KARACHI, November 26, 2024 – Pakistan has introduced an advance income tax requirement on individuals and agencies hiring foreign nationals for domestic work.
The Federal Board of Revenue (FBR) clarified that this provision already exists under Section 231C of the Income Tax Ordinance, 2001.
According to Section 231C, two key provisions govern the imposition of this tax on foreign domestic workers:
Sub-section (1) mandates that any authority responsible for issuing or renewing a domestic aide visa for a foreign national must collect an advance tax from the employing agency, sponsor, or individual. This tax amounts to two hundred thousand rupees at the time the visa is issued or renewed. This tax applies to those who hire foreign nationals for domestic work, including domestic aides such as housemaids or drivers.
Sub-section (2) clarifies that the advance tax collected under this section is adjustable. This means that it can be credited against the total tax liability of the agency, sponsor, or person who hired the foreign domestic worker. The tax is applicable for the relevant tax year and is intended to contribute to the overall income tax obligations of the employer.
This new tax policy aims to regulate the employment of foreign workers in domestic roles and generate additional revenue for the government. It also seeks to standardize the hiring process for foreign domestic workers, ensuring that proper tax procedures are followed.
Experts have pointed out that this move could lead to a formalization of the domestic labor market, making it easier to track foreign employment and prevent illegal hiring practices. However, concerns have been raised about the impact on families and individuals who rely on foreign workers for domestic services, as the tax could increase overall hiring costs.
The FBR’s decision underscores Pakistan’s ongoing efforts to expand its tax net and ensure compliance with tax regulations, particularly in sectors that have traditionally been less regulated.
