Govt redefines what it means to be a resident Pakistani for tax purposes

• The govern,ent has changed the definition of who will be considered a resident Pakistani through the Finance Act 2021-22.
• Under the definition, an individual who spends 183 days or more days in the country during a tax year will be considered a resident for tax purposes.
• The number of days of residence in Pakistan will be counted for each year.

ISLAMABAD: The government has redefined who can be considered a resident of Pakistan by changing its legal definition to mean individuals who spend a period in aggregate of 183 days or more in the country during a tax year.

The Finance Act 2019 had broadened the definition of a resident person as anyone who remained in Pakistan for 120 days during a tax year and who was also present in Pakistan for a cumulative 365 days during the preceding four years.

Now the Finance Act 2021-22 has withdrawn this condition. 

In the change, in order to determine the residential status of an individual, the number of days of residence in Pakistan will only be counted for each tax year.

On Thursday, the FBR had issued an explanation changing the definition of a resident individual, saying it now required “a person to be in Pakistan for a period in aggregate to 183 days or more in a tax year to become a resident."

The other conditions have been waived off by omitting clause (ab) of Section 82 of the Income Tax Ordinance 2001, the FBR added. 

Pakistan is a signatory to many international bilateral and multilateral tax treaties and agreements. However, the law does not provide legal cover to recovery of taxes on the request of a foreign jurisdiction. In order to cater to this, enabling provisions have been introduced by amending Section 107 and introducing new Section 146 of the Ordinance.