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Saturday, July 23, 2011

Royalties & Fee for Technical Services of Non-Resident - Exceptions to FTR

Q: Tax imposed at the rate of 15% on every Non-Resident Person who recieves Pakistan-sourece royalty or Fee for Technical Services (FTS) is considered to be a final tax on the amount in respect of which the tax is imposed. Identify the exeptions to the above rule, as referred to in the Income Tax Ordinance, 2001. (ICAP Module-C, Spring 2010)

Ans: The exceptions are: (i) royalty is earned by NR from a property or right which is connected with the PE of the NR in Pakistan. (ii) FTS is earned by NR where services giving rise to the FTS are rendered by PE of the NR in Pakistan, & (iii) Royalty or FTS is exempt from tax. (Ref: Sec 6(3) of ITO-2001)