As a step in immense benefit to overseas Pakistanis, the Federal Board of Revenue (FBR) has allowed the exemption of advance income tax on property transactions made or received in Pakistan. Thus it has exempted non-residents from payment of advance withholding taxes under sections 236C and 236K of Income Tax Ordinance. The circular, which reached LTOs, RTOs, MTOs, and CTOs on November 25, 2024, clarifies the same for streamlined practical application. This will likely facilitate property dealings and transactions among expatriate Pakistanis at a relatively low cost.
Highlights of the Advance Tax Exemption
No Withholding Tax on Property Transactions for Overseas Pakistanis
Overseas Pakistanis holding a Pakistan Origin Card (POC) or National Identity Card for Overseas Pakistanis (NICOP) are now exempted from withholding taxes on property transactions in Pakistan. The exemption includes the previously charged taxes at the time of buying or selling property, such as:
Section 236K: Tax payable on property purchases.
Section 236C: Tax payable on property sales.
Old Tax Rates (Now Exempted):
For Filers: 3% of the value of the transaction.
For Late Filers: 6% of the value of the transaction.
For Non-Filers: 10% of the value of the transaction.
Overseas Pakistanis are relieved of all this extra load since the exemption. Now, overseas Pakistanis get property deals considerably cheaper and less complicated.
Requirements for Tax Exemption
- Possession of a valid POC or NICOP.
- Completion of a simple verification process through the FBR’s online system.
How to Claim the Tax Exemption
To avail of the tax exemption overseas Pakistanis need to follow the process:
Create a Payment Slip ID (PSID): At the time of property registration, instruct the relevant department to generate a PSID.
Upload Documentation: Update your NICOP or POC details in the FBR’s system using the PSID.
Verification: The information will be sent to the Commissioner of Inland Revenue for approval. Once verified, the exemption is applied, and no tax payment is required.
Addressing Practical Challenges
A lack of awareness among the land registration authorities and housing societies often led to unnecessary tax deductions from non-resident Pakistanis during property transactions. To rectify this, the FBR has issued a detailed circular, giving clear instructions and a structured process. It will ensure the smooth implementation of the tax exemption.
Meaningful Relief for Overseas Pakistanis
This exemption provides substantial relief to overseas Pakistanis whose source of income is outside Pakistan. Unlike residents who can set off withholding taxes against their domestic income or business profits, non-residents were facing an irreducible financial burden. This exemption removes this challenge, ensuring that overseas Pakistanis are treated equitably.
Substantial Savings on Property Transactions
As earlier, under the old regime, a non-filer bought property worth PKR 10 million and then had to pay a withholding tax equal to PKR 1 million. With this exclusion, all such costs were exempted, making these transactions much more economical for non-resident Pakistanis.
Also read:
- Income Tax Return Course in Pakistan
- How to Make an NTN Number in Pakistan?
- Professional Charges in Tax Returns in Pakistan
