Overseas Pakistanis will now be required to obtain approval from the Commissioner Inland Revenue (FBR) to verify their non-resident status in order to qualify for tax rates applicable to “filers” on immovable property transactions.
The Federal Board of Revenue (FBR) issued a clarification regarding the creation of withholding tax challans under sections 236C and 236K of the Income Tax Ordinance, which governs the purchase and sale of immovable property.
Contrary to reports circulating on social media, real estate experts have denied claims that any new exemptions have been granted to overseas Pakistanis. A tax expert clarified that the provision for non-resident Pakistanis was already part of FBR’s laws until June 30, 2024. However, the FBR has recently replaced the “non-resident” category on its portal with a new category of “late filers.”
Experts have raised concerns about this issue with the government on multiple occasions, but no resolution has been reached.
Clarification on Non-Resident Taxpayers
Under the Finance Act, 2022, certain non-resident Pakistanis are not required to file income tax returns due to applicable provisions of the Income Tax Ordinance. As a result, they do not appear on the Active Taxpayers List (ATL) and are subject to the provisions of Rule 1 of the Tenth Schedule of the Ordinance.
To address this, the FBR 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.
However, instead of providing additional facilitation, the FBR has introduced a new requirement for overseas Pakistanis to obtain a certificate from the concerned Commissioner Inland Revenue to verify their non-resident status.
Lengthy Process for Exemptions
This new condition is expected to prolong the process for availing exemptions that are already available to overseas Pakistanis.
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 specifies 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, will be determined in accordance with the rules outlined in the Tenth Schedule.
New Verification Process
According to the FBR’s clarification, a change is being incorporated into the IRIS system. Non-resident taxpayers wishing to avail the exemption under clause 111AC will now be required to upload their Pakistan Origin Card (POC) or NICOP. Once uploaded, a provisional Payment Slip ID (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 relevant 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 to minimize delays.
This new requirement has raised concerns among overseas Pakistanis, as it adds another layer of bureaucracy to an already complex process. Experts have urged the government to simplify the procedure and provide greater facilitation for non-resident Pakistanis.
