Pakistan: Proposed Changes To Attract Foreign Investors

Major changes have been proposed in the recent Pakistan Budget for 2019 which may have an impact on foreign investors. In a bid to attract foreign direct investment into the country, the Government has launched an aggressive drive to cut-down the cost of doing business.

Key changes to impact corporates:

• Option for a non-resident business entity to opt for the Final Tax Regime (FTR) stands withdrawn
• The tax deductible from a non-resident is switched from the Normal Tax Regime (NTR) to Minimum Tax Regime (MTR) without any change in withholding tax rates
• The tax on the offshore component of the non-residents under cohesive business operation is proposed to be reduced to 30% of the tax payable. The residential status for individuals has been redefined:
  o An individual stays in Pakistan for 183 days or more in a Tax Year; or
  o An individual would be considered a resident if he is present in Pakistan for a period of 90 days or more in the tax year and who, in the four years preceding the tax year, has been in Pakistan for a period of 365 days or more.
• The basic exemption threshold for salaried taxpayers has been increased from PKR 400,000 to PKR 600,000

Full details on Pakistan’s 2019 Budget announcement can be read here.