Who is a Tax Resident in Pakistan?

Introduction:

Residents are taxed on their worldwide income. The tax year is the 12-month period ending on 30 June and is denoted by the calendar year in which it ends. The tax year 2019 is from 01 July 2018 up to 30 June 2019. The tax year 2020 is from 01 July 2019 up to 30 June 2020.

Pakistan levies tax on its residents on their worldwide income. A non-resident individual is taxed only on Pakistan-source income, including income received or deemed to be received in Pakistan or deemed to accrue or arise in Pakistan.

A Person is an income tax resident in Pakistan if:

• The individual is present in Pakistan for a period or periods aggregating to 183 days or more in a tax year (July, 1^st through June, 30^th) irrespective of their nationality.
• The individual is present in Pakistan for an aggregate period of 120 days in any one tax year and in the preceding four tax years the aggregate stay is 365 days or more.
• One is an employee of the federal government of Pakistan or a provincial government posted outside Pakistan during the tax year.

An Association of Persons (AOPs) is considered a resident for a tax year if:

the control and management of its affairs is done wholly or partly in Pakistan at any time in that year.

A Company is resident for a tax year if :

• It is incorporated or formed by or under any law in force in Pakistan.
• The control and management of its affairs is situated wholly in Pakistan at any time in the year.
• It is a Provincial Government or a local Government in Pakistan.

In general payments made on account dividend, interest, royalties and fee for technical services income derived from Pakistan sources are subject to a 15% withholding tax (WHT), which tax has to be withheld /deducted from the gross amount paid to the recipient.