Pakistan residents claiming tax credits on foreign income must submit an application with their income tax return and provide supporting evidence of foreign tax payments.

ISLAMABAD: The Federal Board of Revenue (FBR) has explained the procedure for claiming foreign tax credits by Pakistan residents for Tax Year 2027, covering July 1, 2026 to June 30, 2027.

The FBR issued the Income Tax Rules, 2002, updated up to September 15, 2026, explaining Rule 16 concerning foreign tax credits under Section 103 of the Income Tax Ordinance, 2001.

Under Rule 16, a resident taxpayer seeking a foreign tax credit must submit an application along with their income tax return for the relevant tax year.

The application must follow the prescribed format provided in Part I of the First Schedule to the Income Tax Rules, 2002.

Documents required for foreign tax credit

According to the FBR rules, taxpayers must provide supporting documents with their applications.

Where foreign income tax has been deducted at source, the applicant must submit a declaration from the income payer confirming the deduction, along with a certified copy of the receipt received by the payer from the foreign tax authority.

In other cases, taxpayers must provide the original or a certified copy of the receipt issued by the foreign tax authority confirming payment of the tax.

Alternative evidence allowed

Rule 16 also provides relief where a resident taxpayer cannot obtain evidence of tax deduction from the foreign income payer.

In such circumstances, the Commissioner Inland Revenue may accept alternative evidence of the tax deduction, subject to the evidence being considered acceptable by the Commissioner.

These provisions establish the documentation and application requirements for Pakistan residents seeking foreign tax credits under Section 103 for Tax Year 2027.