Income earned by Pakistani residents abroad: do they have to pay tax in Pakistan?

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Income earned by Pakistani residents abroad: do they have to pay tax in Pakistan?

KARACHI (June 29 2010): Wealth is what you have in the bank and the assets you can sell (house, car, stocks, bonds, etc). Income is what your employer gives you or you take out of your own company. In Pakistan, you pay tax on your income, not on your wealth. However, there are some interesting cases that show that country's taxation authorities have sought to tax an individual's wealth.

Karachi Regional Tax Office (RTO) has adopted a novel strategy to broaden tax base as provisional assessment notices are being served without proper verification of data obtained from provincial excise and taxation department, raising fears amongst people, particularly those living abroad.

The tax office, without proper verification of the information of Sindh excise and taxation department, has inadmissibly issued show cause notices to even non-resident Pakistanis, who are not laible to pay income tax that they earn abroad.

According to a show cause notice, which was recently delivered at the locked residence of a non resident Pakistani who has been working abroad for the past many years, Karachi RTO has identified him as a non-filer because he purchased a vehicle in 2009 without paying income tax!

The department, without any physical verification in this regard, has told him that legal proceedings would be initiated against him in the event of non compliance. The Karachi RTO, which is supposed to cross-match information with available FBR data, is indiscriminately issuing provisional assessment notices to broaden the tax base.

Sources said most of the non-resident Pakistanis who have been served with notices do qualify for income tax exclusion. These Pakistani citizens are resident of various foreign countries for a full tax year or more. They had been physically present in those foreign countries for 330 full days out of 12 consecutive months for several tax years.

Business Recorder [Pakistan's First Financial Daily]