First Schedule (4th Division) of the Income Tax Ordinance 2001

4th Division of the First Schedule of the Income Tax Ordinance 2001 deals with the Rate of Tax on Certain Payments which fall in section 6 of Income Tax Ordinance 2001.

Rate of Tax on Certain Payments to Non-Residents

(Section 6, First Schedule, Division-IV, Part 1)

In Case of Royalty or Fee for Technical Services

15% of the Gross Amount

In any other Case

10% of the Gross Amount

What is Section 6 of the Income Tax Ordinance 2001?
Every Non-resident person who receives any Pakistan - source royalty fee for offshore digital services or fee or payment for technical services or assistance.
The tax imposed under sub-section (1) on a non-resident person shall be computed by applying the relevant tax rates to the gross amount of the royalty free for offshore digital services or the fee for technical services.
This section shall not apply to
  • any royalty where the property or right giving rise to the royalty is effectively connected with a permanent establishment in Pakistan of a non-resident person
  • any fee for technical services or fee for offshore digital services where the service giving rise to the fee is rendered through a permanent establishment in Pakistan of a non-resident person, or
  • any royalty or fee for technical services that are exempt from tax
  • Any Pakistani source royalty fee or offshore digital services or fee for technical services received by a non-resident person to which this section does not apply by virtue of clause (a) or (b) of sub-section (3) shall be treated as income from business attributable to the permanent establishment in Pakistan of the person.
Who is Non-Residents in Pakistan?
An individual who is not present in Pakistan for 183 days, in the aggregate, in a tax year, is treated as a non-resident person under section 81(2) of the Income Tax Ordinance 2001.

What is Royalty?
Royalty refers to the payment made to an owner or creator of a copyrighted work, patent, or natural resource for the right to use or extract that work or resource.


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