Chartered accountants urge Pakistan to enforce tax return filing for foreign residents staying more than 183 days annually.
ISLAMABAD: The Institute of Chartered Accountants of Pakistan (ICAP) has recommended making income tax return filing mandatory for foreign nationals residing in Pakistan for more than 183 days during a tax year.
In its budget proposals for 2026-27, ICAP suggested that all foreign individuals meeting the tax residency threshold should be legally required to declare their sources of income in Pakistan and comply with local tax laws, including filing income tax returns under Section 114 of the Income Tax Ordinance, 2001.
According to ICAP, Pakistan hosts a significant number of foreign nationals employed by multinational corporations, foreign-funded projects, diplomatic-linked organisations and local businesses. The institute estimates that more than one million foreign individuals are currently working in the country.
Despite their presence in the workforce, only a small proportion of these individuals are registered with the Federal Board of Revenue (FBR) or contribute to the national tax system, the institute noted.
ICAP emphasised the need for stricter enforcement of tax residency rules to ensure that all qualifying foreign residents are taxed fairly and consistently. Under the proposal, foreign nationals residing in Pakistan beyond the prescribed period would be required to declare Pakistani-sourced income and fulfil the same tax obligations as resident Pakistani taxpayers.
The institute highlighted several benefits of the proposed measure, including the prevention of tax evasion and underreporting by foreign employees, ensuring equitable tax contributions from all income earners, and broadening the country’s tax base without placing additional burdens on existing compliant taxpayers.
ICAP further stated that the policy would enhance transparency and accountability in sectors that employ foreign professionals while strengthening revenue collection efforts.
The institute argued that adopting such a framework would align Pakistan with international practices governing the taxation of resident foreign nationals. It would also reinforce the principle that all individuals residing and earning income in the country should contribute their fair share towards the national economy, regardless of nationality.
The recommendation forms part of ICAP’s broader tax reform proposals aimed at improving documentation, expanding the tax net and increasing revenue generation in the upcoming federal budget for 2026-27.
