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CHAPTER - V
TAXATION OF NON-RESIDENTS
17. Application of Chapter.- The rules in this Chapter apply for the purposes of sub-clause (ii) of clause (a) of sub-section (2) of section 237, which provides for the making of rules concerning the manner in, and procedure by, which the income, profits and gains chargeable to tax, and the tax payable thereon, under the Ordinance shall be determined in the case of non-resident persons.
18. Income from royalties.- The income of a non-resident person by way of royalty received from a resident person or a permanent establishment in Pakistan of a non-resident person shall be -
(a) in the case a royalty received in pursuance of an agreement made before the 8th day of March, 1980, or an agreement made on or after the said date the proposal in respect of which was approved by the Government before the said date, the gross amount of the royalty less the deductions allowed under section 40; or
(b) in any other case, to which sub-section (2) of section 6 does not apply, the gross amount of the royalty less then the following expenditure.
(i) any expenditure incurred in Pakistan to earn such royalty, wherever paid;
(ii) any expenditure incurred outside Pakistan in pursuance of such agreement not exceeding ten percent of gross amount of royalty.
Provided that a non-resident may opt for taxation under sub-section (2) of section 6 of Income Tax Ordinance, 2001, by filing a written declaration/ option within 15 days of the commencement of contract. Such option shall remain operative till completion of the said contract.
(c) in the case of royalty received in pursuance to any other agreement, the gross amount of the royalty less the following expenditures only, namely:–
(i) any expenditure incurred in Pakistan in earning such income;
(ii) any expenditure incurred in Pakistan in respect of any work done in pursuance of such agreement; and
(iii) any expenditure incurred outside Pakistan in respect of any work done in pursuance of such agreement not exceeding ten per cent of the gross amount of such royalty.
(d) The provisions of sub-rule (b) and (c) would not apply where, royalty is covered by section 169.
19. Fees for technical services.- (1) The income of a non-resident person by way of fees for technical services received from a resident person or a permanent establishment in Pakistan of a non-resident person shall be –
(a) in the case of fees received in pursuance of an agreement made before the 8th day of March, 1980, or an agreement made on or after the said date the proposal in respect of which was approved by the Government before the said date only in such cases, the gross amount of the fees less the deductions allowed under section 40;
(b) in the case of fees received in pursuance of an agreement made on or after 8th day of March, 1980 but before the 4th day of May, 1981, the gross amount of the fees less the deductions allowed under section 40 with a maximum total deduction equal to twenty per cent of the gross amount of such fees; or
(a) in any other case to which sub-section (2) of Section 5 of the Income Tax Ordinance, 2001 does not apply, the gross amount of royalty less the following perquisites.
(i) Any expenditure incurred in Pakistan to earn such royalty, wherever paid.
(ii) any expenditure incurred outside Pakistan in pursuance of such agreement not exceeding ten percent of gross amount of royalty.
Provided that a non-resident may opt for taxation under section 6 of Income Tax Ordinance, 2001, by filing a written declaration/ option within 15 days of the commencement of contract. Such option shall remain operative till completion of the said contract.
(d) Sub-rule (c) would not apply where the fee for technical service is covered by the provisions of section 169.
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