The Federal Board of Revenue (FBR) has clarified the tax treatment applicable to non-resident Pakistanis holding Roshan Digital Accounts (RDA), confirming that such account holders are not required to file an income tax return for their RDA investments and are not subject to non-filer tax rates. The clarification addresses questions surrounding investments made through RDAs, particularly investments in the Pakistan Stock Exchange (PSX), as well as the repatriation of profits generated through these accounts.
According to the FBR, non-residents maintaining Roshan Digital Accounts are not required to file an income tax return in relation to income generated through their RDA because profit on debt earned from the account is exempt from tax. This means that eligible non-resident account holders can continue to maintain their RDA investments without being required to submit a regular income tax return solely because of income generated through the account.
The FBR clarification also covers non-resident investors who use funds generated through their Roshan Digital Accounts to invest in the Pakistan Stock Exchange. In such cases, tax treatment depends on the nature of the income generated from the investment. The FBR stated that tax will be deducted at filer rates on gains and dividends from PSX investments where the investment has been made out of profit received from the RDA.
The clarification is particularly relevant for overseas Pakistanis and other non-residents using the RDA framework to access investment opportunities in Pakistan. Roshan Digital Accounts allow eligible non-residents to maintain banking relationships in Pakistan and use funds for various investment and financial activities. Questions had emerged regarding whether investors using RDA-linked funds for PSX investments could be treated as non-filers and consequently face higher tax deductions.
The FBR has clarified that RDA holders covered under the stated conditions will not be charged non-filer rates. Instead, where PSX investments are made from profit received through the RDA, the applicable gains and dividend taxes will be deducted at filer rates. This provides a specific tax treatment for RDA-linked investments while distinguishing the account holder’s status from the tax treatment that may otherwise apply to individuals who have not filed an income tax return.
The tax authority has also clarified the treatment of funds transferred back outside Pakistan through the Roshan Digital Account. According to the FBR, repatriation of funds abroad through the RDA is not subject to tax. This means that when eligible non-residents move their funds back abroad through the RDA channel, the repatriation itself does not create an additional tax liability.
The clarification follows a number of queries concerning investment through Roshan Digital Accounts, particularly in relation to the Pakistan Stock Exchange and the subsequent repatriation of profits. By outlining the applicable treatment, the FBR has provided guidance on how RDA income, PSX gains and dividends, and repatriated funds are treated for tax purposes.
The FBR’s clarification distinguishes between income generated directly through an RDA and returns generated from investments made using RDA-related funds. While profit on debt from the RDA remains exempt for the relevant non-resident account holders, gains and dividends from PSX investments made from RDA profit are subject to tax deductions at filer rates. At the same time, transferring funds back abroad through the RDA is not taxed.
The clarification is relevant to the broader digital banking and investment ecosystem in Pakistan because tax treatment remains an important consideration for overseas Pakistanis using digital banking channels to invest locally. The FBR’s position provides greater clarity on return filing requirements and the rates applicable to RDA-linked PSX investments while confirming that eligible non-resident RDA holders are not required to file an income tax return solely on account of their exempt RDA profit.
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