FBR explains the residency rules for individuals, companies and associations of persons under Sections 81 to 84 of the Income Tax Ordinance, 2001.
ISLAMABAD: The Federal Board of Revenue (FBR) has clarified the criteria for determining whether an individual, company or association of persons (AOP) is treated as a resident for tax purposes during Tax Year 2027.
The FBR has issued the Income Tax Ordinance, 2001, updated up to June 30, 2026, setting out the provisions governing resident and non-resident persons under Sections 81 to 84.
For individuals, the 183-day presence test is a key factor in determining tax residency, although the law also provides additional conditions under which a person may qualify as a resident.
Resident and Non-Resident Persons
Under Section 81, a person is treated as a resident person for a tax year if they qualify as a resident individual, resident company or resident association of persons for that year.
The Federal Government is also treated as a resident person under the provision.
A person is considered a non-resident for a tax year if they do not qualify as a resident for that year.
183-Day Rule for Resident Individuals
Section 82 sets out the conditions under which an individual is regarded as a resident individual for a tax year.
An individual is treated as a resident if they are present in Pakistan for 183 days or more during the tax year. The 183 days do not necessarily have to be consecutive, as periods of presence can collectively reach the required threshold.
The law also provides additional circumstances in which an individual may qualify as a resident.
An individual is treated as a resident if they are an employee or official of the Federal Government or a Provincial Government posted abroad during the tax year.
Pakistani Citizens and Tax Residency
The Income Tax Ordinance also contains specific provisions concerning Pakistani citizens.
A Pakistani citizen is treated as a resident individual if they are not present in any other country for more than 182 days during the tax year.
A Pakistani citizen may also qualify as a resident if they are not a resident taxpayer of any other country.
This means that the 183-day presence test is not the only factor relevant to determining an individual’s tax residency status.
When Is a Company a Resident?
Under Section 83, a company is treated as a resident company for a tax year if it is incorporated or formed under any law in force in Pakistan.
A company can also qualify as a resident where the control and management of its affairs are situated wholly in Pakistan at any time during the tax year.
The provision also treats a Provincial Government or Local Government in Pakistan as a resident company for the relevant tax purposes.
Residency Rules for Associations of Persons
Section 84 deals with the tax residency of an association of persons.
An AOP is considered a resident association of persons for a tax year if the control and management of its affairs are situated wholly or partly in Pakistan at any time during that year.
The residency test for an AOP therefore focuses on where its control and management are situated rather than applying the individual 183-day test.
Key Tax Residency Rules for 2027
The FBR’s provisions establish separate residency tests for individuals, companies and associations of persons under the Income Tax Ordinance, 2001.
For individuals, 183 days or more of presence in Pakistan during the tax year is a key test, while government employment abroad and specific rules concerning Pakistani citizens can also affect residency status.
For companies, incorporation in Pakistan or the location of control and management can determine residency, while an AOP is treated as resident where its control and management are wholly or partly situated in Pakistan.
These rules are relevant for determining how the Income Tax Ordinance applies to taxpayers during Tax Year 2027.