Govt Imposes New Tax on Dual Nationals and Tech Companies

The government has introduced new tax rules for dual nationals and tech companies generating income in Pakistan. This new tax is part of the updated Finance Bill for 2024–25 that easily sailed through the National Assembly despite protests.

Who Will Be Affected?

Tech Companies: International tech firms earning income from Pakistan.
Dual Nationals: People with citizenship in another country but earning money in Pakistan, like rental income.
Foreign Nationals: If Pakistan signs a double taxation agreement with another country, people from that country will only pay taxes in one of the two countries.

We already remember that the Federal Board of Revenue (FBR) has issued a notice to Netflix to pay Rs. 200 million in income tax.

The bill proposes adding sections 3A and 3B to Section 101 of the 2001 Ordinance, which will classify any business income from non-residents as Pakistan-sourced if it is connected to any business activity in the country.

Furthermore, the bill introduces the concept of a “significant economic presence in Pakistan” as a basis for taxation. This includes transactions with people in Pakistan, such as selling goods or services, including digital products like software.

It also covers regular business activities or digital interactions with users in Pakistan, regardless of whether the agreement is signed in Pakistan or the services are physically provided in the country.

This change is designed to make sure that non-residents who earn money in Pakistan through digital channels will also pay taxes here. However, the specific rules about amounts and the number of users involved are yet to be decided.

These new rules will take effect once all the details are clear. The authority responsible for these details has not been specified yet. This move is part of Pakistan’s effort to modernize its tax system and ensure fair taxation for all who earn income within the country.

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