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Lecture 104 Final

The document outlines the criteria for determining residency status for tax purposes in Pakistan, using examples of individuals' stays in various countries. It specifically discusses Akbar's situation regarding his foreign salary income earned in 2023, detailing the implications of his residency status based on his time spent in Pakistan, the USA, and the UK. Ultimately, it concludes that Akbar's foreign salary may be exempt from tax in Pakistan if he qualifies as a resident taxpayer and has paid foreign income tax.

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8 views

Lecture 104 Final

The document outlines the criteria for determining residency status for tax purposes in Pakistan, using examples of individuals' stays in various countries. It specifically discusses Akbar's situation regarding his foreign salary income earned in 2023, detailing the implications of his residency status based on his time spent in Pakistan, the USA, and the UK. Ultimately, it concludes that Akbar's foreign salary may be exempt from tax in Pakistan if he qualifies as a resident taxpayer and has paid foreign income tax.

Uploaded by

fahol42267
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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CAF-02 Lecture 104

Section 82 Resident Individual (Chapter 4)


(d) is a citizen of Pakistan and
o is not present in any other country for more than 182 days during the tax year or
o who is not a resident taxpayer of any other country.
Example-1
Mr. Kamran is citizen of Pakistan. He stayed in China for 100 days and stayed in Germany for 100 days.
His stay in Pakistan is for 165 days. He is not resident of China or Germany.
Solution
He is resident individual because
- he is citizen of Pakistan and
- he is not present in one foreign country for more than 182 days and
- he is not resident of any other country
Example-2
Mr. Taimoor is citizen of Pakistan. He stayed in China for 185 days. He stayed in Pakistan for 180 days.
Solution
He is non-resident individual. Though he is a citizen of Pakistan but he is present in one foreign country
for more than 182 days.

Question-5
Akbar, a Pakistani citizen, worked at ABC Pakistan Limited, an unlisted public company and a wholly
owned subsidiary of ABC International, which is based in the USA. Akbar’s engagement was formed
through a two-year agreement, with the provision that at the end of this period, he had the option to
continue his employment with ABC International in USA.
The two-year period ended on 30 September 2022 and Akbar left for USA on 1 October 2022 to continue
his employment in USA as per the agreement.
On 15 February 2023, he resigned from ABC International, USA, and joined DEF Limited in the UK
under an employment agreement. However, due to his family problems, he resigned from DEF Limited
and returned to Pakistan on 30 April 2023.
Required:
Under the provisions of the Income Tax Ordinance, 2001, discuss the tax treatment Akbar’s foreign
source salary income earned during the tax year 2023. (06)
(September 2023) (Q.5 (a))
Answer-05
(a) Under the ITO-2001, where a citizen of Pakistan leaves Pakistan during a tax year and remains
abroad during that tax year, any salary income earned by him outside Pakistan during that year
shall be exempt from tax.
Since Akbar returned to Pakistan before the end of tax year, his foreign source salary will not be
exempt from tax in Pakistan.
However, if he paid foreign income tax in respect of his foreign salary, his foreign- source salary
will be exempt from tax. This exemption is only available if he is a resident.

Page 1
CAF-02 Lecture 104

His residency determination is based on his presence in different countries during the tax year
2023, as depicted below:
Country Period Days
Pakistan 1 July - 1 Oct 22 93
30 April - 30 June 23 62
155
USA 2 Oct 22 - 15 Feb 23 137
UK 16 Feb 22 - 29 April 23 73

First criterion for residency


As the above table shows that Akbar was present in Pakistan for 155 days, which is less than 183
days, he does not fulfill the first criterion for residency.
Second criterion for residency
With respect to the second criterion, Akbar
- is a citizen of Pakistan,
- was not present in any other country for more than 182 days.
If he was not a resident taxpayer in USA or UK, he was to be recognised in Pakistan as a resident
for the tax year 2023 so his income will be exempt.
If Akbar is classified as resident of other countries then he would be classified as a non-resident
in Pakistan, and therefore his foreign source salary would not be subject to tax in Pakistan.

Page 2
Yes Resident

Stayed in Pakistan Govt employee


No Yes Resident
for 183 days posted abroad
or more
Present in
He is any other Yes Non resident
No Citizen country for No Resident
(Yes) more than 182 Resident of any
No
days other country Yes Non resident

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