A structured proposal for returning overseas Pakistanis and resident Pakistanis with declared foreign assets
This article discusses the principal issues faced by Pakistani tax residents holding foreign assets and the measures needed to encourage them to bring legitimate foreign assets and investment proceeds into Pakistan. These issues include uncertainty regarding disclosure of historical assets, verification of acquisition cost, taxation of foreign income and gains, exchange-rate effects, and the protection and repatriation of foreign capital after it is brought into Pakistan.
Another important concern is that a returning overseas Pakistani may have access to broader investment choices through a Roshan Digital Account while non-resident, but after becoming resident the available investment avenues become much narrower.
This reduces the commercial attraction of bringing foreign funds into Pakistan and may cause otherwise compliant Pakistanis to retain their assets and investment proceeds abroad.
Addressing these concerns has become increasingly important in the current geopolitical environment, as Pakistan seeks to improve its international economic standing and attract foreign investment.
Tax Residence and Section 51(1)- understanding and review required
A Pakistani tax resident is generally taxed on worldwide income. This means that income earned in Pakistan as well as income arising abroad, such as foreign rent, profit, dividends, salary or capital gains, may fall within the Pakistani tax return, subject to any exemption, foreign tax credit or applicable tax treaty.
A resident individual is also required to file a wealth statement disclosing assets and liabilities in Pakistan and abroad.
A separate foreign income and assets statement may also be required where the statutory limits are met. This disclosure can include foreign assets acquired in earlier years, including years when the person was non-resident.
The first and basic rule for determining tax residency is that an individual who stays in Pakistan for 183 days or more during a tax year is treated as a tax resident of Pakistan.
For Pakistani citizens, the Finance Act, 2022 introduced additional criteria under which a citizen could also be treated as resident even where the stay in Pakistan was less than 183 days.
In simple terms, a Pakistani citizen who was not present in any other country for more than 182 days during the tax year, or who was not a resident taxpayer of another country would also be considered as tax resident of Pakistan.
The said additional criteria fundamentally based on citizenship along with CVT on foreign assets of resident individuals led to many high net worth individuals/families transferring citizenship or foreign assets of/through some close family members.
While CVT has been withdrawn, the additional criteria of tax residency based on citizenship needs a review keeping in view the evolving situation across the world and ought to be brought in line international best practices whilst keeping in view Pakistan’s ground realities.
Section 51(1) gives limited relief to a Pakistani citizen who becomes resident after remaining non-resident for all four tax years immediately before the year of return. The person’s foreign-source income is exempt in the tax year in which residence begins and in the following tax year.
In simple terms, the current relief normally covers two tax years for those Pakistani citizens coming back. In line with review required for tax residency provisions, Sec 51(1) also require expansion to include those holding Pakistan origin cards.
Categories of Pakistanis holding foreign assets
This article principally addresses two categories of Pakistanis: first, overseas Pakistanis who return to Pakistan and become tax residents while continuing to hold foreign assets accumulated during their period of non-residence; and second, Pakistan-resident persons who already hold foreign assets that have been duly declared in their tax returns and wealth statements.
There is also a third category comprising overseas Pakistanis who continue to remain non-resident and invest in Pakistan through Roshan Digital Accounts. Since this category already benefits from a dedicated RDA framework, including specified investment and repatriation facilities, it is not discussed in detail in this article.
Conclusion and way forward
The proposed framework if determined to be workable may be implemented through coordinated rules issued by the Federal Board of Revenue and the State Bank of Pakistan covering eligibility, documentation, computation of foreign-currency gains, permitted investments and repatriation rights.
The concessions should in any case not apply to unexplained money, benami assets, round-tripped local funds or transactions lacking commercial substance.
Copyright Business Recorder, 2026
The writer is a seasoned Chartered Accountant, based in Karachi, with over 24 years of post-qualification experience in taxation