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Under Pakistan law, any national residing outside the country for more than 183 days qualifies as an NRP. Image Credit: Shutterstock

Dubai: More Pakistani business owners in the UAE and in the Gulf are receiving notices from Pakistan’s Federal Board of Revenue to clear all their tax obligations. These Non-Resident Pakistanis (NRPs), however, are still not sure why they received these notices.

“Non-Resident Pakistanis are defined by those living more than 183 days outside the country during a fiscal year, which starts July 1,” said Naqqash Ahmed. founder and Managing Partner of Capital Plus Auditing. “Those staying outside the country for more than 183 days are not obliged to declare their income gained from overseas income – and nor are they obligated to submit a wealth declaration.

“They are only obliged to submit returns on income generated from assets/businesses in Pakistan.”

This is why the Federal Board of Revenue’s notices has set off concerns among Pakistan’s expats white-collar professionals and business owners. This is also the point that Ahmed is raising when he says, “This has caused some degree of confusion at a time when investments into Pakistan by overseas Pakistanis is on the increase.”

As per Pakistan law, submissions related to income and taxes need to be made by November each year. The country’s financial year runs from July 1 to June 30 the next year.

Steady rise in Pakistan tax income
The Federal Bureau of Revenue netted PKR1.02 trillion in income tax in the first six months of the ongoing financial year, which ends June 30, 2022. That is up on the PKR194 billion same time last financial year, according to official data.

Close the tax net

The Pakistan government have in the recent past tightened their tax net, with a clear eye on generating more tax revenues. In many respects, the authorities have also eased the procedures related to tax filings, by residents and non-residents alike.

This is why some NRPs are unsure as to how they received the notices – especially when they had already filed submissions as per the law on their wealth generated within Pakistan.

“Multiple Non-Resident Pakistanis are also being asked to appear for court hearings despite the law states that there is no requirement to file such returns,” said Sarwar Ekram, a Dubai-based NRP. “Are these notices being issued because the NRPs have purchased property overseas?

“This is bizarre, especially as the government is also working simultaneously to attract investments from non-residents, whether it is in the local real estate space, healthcare, startups, etc. We hope that this situation is addressed urgently.”

Talking to tax authorities

According to informed sources, the NRPs have reached out to government officials and tax regulators to see what additional info they require. And why they need to mention about wealth or income generated from outside of the country.

According to Uthman Ghani, another NRP who has been a resident in the UAE for some time now, “We have repeatedly provided the authorities with proof of our overseas identity including the Non-Resident Overseas Identity cards and immigration records from the UAE government. “So far, we have not had any success.”

More clarity?

Senior sources in the NRP community reckon that that matter could be sorted out soon enough, and that the finance ministry will provide additional clarifications. “It seems to be an administrative issue more than anything else on the part of the Federal Board of Revenue, but nonetheless has caused some concern amongst NRPs," said Sameer Lakhani, Managing Director at GCP. 

“During a time where Pakistan is looking for higher capital inflows from overseas Pakistanis, the last thing one needs is uncertainty. The FBR is expected to address and resolve this issue shortly, which will hopefully alleviate the anxiety.”