Islamabad: The Federal Board of Revenue issued a detailed circular on Tuesday aimed at explaining important amendments to the Income Tax Ordinance 2001 made through the Budget 2019-20 one of which significantly changed the definition of a resident – a news source reported.
The circular changed the definition of resident individuals for tax purposes. Previously, an individual was treated as a ‘resident’ for a tax year if they were present in Pakistan for a period of 183 days (over six months) or more in a tax year. Now, in addition to that, a person will be considered a resident if they stayed in Pakistan for a period of 120 days in a tax year, provided that the cumulative number of days they stayed in Pakistan during the past four years total to 365. This can have a significant impact on the tax status of overseas Pakistan since non-resident Pakistani are exempt from payment of taxes.
This new policy can have a significant impact on the tax status of overseas Pakistanis since these individuals are exempted from payment of taxes.
Moreover, several modifications have been made to the definitions of the terms: offshore tax evasion, offshore asset, offshore enabler, and asset mover.
Any offshore asset is now defined as moveable or immoveable asset held – any gain, profit or income derived – or any expenditure incurred outside Pakistan.
Similarly, an offshore evader is an individual who ‘owns, possesses, controls or is a beneficial owner of an offshore asset and does not declare, under-declares, or provides inaccurate particulars of such assets to the FBR.’