Freelancer tax filing in Pakistan

Day 11: Freelancer and Online Income Tax Filing In Pakistan
Income declaration for IT professionals, Upwork, Fiverr, etc.

Introduction

In Pakistan’s evolving digital economy, freelancers and online professionals are making a significant impact. Whether you’re working through platforms like Upwork, Fiverr, or offering IT services globally, it’s crucial to understand how your income is taxed and how to stay compliant with the Federal Board of Revenue (FBR).

Who is a Freelancer in Tax Law?

Freelancers include individuals who work independently without being committed to a single employer. This includes:

IT professionals
Content writers
Graphic designers
Digital marketers
Consultants
Anyone offering services through online platforms (Upwork, Fiverr, PeoplePerHour, etc.)

Is Freelancer Income Taxable in Pakistan?

Yes. All income earned by residents of Pakistan—whether locally or internationally—is taxable under Pakistani tax law. This includes:

Income received in local banks from international clients.
Payments made through Payoneer, Wise, or similar platforms.

Which Income Tax Form Should Freelancers Use?

Form 114(1) for individuals.
Form 114(2) for AOPs.
Form 116 to declare foreign assets and income (if applicable).
Form 181 for registration and NTN updates.

How to Declare Freelance Income

Maintain Records: Keep digital invoices, contracts, and bank/payment processor statements.
Foreign Remittance Reporting: If you’re receiving foreign income through proper banking channels, maintain remittance slips or transaction IDs.
Expense Deduction: Legitimate business expenses like internet, software subscriptions, and hardware purchases can be claimed.

Tax Registration for Freelancers

Register on FBR IRIS to obtain your NTN (National Tax Number).
Use your CNIC and select “Individual” as your taxpayer type.
If you’re working as a team or company, register as an AOP or Business.

Are Freelancers Exempt from Tax?

No. However, if your annual income is below the taxable threshold, you may not owe tax but are still required to file a return.

For FY 2023-24:

Individuals earning below PKR 600,000 annually are not liable to pay tax but must file returns to stay on the Active Taxpayer List (ATL).

Tax Rate for Freelancers

Freelancers are treated as self-employed and are subject to progressive tax rates similar to salaried individuals:

0% to 35% depending on the income slab.

Common Challenges Freelancers Face

Not maintaining proper invoices and receipts.
Unawareness of tax filing requirements.
Confusion about foreign remittance classification.
Delays in obtaining NTN and IRIS login credentials.

Tips for Freelancers

Open a separate bank account for freelance income.
Use digital accounting tools (like Wave, QuickBooks, or Excel) for recordkeeping.
Always file your tax returns before the deadline (typically September 30).

Stay ATL-Compliant

Being on the Active Taxpayer List (ATL):

Reduces withholding tax on banking transactions.
Builds your credibility.
Is necessary for government contracts, tenders, and business loans.

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