The Federal Board of Revenue (FBR) has introduced a new requirement mandating overseas Pakistanis to secure approval from the Commissioner Inland Revenue to confirm their non-resident status in order to access tax rates applicable to “filers” for immovable property transactions.
According to a recent report, this new condition was clarified by the FBR in relation to the withholding tax under sections 236C and 236K of the Income Tax Ordinance.
The Finance Act 2022 had provided certain non-resident Pakistanis with exemptions from filing income tax returns. However, their exclusion from the Active Taxpayers List (ATL) resulted in them being subject to higher tax rates under the Tenth Schedule.
To ease the process for NICOP and POC holders, the FBR confirmed that section 100BA and the Tenth Schedule would not apply to their transactions taxed under sections 236C and 236K.
A similar provision had been available until June 30, 2024. However, the FBR later replaced the “non-resident” category on its portal with a “late filers” classification, which led to widespread confusion and delays in processing exemptions.
Real estate experts have criticized the newly introduced requirement of obtaining a certificate from the relevant Commissioner of Inland Revenue. They argue that it adds unnecessary complexity for overseas Pakistanis and pointed to ongoing uncertainty regarding the application of Federal Excise Duty (FED) on non-resident property transactions.
Under the revised procedure, non-resident taxpayers must upload their NICOP or POC documents to the FBR’s IRIS system. Following submission, a provisional PSID is forwarded to the relevant Chief Commissioner of Inland Revenue (CCIR), who will then assign it to the concerned Commissioner for verification. Upon successful verification, the taxpayer will be notified via SMS or email regarding their exemption status.
The FBR has instructed Chief Commissioners to complete the verification process within one business day to prevent undue delays. Nonetheless, real estate experts caution that this additional step could discourage overseas Pakistanis from investing in the country’s property sector.
