Karachi, February 4, 2024 – The Federal Board of Revenue (FBR) in Pakistan has recently provided a comprehensive definition for resident individuals, associations of persons, and companies for the tax year 2024.
The guidelines aim to establish clear criteria for determining tax residency status, ensuring a fair and transparent tax system.
According to the FBR’s announcement, an individual is considered a resident for the Tax Year 2024 if one of the following conditions is met:
1. Presence in Pakistan: The individual is present in Pakistan for a period of, or periods amounting in aggregate to, one hundred and eighty-three days or more during the tax year.
2. Extended Presence: The individual is present in Pakistan for a period of, or periods amounting in aggregate to, one hundred and twenty days or more in the tax year. Additionally, in the four years preceding the tax year, the individual has been in Pakistan for a period of, or periods amounting in aggregate to, three hundred and sixty-five days or more.
3. Government Employees: An individual who is an employee or official of the Federal Government or a Provincial Government and is posted abroad during the Tax Year is also considered a resident.
Furthermore, an Association of Persons is classified as a resident 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. Similarly, a Company is deemed resident for a Tax Year under the following circumstances:
1. Incorporation in Pakistan: The company is incorporated or formed by or under any law in force in Pakistan.
2. Control and Management: The control and management of its affairs are situated wholly in Pakistan at any time during the year.
3. Government Entities: It is a Provincial Government or a local Government in Pakistan.
On the flip side, entities that do not meet the residency criteria are classified as non-residents for the Tax Year 2024. This includes Associations of Persons, Companies, and Individuals who do not fulfill the conditions outlined for residency.
The FBR’s move to define residency criteria is aimed at bringing clarity to the tax system, ensuring that individuals and entities are aware of their tax obligations. By delineating specific parameters for residency, the FBR aims to create a more transparent and accountable tax regime, facilitating compliance and reducing ambiguity in tax-related matters.
These guidelines are crucial for taxpayers, tax consultants, and businesses operating in Pakistan, as they provide a clear framework for determining residency status, ultimately contributing to a more equitable and efficient tax administration system. As the Tax Year 2024 unfolds, taxpayers are urged to familiarize themselves with these regulations to ensure adherence to the established criteria.
