Foreign currency account restriction on non-filers not apply on non-residents: SBP

Foreign currency account restriction on non-filers not apply on non-residents: SBP

The State Bank of Pakistan (SBP) issued an important clarification on Monday regarding the restrictions on foreign currency accounts, emphasizing that these limitations do not apply to non-resident Pakistanis.

This announcement aims to address misunderstandings and ensure smooth banking operations for non-residents.

The SBP highlighted that some banks have incorrectly applied restrictions on non-resident Pakistanis, preventing them from opening and maintaining foreign currency accounts due to their non-filer status in the Active Taxpayer’s List of the Federal Board of Revenue (FBR).

The SBP referred to the proviso of sub-section (4) of Section (5) of the Protection of Economic Reforms Act (PERA), 1992, which states:

“Provided that no cash shall be deposited in an account of a citizen of Pakistan resident in Pakistan, unless the account holder is a filer as defined in the Income Tax Ordinance, 2001.”

The SBP clarified that the restriction is specifically for Pakistani residents and does not extend to non-residents. “It is evident from the aforementioned proviso that the instructions contained therein are not applicable to non-residents,” the SBP stated in its circular.

This clarification is crucial as it ensures that non-resident Pakistanis can continue to benefit from the flexibility of maintaining foreign currency accounts without being penalized for their non-filer status. Foreign currency accounts are vital for non-residents, enabling them to manage their finances efficiently while abroad and facilitating remittances and investments in Pakistan.

The SBP’s move to clarify these provisions underscores its commitment to supporting the economic engagement of non-resident Pakistanis, who play a significant role in the country’s economy through remittances and investments. This clarification is expected to remove any operational barriers faced by non-residents and streamline their banking activities in Pakistan.

By addressing this issue, the SBP aims to foster a more inclusive and accommodating banking environment for all stakeholders. Banks are now expected to align their policies accordingly and ensure that non-residents can open and operate foreign currency accounts without unnecessary hindrances.

The SBP’s proactive stance in issuing this clarification highlights the importance of clear and precise communication in regulatory frameworks. It reassures non-resident Pakistanis that their financial transactions and account operations will not be adversely affected by misinterpretations of the tax regulations.

In conclusion, the SBP’s clarification is a positive step towards enhancing the banking experience for non-resident Pakistanis, ensuring that they are not subjected to restrictions meant only for residents. This move is likely to bolster confidence among non-residents and encourage them to continue their financial engagements with Pakistan, ultimately contributing to the country’s economic growth and stability.