Major Relief for Overseas Pakistanis: FBR Introduces Tax Exemption

Big News – (Overseas Pakistanis tax exemption): The Federal Board of Revenue (FBR) has introduced major relief for overseas Pakistanis.

Non-residents holding a Pakistan Origin Card (POC) or National ID Card for Overseas Pakistanis (NICOP) will no longer face high withholding taxes under sections 236C and 236K of the Income Tax Ordinance, 2001.

This change comes after the Finance Act, 2022, added Clause 111AC to exempt them, even if they are not on the Active Taxpayers List (ATL).

Who Qualifies as a Non-Resident?

To be eligible, an expatriate must have spent more than 183 days outside Pakistan in the last 12 months. This aligns with Pakistan’s standard tax definition of a non-resident.

The FBR will verify this status before granting the exemption.

How the New System Works

First, the FBR has updated its IRIS system to process these exemptions. Non-resident taxpayers who want to benefit must upload their POC or NICOP when creating a CPR (Central Payment Registration). After uploading, the system generates a provisional PSID (Payment Slip ID).

Next, the case goes to the Chief Commissioner of Inland Revenue (CCIR). The CCIR assigns it to a Commissioner of Inland Revenue (CIR) for verification. The CIR checks two key things:

1. Whether the taxpayer holds a valid POC or NICOP.
2. Whether they meet the 183-day non-resident rule.

If everything is correct, the taxpayer gets approval via SMS or email. Once approved, they can claim the exemption.

The FBR has also instructed tax offices to speed up the process. Verification must be completed within one business day, ensuring quick results for overseas Pakistanis.

Why This Matters

Before this rule, overseas Pakistanis faced higher tax rates if they weren’t on the ATL.

Many found this unfair since they live abroad and may not meet local tax requirements. Now, with Clause 111AC, they can avoid extra charges by proving their non-resident status. This move is part of Pakistan’s effort to support its diaspora.

Overseas Pakistanis send billions in remittances yearly. By easing tax burdens, the government hopes to encourage more investment and financial engagement from abroad.

What Overseas Pakistanis Need to Do

If you’re a non-resident with a POC or NICOP, follow these steps:

1. Confirm Eligibility – Ensure you’ve spent over 183 days abroad in the past year.
2. Upload Your Documents – Submit your POC or NICOP when creating a CPR.
3. Wait for Verification – The tax office checks your non-resident status.
4. Get Approval – You’ll receive an SMS or email once confirmed.
5. Claim Exemption – Use the approved PSID to avoid higher taxes.

The process is designed to be simple, with the FBR’s one-day verification rule preventing delays.

Looking Ahead

This policy shows Pakistan’s commitment to its overseas citizens. By removing tax hurdles, the government aims to strengthen diaspora ties. It also makes Pakistan’s tax system more competitive for global citizens.

For now, the focus is on smooth implementation. If successful, more reforms could follow. Overseas Pakistanis should stay updated on tax changes to maximise these benefits.

In short, the new exemption is a win for non-resident Pakistanis. It cuts unnecessary costs and simplifies tax filing. For those living abroad, this is a step in the right direction.