PRESENTED BY

GROUP LEADER

SHAHRUKH AHMED

ASGHAR ALI

M. SAAD GUJJAR

QASIM KHAN

ZUBAIR JAMEEL

Residential status

Residential status has nothing to do with the nationality. For the purpose of income tax.

All person are ground under two types:

1. Resident

2. non-Resident

EXPLANATION OF RESIDENTIAL STATUS

Residential status of any person is not decided upon his nationality or on his purpose of stay in Pakistan. It is strictly connected only with the period of stay in Pakistan in a certain income year.

TYPES OF RESIDENT PERSON

Following are the types of person according to residential status

1. Individual

2. Company

3. Association of person

INDIVIDUAL

An individual would be considered resident of Pakistan in a particular income year if he fulfills any one of the following:

1. A person, who stay in Pakistan for period or periods of 183 fays or more in Pakistan.

2. He is an employee or official of the government posted abroad in the tax year.

EXPLANATION OF INDIVIDUAL

An individual will become a resident of Pakistan, if he stays 183 days or more in a particular tax year. It is not required by law that he stay continuously. But he may stay in gaps but the aggregate of his stay should be 183 days or more in a particular tax year. However, the purpose of stay and the place of stay in Pakistan may be different and is unimportant.

EXAMPLE 1:Mr. Kashif stayed in Pakistan for 80 days and went abroad in 2005. he again came on September 10,2005 and stayed for 15 days so, his period of stay is 95 days and he will be non-resident (less than 183days in Pakistan)

IMPORANT POINTS

1. RELATION WITH TAX YEAR: Residential status of individual is determined with respect to tax year not assessment year.

2. ON THE BASIS OF PERIOF OS STAY: Residential status of individual is determined on the basis of period stay during a particular tax year.

3. PIRPOSE OF STAY: Purpose of stay is not considered when residential status of an individual is determined.

4. NATIONALITY: Nationality is not considered when residential status of an individual is determined.

5. FREQUENCY OF STAY: Frequency of stay is not considered when residential status is determined. It means that whether his stay is continuous or with intervals, it does not matter.

IMPORANT POINTS

PLACE OF STAY: Place of stay is not considered when residential status is determined. It means that whether he is staying in rented building or in his own house, it does not matter.

YEAR TO YEAR DETERMINATION: Residential status is determined for every year separately. A person can be resident in one tax year and he can non-resident in other tax year and he can non-resident in next year.

COUNTING OF PERIOD: Period of 183 days will be determined according to rule 14.

• A part of day will be considered as full day.

• A public holiday will be considered as full day.

• A day of sick leave will be considered as full day.

• A day when a person is in transit between two places will not be counted.

NON-RESIDENT INDIVIDUAL

An individual would be considered non-resident of Pakistan in a particular income year if he fulfills any one of the following.

1. A person who stays in Pakistan is less than 183 days in Pakistan.

2. He is not an employee or official of the government posted abroad in the tax year.

COMPANY

A company will be resident in Pakistan under ITO 2001, in a particular tax year if it fulfills any one of the following condition:

1. it is incorporated or formed by or under any law in Pakistan;

2. The control and management of whose affairs is situated wholly in Pakistan at any time in year;

3. It is provincial government or local authority in pakisatn.

EXPLANATION

1. In case a company is incorporated in Pakistan, it will always be a resident in Pakistan.

2. In case of other companies, they will become resident in Pakistan only if their control and management is wholly or almost wholly situated in Pakistan. Partial control is not sufficient for this purpose.

IMPORANT POINTS

1. RELATION WITH TAC YEAR: Residential status of company is determined with respect to tax year.

2. ON THE BASIS PF MANAGEMENT AND CONTROL: Residential status of company is determined on the basis of management and control during a particular tax year.

3. YEAR TO YEAR DETERMINATION: residential status is determined for every year separately. A company can be resident in one tax year and can non-resident in next tax year.

4. AT ANY TIME IN THE YEAR: Management and control of company in Pakistan is not compulsory for the whole year, it can be for some period of time.

NON-RESIDENT COMPANY

A company will be non-resident in Pakistan under ITO 2001, in a particular tax year if it fulfills any one of the following conditions;

1. It is not incorporated or formed by or under any law in Pakistan.

2. The control and management of whose affairs is not situated wholly in Pakistan at any tie in year.

3. It is not a provincial government or local authority in Pakistan.

ASSOCIATION OF PERSON

An association of person (AOP) shall be resident for any tax year if the control and management of the affairs of the association is situated wholly or partly in Pakistan at any time in the year.

EXPLANATION OF (AOP)

1. In case of AOP even partial control is sufficient to become a resident for tax purposes.

2. It is not necessary that the control should be exercised for the whole year. It means that an AOP will not be a resident if its control and management is completely outside Pakistan through the year.

IMPORANT POINTS (AOP)

RELATION WITH TAX YEAR: Residential status of AOP is determined with respect to tax year.

ON THE BASIS OF MANAGEMENT AND CONTROL: Residential status of association is determined on the basis of management and control during a particular.

YEAR TO YEAR DETERMINATION: Residential status is determined for every year separately. An association can be resident in one tax year and can non-resident in next tax year.

AT ANY TIME IN THE YEAR: Management and control of association in Pakistan is not compulsory for the whole year, it can be for some period of time

NON-RESIDENT AOP

An AOP shall be a non-resident for any tax year if the control and management affairs of the association are not situated wholly or partly in Pakistan.

CONCLUSION

It is necessary ‘to know whether a person is resident of Pakistan or not, because there is difference in rates of tax for for resident and non resisent.