Karachi, January 14, 2024 – In a significant move, the Federal Board of Revenue (FBR) has announced a comprehensive tax exemption on foreign remittances received by non-residents.
The FBR’s decision, outlined in the updated Income Tax Ordinance, 2001 for the tax year 2024, aims to facilitate and encourage the inflow of foreign funds into Pakistan.
Under the revised regulations, the FBR has granted complete tax exemption on any sum received by non-residents, provided it falls under specific categories. The exempted amounts include:
(i) Remittances to Pakistan through banking channels in foreign currency, received by an international buying house from its non-resident principal to meet its expenses in Pakistan.
(ii) Amounts chargeable under the head “Salary” received by an individual, not being a citizen or resident of Pakistan, who is engaged as an expert by an international buying house.
The FBR’s clarification further defines an international buying house as entities that function as buying offices, buyers’ agents, or representatives of international buyers to facilitate exports from Pakistan. These entities must be registered as liaison offices with the Board of Investment or as companies registered with the Securities and Exchange Commission of Pakistan (SECP). The proviso emphasizes that such buying houses should operate solely as cost centers, focusing on bringing export orders to Pakistan on behalf of their principals, without engaging in any local business transactions within the country. Additionally, their expenses must be remitted to Pakistan.
This tax exemption initiative is expected to attract foreign investment and encourage non-resident individuals and entities to engage in transactions that contribute to Pakistan’s economic growth. By eliminating tax liabilities on specific foreign remittances, the FBR aims to create a more favorable environment for international buyers and experts working with buying houses, ultimately boosting the country’s export-oriented activities.
The updated regulations reflect the government’s commitment to fostering a business-friendly environment and attracting foreign capital. It is anticipated that this move will not only incentivize non-residents to channel funds into Pakistan through formal banking channels but will also strengthen the collaboration between international buying houses and local businesses engaged in export-oriented activities.
Furthermore, the FBR’s decision aligns with broader efforts to streamline tax policies, enhance transparency, and facilitate economic activities that contribute to Pakistan’s overall development. The clarification provided by the FBR ensures that the tax exemption is directed towards specific activities that align with the country’s economic goals and do not compromise the integrity of the taxation system.
The FBR’s announcement of a full tax exemption on foreign remittances for non-residents reflects a positive step towards attracting foreign investment and fostering international collaborations, thereby contributing to the economic prosperity of Pakistan. The government’s proactive approach to creating a conducive business environment is likely to yield positive results and position Pakistan as an attractive destination for foreign investors and experts in the international trade domain.
