Diplomats, UN personnel and certain foreign government employees may qualify for income tax exemptions in Pakistan under Sections 42 to 44.
ISLAMABAD: Diplomats, United Nations officials and certain foreign government employees may qualify for income tax exemptions in Pakistan during Tax Year 2027 under provisions of the Income Tax Ordinance, 2001.
The Federal Board of Revenue (FBR), in the Income Tax Ordinance updated up to June 30, 2026, has outlined tax exemptions covering diplomats, United Nations personnel, foreign government officials and individuals covered by international agreements.
Tax exemption for diplomats and UN officials
Under Section 42, income of an individual entitled to privileges under the Diplomatic and Consular Privileges Act, 1972 is exempt from tax to the extent provided under that legislation.
Similarly, income of an individual entitled to privileges under the United Nations (Privileges and Immunities) Act, 1948 is exempt from income tax to the extent provided under the relevant law.
The provision also covers pensions received by Pakistani citizens because of their former employment with the United Nations or its specialised agencies, including the International Court of Justice, provided that their salary from such employment was exempt under the Income Tax Ordinance.
Foreign government employees
Section 43 provides a tax exemption for salary received by an employee of a foreign government for services rendered to that government, subject to specific conditions.
The employee must be a citizen of the foreign country and not a Pakistani citizen. The services performed must also be similar in character to those performed by Federal Government employees serving in foreign countries.
In addition, the employee’s home country must provide a similar tax exemption to Pakistani government employees performing comparable services there.
Exemptions under international agreements
Section 44 provides further exemptions where Pakistan is not permitted to tax certain Pakistan-source income under a tax treaty.
The section also provides exemptions for certain salaries paid under aid agreements between the Federal Government and foreign governments or public international organisations.
To qualify, an individual must generally meet conditions relating to residency, citizenship and the source of funds used to pay the salary.
The provision also covers contractors, consultants and experts working on projects in Pakistan where the project is financed through grant funds under bilateral or multilateral agreements.
Such individuals must meet prescribed conditions, including requirements concerning residency and the source of their income.
Government may grant case-by-case exemptions
The Federal Government may also exempt income on a case-by-case basis in respect of official development assistance financed through loans and grants-in-aid.
Such exemptions may be granted through a notification published in the official Gazette and are subject to conditions and limitations specified by the government.
Tax treatment for Tax Year 2027
The provisions establish the applicable tax treatment for diplomats, foreign officials and certain individuals working under international agreements for Tax Year 2027.
However, eligibility for the exemptions depends on the specific statutory conditions, applicable privileges, international agreements and notifications governing each category.