Govt Imposes 35% Tax on Foreign Allowance

The Federal Government has levied a 35 percent income tax on foreign allowances.

According to the second schedule of the Income Tax Ordinance, 2001, “Exemptions on (foreign) allowance or prerequisite which is paid or allowed outside Pakistan by the government to a citizen of Pakistan for rendering services outside Pakistan,” was earlier available under clause 5 of part 1 of the second schedule of the ordinance. This exemption has now been withdrawn.

Sources said that diplomats serving at Pakistan embassies abroad receive a foreign allowance in dollars as per the inflation in their respective countries.

The Government of Pakistan gives Rs. 1 billion annually to officers as foreign allowance. If one officer pays Rs. 100,000 in taxes in Pakistan, he will now pay more than Rs. 1.3 million in taxes after the withdrawal of this exemption, the officers said.

The sources said that by withdrawing this exemption, the FBR will be able to collect Rs. 1 billion from officers working in Pakistani missions abroad.

The FBR imposed this tax without conducting any studies and should have imposed it keeping in view inflation in the respective countries, they said.

The sources also mentioned that the officers in foreign services will be affected the most by the imposition of this tax.

The high-ups of foreign services have taken this matter up with the Minister for Finance and the Chairman of the FBR.

Note that the FBR cannot decide matters itself after the approval of the budget by the Parliament but the Prime Minister’s Office can give the concession through Statutory Regulatory Orders (SRO) or hold it in abeyance.

It was also previously reported that officers from the Ministry of Foreign Affairs had warned that the Foreign Office, Pakistan embassies, and consulates abroad would be shut down if the exemption was not restored.



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