Government to Tax Dual Nationals and Tech Companies on Income Earned in Pakistan
The government is expanding taxation rules for non-residents earning income in Pakistan through digital means under the revised Finance Bill 2024.
Tech companies and dual nationals who earn money in Pakistan, such as from rental income, will now be taxed. If Pakistan signs a double taxation agreement with another country, foreign nationals will only pay tax in one of the two countries. However, any business presence in Pakistan will make them liable for tax.
The revised bill introduces new rules under Sections 3A and 3B of Section 101 in the 2001 Ordinance. According to Section 101(3), the business income of a non-resident is considered Pakistan source income if it is linked to a business connection in Pakistan.
The bill now defines “business connection” to include “significant economic presence in Pakistan.” This means:
- Transactions involving goods, services, or property, including downloads of data or software, if payments exceed a specified amount.
- Systematic and continuous business activities or digital interactions with a prescribed number of users in Pakistan, regardless of where agreements are signed or whether the non-resident has a physical presence in Pakistan.
The new rules will apply once the specific amounts and user numbers are set, but the exact authority for these details is still unclear.
