Pakistan imposes new taxes on dual nationals and tech companies in Budget 2024-25

The Pakistani government has introduced new tax regulations targeting dual nationals and tech companies earning income in Pakistan. These changes are part of the updated Finance Bill for 2024-25, which has been passed by the National Assembly despite facing protests.

Key Provisions of the Finance Bill:

For Tech Firms:

• International tech firms generating income from Pakistan will now be subject to taxation under the new bill. This includes income from selling goods or services, digital products, and regular business activities or digital interactions with users in Pakistan, regardless of where the agreements are signed or services are provided.

For Dual Nationals:

• Dual nationals earning money in Pakistan, such as rental income, will also be taxed under the new regulations. This measure aims to ensure that individuals holding citizenship of another country but earning income in Pakistan contribute to the tax system.

Read More: The government enforces a 1% advance tax on all exporters

For Foreign Nationals:

• If Pakistan signs a double taxation agreement with another country, individuals from that country will only be taxed in one of the two countries, reducing the tax burden and avoiding double taxation.

The new bill proposes adding sections 3A and 3B to Section 101 of the 2001 Ordinance. These additions classify any business income from non-residents as Pakistan-sourced if connected to any business activity in Pakistan. This ensures that non-residents earning money through digital channels in Pakistan will also be taxed.

Broader Taxation Measures:

The government has enforced new taxation measures totaling Rs. 1.761 trillion through the Finance Act 2024, effective from July 1. These measures include:

• An increased tax burden on the salaried class.
• Heavy indirect taxation on the general public, including a sales tax on stationery items, dairy products, and poultry feed.

These changes aim to boost the country’s revenue amid ongoing economic challenges, but they have also attracted criticism for increasing the financial burden on various sectors of society.