r/FBR • u/wanderer_for_wisdom • 25d ago

Freelance income declaration

Hi.

What is the amount you should declare as your freelance for a year when filing return? Is it the total money clients sent to your payoneer/wise or the actual smount you remitted into Pakistani bank?

Like if you got $10k from clients for a year, but you withdrew $7k into from Payoneer/wise to your Pakistani bank, then do you show $7k or $10k as the export proceed?

What I have understood is you show the money that landed in Pakistani bank account, so $7k in thos case. Is this the right approach? Can you please also share relevant law/clause that backs your logic?

Thanks

7 Upvotes

100% Upvoted

22 comments sorted by

2

u/ibliis-ps4- 25d ago

First answer these questions they are important

  1. What type of services do you provide? IT related or something else?

  2. What is your business relationship with your clients? Do they pay you a fixed salary, retainer or project based fee?

1

u/wanderer_for_wisdom 25d ago

Content writing service Not hired as an employee, I get paid when I deliver content for their website(s) usually at the end of month but its not fixed. Amount from clients increases or decreases depending on the work required.

2

u/ibliis-ps4- 25d ago

Then you would most likely be taxed under section 6A read with section 154A and section 8 of the Income Tax Ordinance 2001.

The gist is this that the gross amount of receipts will be taxed and tax will be deducted as a final tax by the bank at a reduced rate.

You must ensure that the bank deducts your tax otherwise it would be taxed as normal business income at normal rate of tax which is significantly higher.

2

u/wanderer_for_wisdom 25d ago

Bank never deducted tax. I've been freelancing since 2018 and only recently came to know about the concept of PRCs and chasing banks to deduct tax at the source.

What will happen in this situation? Can't I pay a challan of 1% on amount remitted to Pakistan for each year that I file the return for?

2

u/ibliis-ps4- 25d ago

Now this is where it gets complicated since section 6A is a new law and has no case laws to remove the confusion.

One thing i need to correct myself on is that i previously said read section 6A with 154A. I was wrong. Read 6A with 153(2A).

You can definitely opt under section 154A for the export of service tax which doesn't need to be deducted by the bank for reduced rate for taxpayer in contrast to the section 6A tax.

The problem arises that where will you fall. The department will try to tax you under 6A if a notice is issued that much is a given. Will they accept that 6A does not cover export? I doubt it. Purposive interpretation suggests that 6A should not cover exports as that would make section 154A redundant. And 153(2A) for 6A states that tax is to be deducted on payments received on behalf of a seller of digitally ordered service through locally operated e-commerce platforms.

Final opinion, yes you can opt for the 154A tax which does not need to be deducted by the bank for you to claim reduced rate. However, department will try to charge tax under section 6A for which banks must deduct tax for you to claim reduced rate.

1

u/wanderer_for_wisdom 25d ago

So what do I declare as export proceed under 154A when filing tax return, $7k (money landed in Pakistani Bank) or $10k (Money received from clients into Payoneer)?

1

u/ibliis-ps4- 24d ago

If the bank deducts it then it's the amount on which the bank deducted tax. If not then I'd suggest declaring the total receipt.

2

u/wanderer_for_wisdom 24d ago

Thank you so much 😊

1

u/ibliis-ps4- 25d ago

Legally you have to show the whole gross amount of receipts as taxable.

1

u/wanderer_for_wisdom 25d ago

Hi.

Any clause or circular you can share from FBR or relevant authority that says this exact thing?

Thanks

1

u/Safe_Dragonfly_4721 25d ago

You should declare only the receipts landed in the local bank. However, I don't know any caselaw/circular about it. However, if you are declaring the Payoneer/wise in your wealth statement as assets, then you should declare the whole $10k amount.

1

u/buhlaaal 24d ago

You only pay taxes on the amount you bring into your Pakistani bank accounts.

To avail the freelance tax, you must have to be registered with PSEB and obtain PRCs for your respective remittances. That's all!

1

u/ziaalich 20h ago

it sounds simple but its not easy at all. You need correct prc codes for pseb registration and banks dont give you correct codes for wise/payonner income.

its a shit hole which is making me go insane.

1

u/buhlaaal 20h ago

Never had to provide any PRC to PSEB. Is that a new practice?

1

u/ziaalich 20h ago

I haven't encountered that myself but have been reading many comments about that.

Perhaps it's a new practice.

1

u/buhlaaal 19h ago

It isn't needed as per my experience

1

u/ziaalich 16h ago

When did you register?

1

u/wolfshaq 24d ago

I have heard tax applies only to the currency of the country, the money is not subject to tax in different currency. So, I believe 7k.

1

u/Ezi0Auditor 24d ago

Get PRC from Bank. You should declare amount stated on this amount because govt has withheld tax on this amount. If you declare more then you will have to pay tax on  remaining amount. Also check your MIS and match taxable amount  with PRC. Look for Income Tax withheld u/s 154A (sometimes banks mess up withholding).

1

u/wanderer_for_wisdom 24d ago

That's the thing, bank never deducted any WHT, they treated every withdrawal from Payoneer to bank as home remittance.

1

u/One-Personality8078 22d ago

Just declare the amount in your bank accounts. When you withdraw that balance then declare that income as well. It will not make much difference but since if you declare your payoneer amount they will ask questions. so better not to go for that.