The Federal Board of Revenue (FBR) has introduced a new requirement for overseas Pakistanis to obtain approval from the Commissioner Inland Revenue to verify their non-resident status for availing tax rates applicable to “filers” on immovable property transactions.
According to a news report, this condition was outlined in a clarification issued by the FBR regarding withholding tax under sections 236C and 236K of the Income Tax Ordinance.
The Finance Act 2022 exempts some non-resident Pakistanis from filing income tax returns. However, their absence from the Active Taxpayers List (ATL) subjects them to higher tax rates under the Tenth Schedule.
To facilitate NICOP and POC holders, the FBR stated that section 100BA and the Tenth Schedule would not apply to such individuals in transactions taxed under sections 236C and 236K.
A similar provision existed in the tax laws until June 30, 2024, but the FBR recently replaced the non-resident category on its portal with a “late filers” category, creating confusion and delays.
Real estate experts criticized the new condition requiring a certificate from the concerned Commissioner of Inland Revenue, arguing that it unnecessarily complicates the exemption process for overseas Pakistanis. They also pointed out the lack of clarity on applying Federal Excise Duty (FED) for non-residents in property transactions, leaving room for ambiguity.
Under the new system, non-resident taxpayers seeking exemptions must upload their NICOP or POC to the FBR’s IRIS system. A provisional PSID will then be forwarded to the relevant Chief Commissioner of Inland Revenue (CCIR), who will delegate it to the concerned Commissioner for verification. Once verified, taxpayers will be notified of their exemption status via SMS or email.
The FBR has directed Chief Commissioners to process these verifications within one business day to avoid unnecessary delays. However, real estate experts have raised concerns that this additional step may deter overseas Pakistanis from investing in the country’s property sector.
