criticized the FBR for complicating the process for overseas Pakistanis seeking exemptions, noting the lack of clarity about Federal Excise Duty (FED) on property transactions and whether these individuals would be treated as non-filers. He argued that requiring Commissioner approval unnecessarily prolongs the exemption process. Malik also dismissed rumors on social media, stating that no new exemptions have been granted to overseas Pakistanis.
The Income Tax Ordinance, under section 111AC, already states that sections 100BA and rule 1 of the Tenth Schedule do not apply to non-residents with a POC or NICOP for transactions covered by sections 236C and 236K.
To facilitate this exemption, the FBR announced changes to the IRIS system for non-resident taxpayers. Taxpayers must upload their POC or NICOP while generating a CPR, which will create a provisional PSID. This will be sent to the relevant Chief Commissioner Inland Revenue (CCIR) for verification. After verification, the taxpayer will receive approval via SMS or email. The FBR has instructed Chief Commissioners to prioritize these requests and complete the verification within one business day.
