FBR Clarifies Withholding Tax Rules for Freelancers

The Federal Board of Revenue has issued important clarifications regarding withholding tax obligations for freelancers operating in Pakistan.

Withholding Tax on Local Payments

When freelancers receive payments from Pakistani companies:

• Companies must deduct withholding tax at prescribed rates
• Rate varies from 10% to 15% based on filer status
• Freelancers can claim credit in annual tax return

International Payments

For payments received from abroad:

• No withholding at source for foreign remittances
• Income must be declared in annual return
• Tax credit available under IT services export scheme

Registration Requirements

All freelancers earning above Rs. 600,000 annually must:

1. Register for NTN
2. File annual income tax return
3. Maintain records of all projects and payments

Benefits for Registered Freelancers

Registered freelancers enjoy:

• Lower withholding tax rates
• Easy bank account operations
• Access to banking facilities for home and car loans
• No questions on legitimate foreign remittances

The FBR encourages all freelancers to formalize their status and contribute to the documented economy.