Tax regimes for individuals: Pakistan

Preferential and special regimes in 21 countries for people who relocate, work for themselves, invest or draw a pension. Conditions, time limits and the legal basis for each.

Regimes: 4

Foreign-source income of short-term resident individuals (section 50, Income Tax Ordinance 2001)

OpenFor people relocating

Foreign-source income is exempt from Pakistani tax.

Details

Who: Individuals who are resident solely by reason of employment in Pakistan and are present for no more than three years.
How it works: Foreign-source income is exempt; the exemption does not cover income from a business established in Pakistan or foreign-source income brought into or received in Pakistan. Pakistani salary is taxed at the regular scale.
Duration: While your total presence in Pakistan does not exceed 3 years.
How to opt in: Automatic: declare the foreign income as exempt in the annual return.
Limits and risks: Not for foreign income brought into or received in Pakistan, nor for income of a business set up in Pakistan; Pakistani salary is taxed normally.
Legal basis: Income Tax Ordinance, 2001, s. 50
Checked: 4 November 2026

Foreign-source income of returning expatriates (section 51, Income Tax Ordinance 2001)

OpenFor people relocating

Foreign-source income is exempt for two tax years.

Details

Who: Pakistani citizens who become resident after at least four tax years of non-residence.
How it works: Foreign-source income is exempt in the tax year of becoming resident and the following tax year. Separately, salary earned abroad in the year of departure is exempt.
Duration: The tax year you become resident and the following tax year.
How to opt in: Automatic: declare the foreign income as exempt in the return; keep proof of the four non-resident years.
Limits and risks: Pakistani citizens only, non-resident in each of the four preceding tax years; Pakistani-source income is taxed normally.
Legal basis: Income Tax Ordinance, 2001, s. 51(1)–(2)
Checked: 4 November 2026

Export of computer software or IT / IT-enabled services (section 154A, Income Tax Ordinance 2001; Division IVA, Part III, First Schedule)

OpenFor the self-employed

0.25% of export proceeds as final tax for PSEB-registered IT exporters (1% for other service exports).

Details

Who: Persons (including freelancers) exporting software, IT or IT-enabled services; the reduced rate applies to those registered with the Pakistan Software Export Board (PSEB).
How it works: The bank deducts tax when export proceeds are realised: 0.25% for exporters of software, IT or IT-enabled services registered with and certified by the PSEB (tax years 2024–2029), 1% for other exports of services. The deduction is a final tax if the return (and any required withholding and sales-tax statements) is filed; no foreign tax credit is given. The taxpayer may opt out each year in the return and be taxed under the normal regime.
Duration: 0.25% rate fixed for tax years 2024–2029.
How to opt in: Register with the PSEB and receive export proceeds through a bank; file the annual return in IRIS by 30 September.
Limits and risks: Final only if the return is filed; no credit for foreign tax; without PSEB registration the rate is 1%.
Legal basis: Income Tax Ordinance, 2001, s. 154A(1)–(3); First Schedule, Part III, Division IVA
Checked: 4 November 2026

Tax on pension (section 149(1A), Income Tax Ordinance 2001; Division I, Part I, First Schedule)

OpenFor pensioners

0% up to Rs 10 million a year, 5% above; no tax from age 70.

Details

Who: Individuals receiving a pension from a former employer (including government).
How it works: Pension from a former employer up to Rs 10 million a year — 0%; above that — 5% of the excess as a final tax. Individuals aged 70 or over pay no tax on pension. Pension falls under the head 'Salary', so the 10% surcharge does not apply. If you keep working for the former employer or its associate, the pension is taxed at the regular salary rates.
How to opt in: Automatic: the pension payer deducts the tax; report the pension in the annual return.
Limits and risks: Only pensions from a former employer; if you still work for that employer or its associate, regular salary rates apply.
Legal basis: Income Tax Ordinance, 2001, s. 12(2A), s. 4AB proviso (as amended by Finance Act 2026), s. 149(1A); First Schedule, Part I, Division I, clause (2), proviso
Checked: 4 November 2026

The catalogue describes general conditions. Whether a regime fits you depends on your circumstances and the tax authority's decision.