Govt May Amend Laws Related to Changing Tax Residency for Non-Resident Pakistanis

The federal government is likely to bring amendments in laws related to changing tax residency for non-resident Pakistanis in next year’s budget.

Sources told ProPakistani that Capital Value Tax and tax on deemed income under section 7E of Income Tax Ordinance, 2001 is applicable to individuals resident in Pakistan.

Under section 82 of the Ordinance, an individual is resident in Pakistan if the individual is present in Pakistan for a period of 183 days or more in a tax year, an employee of federal or provincial government posted abroad in the tax year and being a citizen of Pakistan is not present in any other country for more than 180 days during the tax year or who is not a resident of any other country.

It has been observed that taxpayers are changing their tax residency status by staying in another country for more than 6 months.

It is, therefore, recommended that suitable amendments be made, which would be applicable from Tax Year 2023 to the effect that the assets owned by such individuals would be deemed as disposed of, in the year in which such person has become non-resident.

The deemed disposal would require paying tax on capital gains which would be calculated as the difference of the fair value of assets (whether local or foreign) at year-end in which such person becomes a non-resident) and the original cost of such assets in that person’s hands.

For this purpose, suitable amendments would be required in Section 75 –Disposal and Acquisition of Assets.

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