Foreign Government Officials

<< Computation of Income, partly Agricultural,

Exemptions and Tax Concessions >>

Taxation Management FIN 623

MODULE 4

LESSON 4.12

HEADS OF INCOME (SECTION 11)

Section 43 Foreign Government Officials

Salary of an employee of foreign government exempt Provided:

a. Employee citizen of foreign country and not a citizen of Pakistan.

b. Services performed are similar to services performed by employees of the Federal Government in

foreign countries and

c. Foreign government also grants similar exemptions to employees of Federal Government.

Exemptions under International Agreements Section 44

44. Exemptions under international agreements

(1) Any Pakistan-source income which Pakistan is not permitted to tax under a tax treaty

shall be exempt from tax under this Ordinance.

(2) Any salary received by an individual (not being a citizen of Pakistan) shall be exempt

from tax under this Ordinance to the extent provided for in an Aid Agreement between

the Federal Government and a foreign government or public international

organization, where:

(a) the individual is either not a resident individual or a resident individual solely

by reason of the performance of services under the Aid Agreement;

(b) if the Aid Agreement is with a foreign country, the individual is a citizen of

that country; and

organization out of funds or grants released as aid to Pakistan in pursuance of

such Agreement.

(3) Any income received by a person (not being a citizen of Pakistan) engaged as a

contractor, consultant, or expert on a project in Pakistan shall be exempt from tax

under this Ordinance to the extent provided for in a bilateral or multilateral technical

assistance agreement between the Federal Government and a foreign government or

public international organization, where:

(a) the project is financed out of grant funds in accordance with the agreement;

(b) the person is either a non-resident person or a resident person solely by reason of

the performance of services under the agreement; and

Exemptions under Tax Treaty

Any salary received by an individual (not being a citizen of Pakistan) shall be exempt from

Tax to the extent provided for in an Aid Agreement.

Section 45 President's Honour

(1) Any allowance attached to any Honour, Award, or Medal awarded to a person by the President

of Pakistan shall be exempt from tax under this Ordinance.

(2) Any monetary award granted to a person by the President of Pakistan shall be exempt from tax

under this Ordinance.

Section 46 Profit on Debt

Any profit received by a non resident person on a security issued by a resident person shall be exempt

from tax Provided:

· Persons not associates

· Security widely issued by resident person outside Pakistan

· Profit on security was paid outside Pakistan

· Security approved by Central Board of Revenue (CBR)

Section 47 Scholarships

· Any scholarship granted to a person to meet the cost of person's education shall be exempt from tax.

Section 48 Support Payments under an Agreement to Live Apart

Any income received by a spouse as support payment under an agreement to live apart shall be exempt

from tax under this Ordinance.

Taxation Management FIN 623

Section 49 Federal & Provincial Govt. and Local Authority Income

· Income of Federal Government exempt from tax

· Income of Provincial Government or a Local Authority in Pakistan shall be exempt under all heads

of income other than income from Business, derived outside its jurisdictional area, that shall be

taxable.

· Federal Government, a Provincial Government or a Local Authority shall not be liable to any

collection or deduction of advance tax.

Section 50 Foreign-Source Income of Short-Term Resident Individuals

1. Subject to sub-section-2, the foreign-source income of an individual shall be exempt:

a. Who is a resident individual solely by reason of the individual's employment; and

b. Who is present in Pakistan for a period or periods not exceeding three years,

2. This section shall not apply to

a. Any income derived from a business of the person established in Pakistan; or

b. Any foreign-source income brought into or received in Pakistan by the person.

Section 51 Foreign-Source Income of Returning Expatriates

1. Any foreign-source income derived by a citizen of Pakistan in a tax year who was not a resident

individual in any of the four tax years preceding the tax year in which the individual became a

resident shall be exempt from tax under this Ordinance in the tax year in which the individual

became a resident individual and in the following tax year.

2. Where a citizen of Pakistan leaves Pakistan during a tax year and remains abroad during that tax

year, any income chargeable under the head :Salary" earned by him outside Pakistan during that

year shall be exempt from tax under the Ordinance.

Exemptions and tax Concessions in second Schedule Section 53

Income is exempt from income tax derived from voluntary contributions, to charitable or religious

institutions. The exemption is conditional to:

a. must be solely applied for the purposes of the objects of the institution

b. No benefit for private religious trust which do not ensure for public benefit.

Certain receipts of charitable institution [Clause (60), Part I of the Second Schedule]

Donation to certain institution [Clause (61), Part I of the Second Schedule]

"[Any] amount paid as donation to the following institution, foundations, societies, boards, trusts and

funds, namely:

i) Any Sports Board or Institution recognized by the Federal Government for the purposes of

promoting, controlling or regulating any sport or game;

ii) Fund for Promotion of Science and Technology in Pakistan

iii) Fund for Retarded and Handicapped Children; Proviso, Individual 30,Co.15p.c

Donation to the President's Relief Fund for Earthquake Victims 2005 [Clause (63A),]

"Any amount paid as donation to the President's Relief Fund for Earthquake Victims 2005."

Foreign Currency Accounts [Clause (80), Part I of the Second Schedule]

"Any income derived from a private foreign currency account held with an authorized bank in Pakistan, [or

certificates of investment issued by Investment Banks,] in accordance with the Foreign Currency Accounts

Scheme introduced by the State Bank of Pakistan, by a resident individual who is a citizen of Pakistan.

Provided that the exemption under this clause shall not be available in respect of any incremental deposits

made in the said accounts on the after the 16th day of December, 1999, or in respect of any accounts

opened under the said scheme on or after the said date."

Table of Contents: