The Federal Board of Revenue (FBR) has introduced a new requirement for overseas Pakistanis, mandating them to obtain approval from the relevant Commissioner of Inland Revenue to confirm their non-resident status for tax rates applicable to “filers” in immovable property transactions.
This legal clarification pertains to the creation of withholding tax challans under sections 236C and 236K of the Income Tax Ordinance.
According to real estate expert Muhammad Ahsan Malik, this provision has been part of the FBR’s regulations until June 30, 2024. However, recently, the FBR replaced the non-resident category on its portal with a category for late filers, despite ongoing requests from experts to address this issue, Business Recorder reported.
Under the Finance Act of 2022, some non-resident Pakistanis are exempt from filing income tax returns due to specific provisions of the Ordinance, which means they do not appear on the active taxpayers list. Consequently, they may be affected by rule 1 of the Tenth Schedule of the Ordinance. To assist non-resident Pakistanis holding a Pakistan Origin Card (POC) or a National ID Card for Overseas Pakistanis (NICOP), it has been stated that sections 100BA and rule 1 of the Tenth Schedule will not apply to them for transactions subject to tax under sections 236C and 236K.
Malik criticized the FBR for not providing adequate support for overseas Pakistanis, suggesting that the new requirement only complicates the existing process for obtaining exemptions. He also questioned the lack of clarification regarding the payment of Federal Excise Duty (FED) on property transactions for overseas Pakistanis and whether they would be classified as non-filers during these payments.
He expressed confusion over the necessity of changing the previous system, arguing that seeking approval from the Commissioner would extend the already established process of exemption. Contrary to rumors on social media, Malik denied that any new exemptions have been granted to overseas Pakistanis.
The existing section 111AC of the Income Tax Ordinance states that sections 100BA and rule 1 of the Tenth Schedule do not apply to non-resident individuals holding a POC or NICOP concerning transactions subject to tax under sections 236C and 236K.
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As part of the FBR’s clarification, a change will be implemented in the IRIS System for non-resident taxpayers wishing to claim this exemption. They will need to upload their POC or NICOP card when creating a CPR. A provisional PSID will then be generated and sent to the relevant CCIR. After verification by the concerned CIR, the taxpayer will be notified via SMS or email about the approval, allowing them to access the exemption. The FBR has urged Chief Commissioners Inland Revenue to prioritize this verification process, ensuring it is completed within one business day.
