Islamabad: In the upcoming budget for 2023-2024, the federal government is reportedly considering amendments to the legislation concerning the alteration of tax residency for non-resident Pakistanis. As per a report from a reliable news source on May 31.

The report highlights the Capital Value Tax and the tax imposed on income under Section 7E of the Tax Ordinance. It currently applies to resident individuals of Pakistan.

According to Section 82 of the Ordinance, an individual is recognized as a resident in Pakistan if they spend 183 days or more in the country during a tax year. Or if they are a government employee living abroad in that tax year while also being a Pakistani citizen not present in any other country for over 180 days during the tax year. Or if they are not a resident of any other country.

The news source reveals that taxpayers are exploiting this provision by manipulating their tax residency status. They are spending more than six months in another country. Therefore, they recommended amendments implementing suitable tax modifications for non-resident Pakistanis starting from the tax year 2023-24. The proposed amendment suggests that the assets owned by such individuals will be considered disposed of in the year.

Under the provision of deemed disposal. The individuals will have to pay tax on capital gains, as per the difference between the fair value of assets. This necessitates tax adjustments for non-resident Pakistanis under Section 75 – Disposal and Acquisition of Assets.