Karachi, September 22, 2024 – The Federal Board of Revenue (FBR) has issued clear guidelines categorizing resident and non-resident persons for tax purposes under the Income Tax Ordinance, 2001 for the tax year 2024-25.
This classification is essential for determining the tax liabilities of individuals, companies, and associations of persons.
The FBR explained that under Section 81 of the Income Tax Ordinance, 2001, a person is categorized as either a resident or a non-resident for tax purposes. A person will be considered a resident for a given tax year if they fall into one of the following categories:
1. Resident Person:
– Individual, company, or association of persons: A person residing in Pakistan for the year.
– Federal Government: Automatically considered a resident.
On the other hand, a non-resident person is defined as any individual or entity that does not meet the criteria for being considered a resident during that tax year.
Further clarifications were provided under Section 82 of the Ordinance, which focuses on defining a resident individual. The FBR outlined that an individual will be considered a resident for tax purposes if:
• They are physically present in Pakistan for a cumulative period of 183 days or more during the tax year.
• They are an employee or official of the Federal Government or a Provincial Government posted abroad during the tax year.
• A citizen of Pakistan who is not present in any other country for more than 182 days in the tax year or is not classified as a resident taxpayer of another country.
The FBR also elaborated on the status of a resident company under Section 83. A company is deemed to be a resident company for a tax year if it meets any of the following conditions:
• It is incorporated or formed under any law in Pakistan.
• The control and management of the company’s affairs are situated entirely within Pakistan at any point during the year.
• It represents the Provincial Government or a Local Government in Pakistan.
Lastly, the FBR provided clarification regarding resident associations of persons under Section 84. An association of persons (AOP) is considered a resident if the control and management of its affairs are located wholly or partly within Pakistan at any time during the tax year.
These definitions are crucial for understanding tax liabilities and ensuring compliance with Pakistan’s tax regulations. Resident persons are subject to tax on their global income, while non-resident persons are only taxed on income sourced within Pakistan. The FBR’s categorization helps streamline the tax process and ensures that individuals and entities adhere to the applicable tax framework.
