What counts as Pakistan-source income for a non-resident
Once residence is settled, the next question for a non-resident is scope: which income remains within the Pakistani net? The answer is not intuitive, because it turns on where income is sourced rather than on where it is received or where you live.
The main source categories
| Income | Pakistan-source? | Notes |
|---|---|---|
| Rent from Pakistani immovable property | Yes | Taxable under the property head; section 155 withholding where the tenant is a prescribed person |
| Gain on disposal of Pakistani property | Yes | Plus advance tax at transfer — section 236C |
| Dividend from a Pakistani company | Yes | Subject to withholding |
| Profit on a Pakistani bank deposit | Yes | Subject to withholding under section 151 |
| Salary for employment exercised in Pakistan | Yes | Sourced where duties are performed |
| Salary for work performed entirely abroad | Generally no | Fact-dependent; travel to Pakistan complicates it |
| Business income from a Pakistani connection | Depends | Including through significant economic presence |
| Royalties and fees for technical services from Pakistani payers | Generally yes | Withholding applies; treaty relief may modify |
| Foreign employment, business or investment income | No | Outside the non-resident charge |
Significant economic presence
This is the provision most non-resident businesses have not registered. Business income of a non-resident can be treated as Pakistan-source where there is a significant economic presence in Pakistan, established on specified criteria rather than on physical premises.
The intent is to reach business models that serve Pakistani customers without setting foot here — digital services, platforms, remote software and subscription businesses. Practical implications:
- Absence of an office, staff or bank account in Pakistan does not settle the question.
- Revenue derived from Pakistani customers, and the scale of digital interaction with them, are relevant.
- Where the threshold is met, a filing and withholding position can arise for a business that considered itself entirely outside Pakistan.
Alongside this sits the section 6A regime taxing payments for digitally ordered goods and services delivered from within Pakistan through locally operated platforms — see e-commerce and digital business tax.
You live and work outside Pakistan, you still hold property, bank accounts or rental income here, and nobody has ever told you in writing what your status actually is.
Withholding does most of the collection
For non-residents, tax is usually collected by the Pakistani payer rather than through a return. Payments to non-residents fall under their own provisions with rates varying by payment type, and the payer carries the obligation and the exposure.
Where treaty relief fits
Pakistan has double taxation treaties with many jurisdictions. A treaty can reduce or eliminate Pakistani tax on specified categories — dividends, interest, royalties, technical service fees, business profits absent a permanent establishment. Three things to understand:
- Relief is claimed, not automatic. A payer without documentation will withhold at domestic rates, correctly.
- Residence in the other state must be established, typically with a tax residence certificate from that jurisdiction.
- Each article has its own conditions, including beneficial ownership and, in some treaties, anti-abuse provisions.
Permanent establishment: the other threshold
Alongside significant economic presence sits the more traditional question of whether a non-resident has a permanent establishment in Pakistan. Where one exists, business profits attributable to it are generally taxable here, and treaty protection for business profits typically falls away.
The situations that create one more often than businesses expect:
- A fixed place of business — an office, branch, workshop or site, even a small one.
- A dependent agent habitually concluding contracts on your behalf in Pakistan.
- A project site where work continues beyond a threshold duration.
- Employees present in Pakistan for an extended period performing core activities.
Practical steps for a non-resident with Pakistani income
- Confirm residence for each tax year on the day count — the 183-day rule.
- List your Pakistani income sources and assets and classify each as Pakistan-source or not.
- Check Active Taxpayer List status. It applies to non-residents identically, and it drives withholding on property and banking transactions — ATL status.
- Establish the treaty position before payments are made, with the residence certificate in hand.
- Keep Pakistani correspondence details current in IRIS, so a notice served in Pakistan is actually seen.
- File where an obligation exists, which for property owners it usually does — who must file.
Sources
This guide is written against the official and clearly labelled professional references below. Rates, thresholds and portal procedures change between reviews, so open the primary source before relying on a figure.
- Income Tax Basics (FBR)
- Overseas Pakistanis tax guidance (FBR)
- Withholding Tax Rate Cards (FBR)
- Finance Act 2026 (FBR)
Questions people also ask
I am non-resident and my company has no office in Pakistan. Can I still be taxed here?
Potentially yes. Business income of a non-resident can be treated as Pakistan-source where there is a significant economic presence in Pakistan based on specified criteria, which is designed to reach digital and remote business models without physical premises. If you derive meaningful revenue from Pakistani customers, the position should be tested rather than assumed.
Is my salary taxable in Pakistan if I work remotely for a Pakistani company from abroad?
The general principle is that salary is sourced where the employment is exercised, so work performed entirely outside Pakistan points away from Pakistani source. But the analysis depends on the facts — where duties are performed, where the employer is, and what the contract provides — and a role involving periodic travel to Pakistan complicates it. Get it reviewed rather than inferred.
Does a treaty automatically reduce my Pakistani tax?
No. A treaty allocates taxing rights and may reduce or eliminate Pakistani tax on particular categories, but relief is claimed rather than automatic. It generally requires establishing residence in the other state, often through a tax residence certificate, and satisfying the conditions in the relevant article. A payer will withhold at domestic rates absent proper documentation.
Who is responsible for withholding on payments to me as a non-resident?
The Pakistani payer, under the provisions governing payments to non-residents. That is why the treaty and documentation position needs settling before the invoice is paid rather than afterwards — once tax has been withheld at the domestic rate, recovering it requires a claim rather than a conversation.
I sold my Pakistani plot while living abroad. What applies?
The gain on Pakistani immovable property is Pakistan-source and remains taxable regardless of your residence, and the advance tax collection at transfer applies with your Active Taxpayer List status driving the rate. Non-residence changes neither. This is the most common way overseas Pakistanis encounter the system unexpectedly.
Send the tax year and the transaction or filing involved, and we will tell you what is actually required.
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