Overseas Pakistanis will now be required to obtain approval from the Commissioner Inland Revenue (FBR) to verify their non-resident status to qualify for the tax rates applicable to “filers” on immovable property transactions.
The Federal Board of Revenue (FBR) has issued a clarification regarding the creation of withholding tax challans under sections 236C and 236K of the Income Tax Ordinance.
Real estate experts have categorically denied reports circulating on social media that suggest any new exemptions have been granted to overseas Pakistanis.
A tax expert clarified that the provision was already part of FBR’s laws until June 30, 2024. However, the FBR has since replaced the “non-resident” category on its portal with a new category of “late filers.”
Experts have repeatedly raised this issue with the government at various levels, but no resolution has been achieved.
Under the Finance Act, 2022, certain non-resident Pakistanis may not be required to file income tax returns due to applicable provisions of the Ordinance. As a result, they do not appear on the Active Taxpayers List (ATL) and are therefore subject to the provisions of Rule 1 of the Tenth Schedule of the Ordinance. To address this, the FBR has clarified that non-resident Pakistanis holding a Pakistan Origin Card (POC) or National ID Card for Overseas Pakistanis (NICOP) will not be subject to the provisions of section 100BA and Rule 1 of the Tenth Schedule for transactions where tax is collectible under sections 236C and 236K of the Ordinance, which apply to the purchase or sale of immovable property.
However, the FBR’s recent clarification has not provided any additional facilitation for overseas Pakistanis. Instead, it has introduced a new requirement for overseas Pakistanis to obtain a certificate from the concerned Commissioner Inland Revenue to verify their non-resident status.
This new condition is expected to lengthen the process for availing exemptions that are already available to overseas Pakistanis.
The existing section 111AC of the Income Tax Ordinance states: “The provisions of section 100BA and Rule 1 of the Tenth Schedule shall not apply to non-resident individuals holding a Pakistan Origin Card (POC) or National ID Card for Overseas Pakistanis (NICOP) in respect of transactions on which tax is collectible under sections 236C and 236K of the Ordinance.”
Section 100BA pertains to special provisions for individuals not appearing on the Active Taxpayers List. It states that the collection or deduction of advance income tax, as well as the computation of income and tax payable for individuals not on the ATL, shall be determined in accordance with the rules outlined in the Tenth Schedule.
According to the FBR’s clarification, a change is being incorporated into the IRIS system. Any non-resident taxpayer wishing to avail the exemption under clause 111AC will be required to upload their Pakistan Origin Card (POC) or NICOP. Once uploaded, a provisional PSID will be generated and forwarded to the login of the concerned Chief Commissioner Inland Revenue (CCIR). The CCIR will then assign the case to the concerned Commissioner Inland Revenue (CIR), who will verify the non-resident status.
If the CIR is satisfied, they will approve the exemption, and the taxpayer will be notified via SMS or email. Once approved, the taxpayer can avail the exemption.
The FBR has directed Chief Commissioners Inland Revenue to process these verifications on a priority basis within one business day.