How can an Umbrella Company Help with Contracting in Pakistan?
Most freelance workers aren’t superheroes who successfully tackle these issues all on their own. There are companies who specialise in helping workers make the most out of their contracts.
They’re called Umbrella Companies (or, contractor management companies).
Basically, an Umbrella Company acts as your full-time employer, even though you maintain your independence as a contractor. They collect and filter payments from your clients, filtering out the necessary social security and fees. You send them your timesheets, and they send you payments.
Because they act as your “employer,’ they can sponsor you and provide a single work permit for multiple contracts in Pakistan. Even better, most are experts in Pakistani and expat tax law, meaning they’ll also help you optimise your earnings in Pakistan.
Although the Umbrella Company is technically your “employer,” you’re essentially freeing yourself to work even more independently. You still dictate your contracts, your hours, your schedule. The Umbrella Company simply filters out the time-consuming admin and immigration issues, allowing you to focus on your new contract.
Can I Organise My Taxes and Work Permit Myself?
Generally, you need to have an employer sponsor in order to secure the appropriate work permit and work visa for Pakistan.
If you’re working independently, it can be difficult to find clients willing to sponsor you. Moreover, even if your client can do this, you’ll need a new sponsor each time you decide to take on a new contract. Of course, every new sponsor will mean more paperwork.
Also, are you familiar with the intricacies of the tax system in Pakistan, as well as your own country’s laws on overseas earnings? If so, good on you!
However, if you’re like the rest of us, figuring out (much less reducing) your tax liability in Pakistan and your home country can seem like full-time work in itself.
A Contractor’s Guide to Taxes in Pakistan
One of the most consistently challenging aspects of contracting in Pakistan is complying with the country’s tax system. As well as paying tax in Pakistan, you might also still be eligible to pay some tax in your home country, and understanding the legislation behind this can be a challenge.
How do I calculate my taxable income in Pakistan
If you’re working in Pakistan under a permanent contract, many employers will handle your tax under the PAYE (pay-as-you-earn) system. This means that they calculate and process your taxes in Pakistan for you and then send you a net wage. Your income tax, public health insurance, social security and other deductions will all be covered by this payment. This is the easiest way to handle your income tax in Pakistan, but contractors may not be offered this service because of their short stay with each employer.
Anybody who can’t pay their tax in Pakistan through PAYE is left with the prospect doing everything themselves.
Do you know much about Pakistani Tax Law? Does Pakistan have a tax treaty with your home country? You will need to find out or find someone who can help! Income tax in Pakistan can range from 2 to 30 percent, and you need to be sure you are placed in the correct tax brackets.
Tax Filing as a Contractor in Pakistan
| When Do You Need to Lodge Your Tax Return? | 30 September (31 August for individuals with income above PKR500,000) |
| Tax Filing Deadline | 30 September (31 August for individuals with income above PKR500,000) |
| Can you file it online? | Yes, https://iris.fbr.gov.pk/infosys/public/txplogin.xhtml |
How to File Taxes in Pakistan as a Contractor
Step 1: Register
Obtain a Registration Number and password for Iris, the Federal Board of Revenue’s online system for taxpayer registration, here(link is external) .
Go to ‘Registration for Unregistered Person’ and provide the required information. You’ll be sent an email or SMS to verify your account. Following this, you’ll be sent a login PIN. This process may take a few days, for security reasons.
Step 2: File Taxes Using Iris
You can now log in with your Registration Number and password, and file your taxes. Your Registration Number can be found on your CNIC (National Identity Card)/NICOP (National Identity Card for Overseas Pakistanis) (13 digits).
Tax Figures in Pakistan
| Currency | Pakistani Rupee (PKR) | ||||||||||||||||||||||||||
| Tax-free Threshold in Pakistan | PKR400,000 | ||||||||||||||||||||||||||
| Income Tax Rates |
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| Notes | Income tax is withheld from salaries by the employer. The amount to be withheld is determined by applying the average rate of tax on the estimated salary of the employee for the fiscal year. |
Tax Residency in Pakistan
When do you become a tax resident in Pakistan
You become a tax resident in Pakistan when:
- You are present in Pakistan for 183 or more in a tax year (1 July through to 30 June); or
- You are an employee of the Pakistani federal or provincial government and you are posted outside Pakistan during the tax year.
Does the 183 day rule apply in Pakistan
Yes
Am I taxed on my global income in Pakistan
Residents are taxed on their global income in Pakistan. Non-residents are taxed on their Pakistan-sourced income only.
Can you set up your own Limited Company in Pakistan?
| How long does it take to set up | 12 days |
| How much does it cost | PKR1600 |
| Is it easy? | Starting a Business Rank: 142/190 (Source: World Bank) |
Tax Calculator in Pakistan
If you are a contractor and want a calculation on your tax and net retention in Pakistan, we can supply it to you free of charge.
Using an Umbrella Company for Income Tax in Pakistan
Contractors in Pakistan are faced with masses of paperwork and numerous wasted hours filing a tax return unless they find an alternative option. A Pakistani umbrella company can act as your employer during your stay in the country whilst still allowing you the freedom of a contractor. The only difference is that you submit your timesheets to them; they’ll calculate and pay your taxes as you earn, and then you receive a net wage (as well as documentation for your records).
The companies are experts in Pakistani taxation, and they’ll ensure that you keep the largest proportion of your earnings whilst complying with local laws. They can deal with any issues with the Pakistani tax office or tax department directly including processing your tax refund if you are eligible.
How We Can Help You with Tax in Pakistan
We work with numerous umbrella companies in Pakistan, many of whom are experts in tax and immigration laws. If you have any questions about tax in Pakistan, we’ll get the answers from them directly so you can rest assured you’ll be getting accurate information. We have comprehensive knowledge of the different services they provide, and can help you find the right company to handle your income tax. We help oil and gas workers, software developers, IT project managers, testers, business analysts and telecommunications contractors get tax efficient payments and sponsorship for their Pakistani work permit.
Our advice is 100 percent free, and comes with no obligations. You will be paying taxes in Pakistan but without the overhead of directly dealing with the Pakistani tax authorities. Get in touch with us today for some reliable advice on tax in Pakistan!
A Contractor’s Guide to Work Permits in Pakistan
Immigration is one of the primary concerns for any contractor hoping to start working in Pakistan. Permanent employees will find it easy to get their Pakistani work permit because they’ll receive “sponsorship” for their entire stay from their prospective employer.
The Pakistani work permit, known more commonly as the Pakistani Work Visa, is dependent on this sponsorship because it confirms that you’ll be earning money during your stay in the country. Contracting in Pakistan is more difficult because the work permit is tied to one employer, so you have to change it to suit each new contract. Thankfully, umbrella companies provide a convenient and effective solution to this issue.
How Does an Umbrella Company Work?
Most people want to do their work, earn their money and enjoy their spare time without taking on loads of admin in a new country. That is why an umbrella company can help.
When you’re working through an Umbrella Company, you’ll essentially be outsourcing the admin and tax issues to specialists.
While the umbrella company will charge a fee, you’ll likely end up saving more money in the long run: you’ll be able to focus on your work, expertly reduce your tax liability, and comply with all laws and regulations in Pakistan (which means avoiding fees, fines, or even worse penalties).
How Can We Help You?
There’s a huge variety of Umbrella Companies with different specialities and advantages in Pakistan. How do you find the right one for your circumstances?
We work closely with Umbrella Companies all throughout Pakistan and match contractors with the right company for them. If you’ve already secured a contract in Pakistan, we can help you find your best match (for free). Or, we can simply give you feedback on your situation (for free).
