Question Tax Exemption for Pakistani Freelanc... - Page 3

hussain114 · ‎07-12-2019

Hi there,

I've a question about tax exemption in Pakistan for Pakistani freelancers offering IT services.

I visited my tax consultant recently to file my tax returns for tax year 2019.

IT services are definitely 100% exempted from tax till year 2025, but to my surprise my tax consultant said that any income generated through IT services is fully taxable in Pakistan 'UNLESS' membership is acquired from Pakistan Software Export Board (PSEB).

I consulted PSEB, they said they don't offer membership to invididual freelancers, but if an individual freelancer can form a sole proprietorship company, then PSEB membership can be acquired easily.

And then you've to open a new business bank account and report all earnings to PSEB with Form-R and few other supporting documents.

And this is how an individual freelancer offering IT services in Pakistan can avail 100% tax exemption. This all sounds fine, but my concern is that the same tax consultant never gave me the same information earlier and now he's saying that all previous earnings are fully taxable just because I didn't had PSEB membership, which no one ever communicated to me, not even the same tax consultant ever told me before. And in fact not even 'Income Tax Ordinance 2001 - 2019 Amendment' states this in article 133 where it talks about income tax exemption on IT services.

I need input from other fellow pakistani freelancers on this.

Also please tell me did you know about above information before & if you've formed a company to avail tax exemption or are you still working without a company?

(I'll probably add more thoughts to this post as I consult with few more people).

Thanks

emerald_2010 · ‎12-20-2019

Great discussion! I would like to ask about this scenerio:

1- I have clients in Upwork, i withdraw all my payments to Payoneer and transfer to my local bank personal account. All these payments are tagged as 'Home Remittance' rather than IT export income in the PRCs i get from my bank.

2- I have clients outside Upwork who want to pay directly to my bank accout through wire transfer, right now i have no way for them to pay me directly. So for these clients, I need a business account for my comapny (sole owner company which i registered). I can get PRC from my bank easily for these payments with purpose code as IT export/ business income.

My questions are:

Q1- Right now in my return i mention all income from 1 and 2 as my business income IT export. Is this correct?

Q2-Can i get money from Payoneer in my business account under IT export?

hussain114 · ‎12-20-2019

1. Yes, correct. Any income you're receiving by offering IT services online are exempted from tax.

2. I don't think it should be a problem.

My Question:
1. Did you only registered sole prop just to receive wires? Was that not possible for individual account?

2. What kind of PRC you get from your bank? I once asked my branch for PRCs, they said if you want PRC from head office, it will take forever, but bank manager helped by printing all my remittances for a certain period on a white paper with bank logo on it, signed & stamped it. He said this will serve as the PRC, but there was no mention of any purpose code on it. That time I had no idea that purpose code is needed. So I've no idea if this is valid but if anyone knows please let me know.

Maybe I can ask my branch manager to reprint that doc but this time with a purpose code on it. If anyone knows please guide me.

emerald_2010 · ‎12-25-2019

I have another question:

Q1: Can we receive payments from Payoneer in a personal foreign currency account? Will those be exempted from tax in that case?

Answers to your questions are below:

1: Yes, i was having problems when my client sent me a payment from abroad into my personal account. My bank manager said pupose of this payment is trade, then how can it come in personal account. My bank also held my payments for 3-4 months and then finally released saying next time i cannot have payments in my personal account from direct wire transfers from clients. So I decided to open a business account (still in process).

2: I contacted my bank manager and asked him to give me PRCs, i had to call him and go to my bank multiple times, eat their heads for few months and finally received my PRCs. Each PRC is printed on intermediary bank letterhead and has amount and date and purpose of payment mentioned as Home remittance. Askari Bank is the bank in case of Upwork payments and for Payoneer payments there are different banks every time.

Thanks.

hussain114 · ‎12-25-2019

Hi,

Well it might be a problem to receive your remittances in your USD personal account. My bank rep once shown me an email from the head office, (long story short), in that email it was clearly mentioned that as per state bank rules any personal foreign currency accounts should not be used for any kind of business related remittances.

As for tax exemption, I believe the amount you receive in your USD bank account will be exempted because now a days if you want to withdraw any funds from your USD bank account, the bank will encash in PKR only on current rate (instead of USD), so the govt gets the benefit of foreign exchange. And in fact this is one of the 2 conditions as well for IT services tax exemptions, which are:

1. Any remittances you earn by offering IT services, should arrive in the country through proper banking channels.

2. 80% of those remittances must be encashed in PKR.

--

My bank normally receive any kinds of payments but they hold some payments here & there. And as I mentioned above, state bank rule for USD bank account is that you can't receive any business remittances in your personal USD bank account, so I believe sooner or later they will change the rule for personal PKR accounts as well. So I think it will be a wise move to form a sole proprietor & open a new business account to avoid any trouble later on.

Even right now a lot of banks still don't allow you to receive any kind of business related remittances in your personal account (even in PKR). For example I once went to open a basic banking account in Askari bank, I ask them if I can receive remittances in this account but they said, you simply can't receive any remittances in a personal account.

So we already see that heppening.

I've some more questions for you:

(I asked same questions to another brother here as well but I'll ask you again, so I & other readers here get different version as well)

1. The PRCs you acquired, was that under your current 'personal/individual' bank account? And were those mostly Upwork payments?
2. Did those PRCs had any purpose code on them?
2A. Did one PRC will show only one remittance? I mean any idea if a PRC can show remittances you received over a period of time?

3. Can you possibly send screenshot of the PRC you acquired? You can hide the details, I just need to see a format, so I get a better picture of what kind of information it holds & can ask my bank accordingly.

4. Who formed the sole proprietor for you?
4A. How much time & money it took? Same home address will be acceptable for sole prop, right?

5. Pls let me know in which bank you opened your business account?
6. What documents/other stuff they asked for? (And did they ask for stuff like letterhead, stamp etc.?)
6A. Is anything related with NTN also required to open business bank account? If so, what's that & how you acquired it?
7. What kind of time frame is needed to have the bank account opened & ready to use?

I'm also planning to register a sole proprietor & then open a business bank account. I know like 99% of freelancers in our country are not doing this right now, and it's a bit of hassle to take this route, but again there are no set rules on paper for all this yet.

Thanks

aliasif35202 · ‎02-28-2020

Hi Everybody,

Hope you all are well.

I want to become a filer, looking here and there in search of the right information. Finally, I reached here & saw the too long discussion. What I learned until now is that:

Freelance Work's earning is tax exempted till 2025, happy for this
Earning must reflect in the bank account as a foreign remittance - In my case, it is not like this I received withdrawal in my local bank account as Inter Bank Funds Transfer (IBFT) which is not considered as a remittance. Then I started to look at how I can get USD in my local bank account. I found a way, transfer USD to Payoneer then transfer to the local bank account. I tested this method & received USD in PKR as IBFT from Mobilink Microfinance Bank (I have already called them to send me PRC, waiting for their reply). Then I saw option there I can send USD directly in my account used it & received USD in PKR as a remittance in my local PKR bank account. I tested it on my two local bank accounts which are shown below (Sent 300 USD in each)

--------------------------------------------------------------------------------------------------------------------------------**Edited for Community Guidelines**

--------------------------------------------------------------------------------------------------------------------------------------

Both requested the same day without any Form-R.

I received first one in my personal HBL PKR Account. Requested for PRC received on next day but with wrong code 9471 which is for workers living abroad & sending USD to family. I'm battling with them for the right code which is 9185 with the argument that 9471 is for workers who live abroad & send payments while I live here in Pakistan I work with clients abroad I want purpose code 9185. HBL has centralized remittance system manager said code is what the sender said when he was sending. I told the manager that I'm the sender he said how I showed him receipts from Upwork to Payoneer & then Payoneer to my local bank account. I also told him how this freelance system works that client pay me on Upwork then I move USD to Payoneer then Payoneer to my local bank account. The manager then asked me to write an application for what you want. I gave him an application with receipts he verified my signatures & scanned all files to forward their remittances department.

I received the second one in my personal FBL PKR Account. When I received SMS that payment received I went to branch asked the operational manager for PRC he printed with wrong code I told him that I want to code it as 9185. He asked me why I told him all story as above in HBL case, showed him receipts he applied code & printed it.

What I learned that HBL has a centralized system for remittance it takes time to communicate but Faysal Bank has an in-branch system for remittance that's why it took a few minutes to get PRC.

Now your turn guys, I'm Freelancer with all payments proof, USD received as remittance under code 9185 with 100% encashed in PKR, am I good enough to file for 100% tax exemption on my income or I have to cross more rivers of ZULMAAT?

hussain114 · ‎02-29-2020

Good info, thanks for sharing here. But my first question to you is, how did you managed to open bank accounts as a freelancer in HBL & Faysal bank? Normally banks don't open an account for freelancers easily.

PRC is the main proof needed that your income as a freelancer is exempted from tax.

So to answer your main question, yes you can go ahead & become a filer now.

Good to know that Faysal Bank has an in-branch system for PRCs. If that's the case for all branches, that's really cool & will attract more freelancers.

aliasif35202 · ‎02-29-2020

Banks open account for everyone who has payment proof & CNIC but it is the staff members who make it hard to open an account. I opened my first account in Faysal Bank as a Freelancer, on my first visit staff there didn't cooperate with me. Prior to freelancing, I was a supervisor in Lahore's biggest food chain & the only fear we have with those customers who know how to get quality service & their rights. I mean when they don't feel well with staff behaviour or service they just call CUSTOMER SERVICE & register complain then all staff serve him like he is the only one for which company is built. I did the same in case of FBL I emailed their customer service, very next day the same person who was not ready for account opening called me for sorry, did all paperwork, offered me tea & said your account will be active in one week, I said thanks, he said who told you to contact CUSTOMER SERVICE, I left with smiley face. From that day I never had a single issue.

In HBL I told them to open my account with a story about how I earn + Upwork Earning Proof & it's done.

Tips for new Pakistani Freelancers if they stuck at account opening:

Go with full confidence, don't fear that what if they don't open account for you. I have opened my friends' accounts who failed on the first attempt.
Before you visit any bank go to their website & check those current accounts which require 25k to 100K Monthly balance maintenance. **Edited for Community Guidelines**
Choose high-level debit cards (like golden or the world as every bank has it own) ask for 50 to 100 pages chequebook.
When you told them all the above things he will has your image as well aware customer & serve you very well.
Have in mind that you're money man & all people in the bank to serve you.
There are 3 main ranks in any branch Relationship Manager, Operational Manager & Branch Manager. Start with the first one if he is not in the mood of listening go to OM then BM. If nobody listens to you call the CUSTOMER SERVICE in front of the manager who is not taking you seriously then you'll experience a service you never had before

hussain114 · ‎03-19-2020

Hi,

Can you please confirm if you were able to get PRC from HBL & how was the overall process eventually?

Also the HBL PRC specimen you've shared, is it not possible that you make exactly same format & ask your branch or operations manager to fill it for you within branch, instead of having to go through a long process of going on the backend to get the PRC?
Also if Faysal bank can make a PRC in branch, that confirms a PRC is not necessarily required to be issued from head office or remittance depertment of the bank, so I wonder why HBL can't make this process easy?

aliasif35202 · ‎03-19-2020

Hi

Yes, I have received PRC from HBL with code 9185. The overall process was a bit hard as all branch senior staff was unable to understand things. My purpose code issue was resolved by the Centralized Remittance Department of HBL. Let me explain to you how things work:

1. Freelancers should not worry about tax exemption but they should care about their documentation to prove that their income source is remittance. For this purpose, FBR may need encashment certificate which we call Proceed Realization Certificate (PRC).

2. Freelancers should not worry about purpose code on their PRC. I have talked with tax advisors they are just here to make money, they just want to you in making company so they can charge you in different ways. I have talked with FBR they said there is no tax if your income source is remittance which can be proved by PRC. FBR Officer can only ask if they ask but it is rare, the purpose of remittance & you just need to say I'm a freelancer & I provider my service overseas clients. No more no less. PSEB is just for big companies. There is no tax on any remittance you just need to have PRC with any code as proof.

3. Some of the freelancers said they get their withdrawals in their local bank accounts as Inter-Bank Funds Transfer in rupees so they try to withdraw in USD just to reflect as remittance this is a little bit expansive & time taking procedure. Upwork & Payoneer both have their partners here in Pakistan just for our convenience so that we can get our funds faster. This is a blessing in disguise. Let me explain to you how:

There are two ways to get funds in our local bank accounts PKR & USD
PKR is fast but many of us get confused that it is showing as IBFT & how can we prove that it is remittance. I dig in for this & found that PKR withdrawal that appears as IBFT comes from Mobilink Microfinance Bank Limited's Home Remittance Account, Askari Bank's Home Remittance Account & Meezan Bank's Home Remittance Account. To prove this IBFT transaction as remittance we need to go our bank's operational manager with written application that I want encashment certificate/PRC for this transaction, I know that he will say this is IBFT. You have to say that send request from where this has come. Banks have a mechanism that they can request each other on behalf of the customer's demand. Why I'm saying this because I got my one PRC with purpose code 9184 without any hassle from Mobilink Microfinance Bank Limited for a transaction which I did from Payoneer. I can't show you PRC here because of the community guidelines.
USD is expansive & time-consuming but why freelancers are doing it just to feel safe & comfortable that our withdrawal is USD, easy to prove it as remittance but they got stuck at purpose code. It is very hard for freelancers to change that code but it can be changed before the last working day of the month because all banks have to submit a report of remittances under specific codes to State Bank Of Pakistan. Once last working day passed you will be unable to change that code.
Any type of certificate which you request from a bank is free of charge for the current year like in 2020 if I go to bank ask for PRC for a transaction which completed in 2020 it will be free of cost. But in 2020 if I go to the bank & ask for the PRC for a transaction which completed in 2019 or 2018 any previous year I have to pay 600/- Rs for each transaction. So whenever you request a withdrawal, go to the bank & ask for PRC once the transaction is completed.
So I will suggest that you should transfer your funds from Upwork to Payoneer then withdraw to your local bank account because of their competitive exchange rates. You should choose PKR, not USD when adding a local bank in Payoneer & when you request from Payoneer in description field add this "Remittance for IT Export under Proceed Realization Certificate (PRC) Code No. 9185 - Other Computer Services" you can change code & reason which suits you best. Once transaction completed you can go to the bank for PRC with Payoneer confirmation letter.

4. More about remittance I would say that it should not be stuck in a branch. I mean If you have an individual bank account & bank holds you remittance just email complaints@pri.gov.pk they will put a heavy penalty on the bank. I don't know the process for business account holders.

5. HBL has centralized remittance system I have to go through it to get PRC. In Faysal Banks remittance system is the branch based & PRC has stamp + signatures of head of the department.

g-tech · ‎04-16-2020

Hi Ali,

So you have to go to your bank once for the PRC with Payoneer's confirmation letter or do you have to do it for every single transaction you make? I do a weekly transaction so does that imply that I visit my bank 4 times a month?

This is in regards to point 4 of your last message "Once transaction completed you can go to the bank for PRC with Payoneer confirmation letter."

hussain114 · ‎04-16-2020

Not necessarily, you can go to the bank after few months & request PRC for all amounts at once. No need to get PRC each week.

8cc9fa9a · ‎07-28-2020

Firstly I want everyone to have look at the following discussion:

Awareness Webinar on SBP Initiatives/Schemes for IT/ITeS Exporters

It answers some of our Questions.

Secondly, I got in contact with some of people in the discussions and I asked them to answer some of our pressing questions regarding Free Lancers.. (Though techincally I have setup a Sole proprietry company but still I went through the pain of getting the Information from multiple sources.) So guys If we can compile a comprehensive questions, post here and I will send them, hopefully they will be answered in the forum someday.

Thridly Hussain A,

I got the PRC with the correct code from the banks for all the remittances. Thats complete my journey from free lancer to setting up a sole proprietry company to get my PRC with correct code so that I can complete my taxes this year with peace of mind. Though in the above discussion, they did cover how free lancer should deal with PRC code.

hussain114 · ‎07-29-2020

@Syed Z N, Glad to hear your journey is complete now, finally. I myself still couldn't register a sole proprietor, still having seconds thoughts whether I should or shouldn't!

I'll check the above Webinar soon, but after all this exercise, please tell me what did you find out?
Is it necessary for a freelancer to setup a Sole Proprietor > open a business bank account > receive remittances in that business account > get PRC with the right code on it > File tax returns?

OR is it fine to go following route as well?
A freelancer can continue to receive remittances in personal bank account > get PRC with the right code on it > File tax returns?

The reason I'm having 2nd thoughts is bcoz as per income ordinance, only 2 conditions are mentioned in order to have the freelance remittance income tax exempted. (1. Receive all freelance through proper banking channels. 2. 80% of the income should be encashed in PKR).

They didn't mentioned if PRC is needed and what codes are needed to be mentioned on it. If they could clear this confusion, it would save us a lot of trouble.

BTW Question: Does it matter what form of PRC the bank gives you? I mean can I simply give them any format of PRC, put all remittances on it and add a code to it and get it signed & stamped by the branch manager? (Of course I can show them proof of all transactions, but my confusion again is the format of the PRC. Whether the PRC needs to be acquired by the bank's Head Office ONLY? Or the branch can issue it as well on your request, on your given format?)

So many confusions that the relevant institutions fail to clear.

Many Thanks.

8cc9fa9a · ‎07-29-2020

Disclaimer: (I only watched webminar once, Please watch the specific part again to verify.) after 25:00 mins

Is it necessary for a freelancer to setup a Sole Proprietor > open a business bank account > receive remittances in that business account > get PRC with the right code on it > File tax returns?

In short NO. As long as the monthly income is less than $5000 per month..

A freelancer can continue to receive remittances in personal bank account > get PRC with the right code on it > File tax returns?

Yes. That should work.. Though not very sure about the PRC code part in case of personal account

BTW Question: Does it matter what form of PRC the bank gives you? I mean can I simply give them any format of PRC, put all remittances on it and add a code to it and get it signed & stamped by the branch manager? (Of course I can show them proof of all transactions, but my confusion again is the format of the PRC. Whether the PRC needs to be acquired by the bank's Head Office ONLY? Or the branch can issue it as well on your request, on your given format?)

There is not direct answer to this question.

1. After I have formed bussiness account, I get call from bank on each inward transactions. They ask for purpose code themselves.So no more proactive approach is needed currently in my case

2. With salary/personal account, I had to proactively send them the form with all transactions and purpose code and make them receive it.

3. PRC is kinda letter issued by your Bank to State Bank of Pakistan, informing about the transactions and purpose code.So I think it may differ to bank to bank. But what should remain constant is that it should be addressed to SBP with the purpose code and transaction details.

hussain114 · ‎07-29-2020

Yes, so far I'm 20 mins in that webinar, will continue soon.

What if someone is making more than 5000 per month?

Is there any defined procedure/suggested route for them to follow?
And is sole proprietor a MUST in that case?

I guess I'll have to check again with my bank on the PRC.

BTW is your sole proprietor registered with PSEB as well or is that not necessary at all?

8cc9fa9a · ‎08-03-2020

What if someone is making more than 5000 per month?

Is there any defined procedure/suggested route for them to follow?
And is sole proprietor a MUST in that case?

I don't have a definitive answer.One of the reason I shifted to business account when the limit was $1500. It seemed the only option to me but like I said I am not sure.

BTW is your sole proprietor registered with PSEB as well or is that not necessary at all?

It is not necessary as I have asked multiple times from PSEB. Though bank needed some persuation to open a account without PSEB registeration.

hussain114 · ‎08-03-2020

AOA brother Syed Z,

Waiting for your input on my last message.

ALSO, please tell me in which bank you opened your sole proprietor business bank account?

Can you please share the whole process of acquiring the PRC, starting from when your amount is sent to the bank, and until you receive the PRC with the purpose code?

For example if you're receiving a remittance in your bank account today August 3rd, what is the process like to get the PRC, and how long it normally takes?

You mentioned they call you to get the purpose code, at what stage they call?

Do you get the PRC automatically for each transaction or do you've to apply/ask for it each time?

And do you've to visit the branch for each PRC?

Also now that you've got business bank account opened, any insights if you can get PRCs of remittances that you received in a personal bank account before registering sole proprietorship?

I'm almost ready to make the move on registering sole proprietor & opening a business bank account, but I'd like to check with my bank before I open an account with them to ensure a smooth process to get the PRC, because if their process is slow/not-smooth, then I can look into other banks.

Many Thanks.

8cc9fa9a · ‎08-03-2020

Waiting for your input on my last message.

DONE

ALSO, please tell me in which bank you opened your sole proprietor business bank account?

SCB and UBL

Can you please share the whole process of acquiring the PRC, starting from when your amount is sent to the bank, and until you receive the PRC with the purpose code?
For example if you're receiving a remittance in your bank account today August 3rd, what is the process like to get the PRC, and how long it normally takes?

You mentioned they call you to get the purpose code, at what stage they call?
Do you get the PRC automatically for each transaction or do you've to apply/ask for it each time? And do you've to visit the branch for each PRC?

I rarely have to work through upwork, so just to clear that my case can be very different from upwork users.

Post Business Account

1. When I do a job, I send a invoice to a client. On a letter head.

2. When client send me the fund, they notify me with an email and send the tranaction details. i.e. from ABC bank to SCB bank in 123 account, transaction number, amount against invoice etc.

3. With in 1 or 2 days bank calls me that they receive certain amount, they are willing to give me xyz dollar rate.

4. I check the rates are suitable (don't have much choice then to accept but you can bargain very little) and give the purpose code. I needed to remind them the purpose code alot initially, but now I am dealing with a single person in bank, who knows all my details, hence it has become easier..

5. After that, i get funds in the account the same day

6. I don't get PRC automatically. I applied to all my last year PRC in a single go. I did it on phone, as a single person is dealing my account. Normally we need to goto bank. but covid-19 changed things a bit

Also now that you've got business bank account opened, any insights if you can get PRCs of remittances that you received in a personal bank account before registering sole proprietorship?

Personal Account (BUT post gaining some knowlegde about the system)

1. When I do a job, I send a invoice to a client but in a format that client wanted. This involved writing my details and work hours etc. (no letter head etc)

2. When client send me the fund, they notify me with an email and send the tranaction details. i.e. from ABC bank to SCB bank in 123 account, transaction number, amount against invoice etc.

3. With in 1 or 2 days bank calls me that they receive certain amount, they are willing to give me xyz dollar rate.

4. I check the rates are suitable (don't have much choice then to accept but you can bargain very little) and give the purpose code. I needed to remind them the purpose code and give them r-forms and get it stamped by SCB.

5. There was always a concern from the bank that I can't receive this amount in the personal account. It was OK to receive before until I pushed them to change the purpose code to 9814. (hence I moved forward to business account)

5. After that, i get funds in the account the same day

6. I still haven't got the PRC from personal account

hussain114 · ‎08-03-2020

Thanks for the detailed process, very helpful.

>>> 3. With in 1 or 2 days bank calls me that they receive certain amount, they are willing to give me xyz dollar rate. <<<

- Q: Normally what's the difference, for example if USD rate today is 166.80 Buying & 167.65 Selling, what rate you'll get? I think Payoneer normally gives a PKR 2.5 to 3 lower rate, but banks normally give a better rate, like with a difference of PKR 1 to 1.50.

>>> 6. I don't get PRC automatically. I applied to all my last year PRC in a single go. I did it on phone, as a single person is dealing my account. Normally we need to goto bank. but covid-19 changed things a bit <<<

- Q: So you got PRC for all of your last year's remittances with correct purpose code, that you had received in your personal account? (I'm confused bcoz in the end you mentioned you didn't got PRC against the personal account?). ALSO, do you verbally apply for PRC on the phone or email them?

Also you didn't mentioned Form-R in post business bank account steps. Is that bcoz of COVID-19?
Form-R is really a waste of time & paper in my opinion if one can communicate the purpose code on the phone, which is totally fine.

BTW do you receive all wire transfers in your business account?

I just called my bank's remittance department and they said things are different for a personal account where purpose code isn't needed, but in case of a business account, purpose code is a must, and if you've good relation with the branch staff, then you can communicate them the purpose code once if all your remittances are coming under the same code & they don't have to call you each time, which is good.

They also said you can request PRC from the branch, and if the remittance came directly to your bank (where no other bank is involved, then you can get the PRC within 8 to 10 working days. BUT in case a 3rd party bank is involved, then it may take longer than that. Now here I think Upwork & Payoneer remittances are often sent to the banks through 3rd party banks, so here it may take longer to get the PRCs. I remember it's been over a year I requested Meezan bank to issue me a PRC, and despite several reminders, I never got it yet. So this is important thing to consider here.

8cc9fa9a · ‎08-03-2020

Thanks for the detailed process, very helpful.

>>> 3. With in 1 or 2 days bank calls me that they receive certain amount, they are willing to give me xyz dollar rate. <<<

- Q: Normally what's the difference, for example if USD rate today is 166.80 Buying & 167.65 Selling, what rate you'll get? I think Payoneer normally gives a PKR 2.5 to 3 lower rate, but banks normally give a better rate, like with a difference of PKR 1 to 1.50.

Ans. around 2-3 PKR difference or more ... Bank are not at all good at giving rates

>>> 6. I don't get PRC automatically. I applied to all my last year PRC in a single go. I did it on phone, as a single person is dealing my account. Normally we need to goto bank. but covid-19 changed things a bit <<<

- Q: So you got PRC for all of your last year's remittances with correct purpose code, that you had received in your personal account? (I'm confused bcoz in the end you mentioned you didn't got PRC against the personal account?). ALSO, do you verbally apply for PRC on the phone or email them?

Also you didn't mentioned Form-R in post business bank account steps. Is that bcoz of COVID-19?
Form-R is really a waste of time & paper in my opinion if one can communicate the purpose code on the phone, which is totally fine.

ANS. got PRC For business Account with correct purpose code: Yes.

got PRC For personal account with correct purpose code: No (In process but I highly doubt I will ever get the corrected version)

Form-R is NOT required for bussiness account. BTW you do know that Filling form-R is bank responsibility not ours. But in case of personal account there are so many problems, that we need to do form-R stuff ourselves..

BTW do you receive all wire transfers in your business account?

ANS. yes ..

They also said you can request PRC from the branch, and if the remittance came directly to your bank (where no other bank is involved, then you can get the PRC within 8 to 10 working days. BUT in case a 3rd party bank is involved, then it may take longer than that. Now here I think Upwork & Payoneer remittances are often sent to the banks through 3rd party banks, so here it may take longer to get the PRCs. I remember it's been over a year I requested Meezan bank to issue me a PRC, and despite several reminders, I never got it yet. So this is important thing to consider here.

Yes that is 100% accurate. The only reason I am stuck with SCB becuase I know my clients payments has a direct route to SCB.

hussain114 · ‎08-03-2020

Ok thanks. So it appears in case of a business bank account, PRC and correct purpose is relatively easier to get, which is good.

Q: Do you request PRC on the phone? How much time it normally takes to get it?

Q: Is there any difference in filing returns pre and post sole proprietor registration?

I'll email SBP facilitation portal as well for some information regarding this topic, and will share here when I hear back.

8cc9fa9a · ‎08-11-2020

Q: Do you request PRC on the phone? How much time it normally takes to get it?

On phone

Q: Is there any difference in filing returns pre and post sole proprietor registration?

Haven't submitted yet.

hussain114 · ‎08-07-2020

AOA bro,

Following up on my previous message.

Also I've registed a sole proprietor as well, it hardly took 15-20 mins & it was simple enough so I was able to do it myself, following some relevant videos on the internet.

Also I discussed with my HBL branch manager about business account & PRCs, they assured me they'll provide PRCs with the right purpose code, so I went to open a business account as well.

Does UBL & SCB charge you anything for the PRCs?

hussain114 · ‎08-07-2020

Another question. You mentioned you've accounts in SCB & UBL. Are they both equally good to issue PRCs without any hassle? Also why you used the term 'stuck with SCB'? Are you having any issues with them?

Also looks like SCB got a minimum balance limit of PKR 500K. is that correct? It's really high, while other accounts have minimum limit of around 25k only.

302231f5 · ‎08-09-2020

I am surprised that no one mentioned 111(4) section of Income Tax Ordinance here. The purpose of all this is to avail income tax exemption right? So as per my understanding, there is no income tax on foreign remittances if they are encashed in local bank account and you get PRC regardless of what code it has, and regardless if the sender is a person or a company.

This clause provide more powerful immunity from income tax than IT export or services. So even if you fail to prove your income as IT based in case of an audit, you can use this clause for tax exemption. As per this clause FBR can't even ask you about your source of income if its less than 5 million rupees in a tax year.

____

Income Tax Ordinance

111. Unexplained income or assets.

(1) Where —
(a) any amount is credited in a person’s books of account;
(b) a person has made any investment or is the owner of any money or valuable article;
(c) a person has incurred any expenditure2[; or]

(d) any person has concealed income or furnished inaccurate particulars of income including...

...

(4) Sub-section (1) does not apply,—
(a) to any amount of foreign exchange remitted from outside Pakistan through normal banking channels 4[not exceeding 5[five] million Rupees in a tax year] that is encashed into rupees by a scheduled bank and a certificate from such bank is produced to that effect.

____

According to this article on government's PRI website. There is no income tax even if remittance amount is over 5 million in a year, only source has to be explained.

The above mentioned clause does not differentiate between home remittance from individuals to individuals, or business remittances to individuals.

Please correct me if I am missing something here.

8cc9fa9a · ‎08-11-2020

What you have said is true BUT we are here finding out the most authentic fool proof legal way to declare the earnings and probably shield ourselves from the wrath of FBR in future.

This thread was started last year when the remittance income cap was 1500 USD per month so things have changed alot since then.

The issues starts when you file your returns and ask FBR help desk for queries.

302231f5 · ‎08-11-2020

"This thread was started last year when the remittance income cap was 1500 USD per month so things have changed alot since then. The issues starts when you file your returns and ask FBR help desk for queries."

What $1,500 limit? As far as I know there is no limit on foreign remittances one can receive or declare as tax exempt. If there were a limit, it would have been mentioned in Income Tax Ordinance.

I contact FBR helpdesk and they said that income tax is exempt on remittances if you have enashment certificates (PRC). I didn't even mention IT exports.

Also, SCB is the worst bank in Pakistan. Had accounts there for a few years and it was nothing but trouble and high fees.

Now I am with Bank Al Habib and I am satisfied.

8cc9fa9a · ‎08-11-2020

"This thread was started last year when the remittance income cap was 1500 USD per month so things have changed alot since then. The issues starts when you file your returns and ask FBR help desk for queries."

What $1,500 limit? As far as I know there is no limit on foreign remittances one can receive or declare as tax exempt. If there were a limit, it would have been mentioned in Income Tax Ordinance.

I contact FBR helpdesk and they said that income tax is exempt on remittances if you have enashment certificates (PRC). I didn't even mention IT exports.

Previously freelancers were only allowed to earn $1500 per month which is now this year $5000 per month.

Do you want to declare your remittance as earning? if not then you don't need to worry about a thing unless FBR asked it from you. but as a freelancer if you earn more than $5000 per month and want to declare it then what? please get the answer and let us all know.

what if you get your Two or three payments at the same time in a single month and its more than $5000 .. the list will go on.

Brother, No one is contesting about remiittance are Tax free.. This is about how to declare earning and get the IT exports exemptions which can't be challenged by FBR in future.

8cc9fa9a · ‎08-11-2020

Another question. You mentioned you've accounts in SCB & UBL. Are they both equally good to issue PRCs without any hassle? Also why you used the term 'stuck with SCB'? Are you having any issues with them?

I am stuck with SCB because I know that payments to the Account is through direct link, i.e. remiittance is handled directly by SCB and no other bank is involved. Hence, haven't tested UBL yet. What I have heard from others, that SCB follows SBP rules very strictly.Hence they tend to be very annoying, I have nothing to compred against, so can't comment which is better.

Also looks like SCB got a minimum balance limit of PKR 500K. is that correct? It's really high, while other accounts have minimum limit of around 25k only.

Yes that is an issue, but probably for account openning. I have had my account below the limit too but no one called or nothing changed. Depends on branch as well.

hussain114 · ‎09-21-2020

AOA.

Just to keep everyone posted, I've been doing this new stuff for past few weeks, registering sole proprietor, opening a new business bank account, sending remittance to it etc so couldn't update here.

I really had a bad exeperience with HBL. So I'd suggest everyone to please stay away from HBL.

I opened the new bank account in HBL, and I've been an HBL customer with a personal account for over 9 years. But this new experience was the WORST. It was easy to get a business account opened with HBL and it took less than a week. But (long story short), my first remittance got stuck at HBL, first they asked to provide the usual stuff like Form-R, invoice etc, which I provided right away, but after wasting another week, they asked me to come and provide KYC details (Know Your Customer), which I also provided the same day, but another 2 weeks passed, branch manager kept saying it will be credited soon, in 1 day, in 2 days etc, and now today eventually its 1 month wasted and the amount is still not credited to my new bank account. No one in the branch is even picking up my phone anymore. And my ATM card is not even generated yet. Helpline says talk to branch staff, and branch staff says it is showing as generated & will arrive soon. All this is just disgusting.

Main problem is HBL trade dept, so it doesn't matter where you open your bank account, your remittance will probably go through the same central trade dept. And branch staff appears to be so helpless in front of trade dept.

Now I'm left with no option but to ask them to return that remittance and then I'll say goodbye to HBL, but I wanted to share this with everyone here so you can stay away from HBL. If they can do this to a very old customer like me, GOD know what they'll do to the new customers.

As for the PRCs, it's been over a month I've requested the PRCs & they keep saying it's coming today/tomorrow. I'm guessing it will never come.

Bro @Syed Z N, on a scale of 1 to 10, what will be your vote for SCB? If they're good, I can open an account with them bcoz I need PEACE OF MIND once and for all. I've really wasted a TON LOAD of time with HBL with 0 result.

Many Thanks

aliasif35202 · ‎09-21-2020

Salaam

My experience with HBL is not going well, I'm receiving PRC but with incorrect code in my personal account. I talked with **Edited for Community Guidelines** (Officer Domestic Business Facilitation PSEB Registration) in detail. Let's take it simple:

Why we are here & keep posting: We want to register as Filer & get benefits of Tax Exemption which is till 2025

Have we found any solid solution till now: No

What is the main thing to get Tax Exemption till 2025: Proceed Realization Certificate (PRC) with purpose code 9186

How can we get PRC with 9186: As an Individual Freelancer & As a Business

Which is the best option: As a Business

Why as a business is the best option: Because Pakistan Software Export Board (PSEB) facilitation, its registration will help to go through tax matters smoothly in FBR.

Where we stuck at receiving remittances in business account: In getting PRC with correct code & every time we have to provide paperwork like some proofs & invoices.

So What is another way for getting PRC with code 9186: As an individual by sending money from Upwork to Payoneer then send USD to Local PKR Bank Account. By this, we will get PRC with 9186 from Mobilink Microfinance Bank (I'm on this model to get tax exemption benefit, once I'll complete procedure I'll update here quickly)

Regards

Ali Asif
**Edited for Community Guidelines**

8cc9fa9a · ‎09-21-2020

Really sorry to hear that. I think Everyone go through different kind of hurdle with different type of banks and probably its much harder to get things setup legally than getting the remittances in personal account.

My most hurdles were getting my bussiness account opened up in bank. I didn't face the remiittance issue that you had. Most people will says the SCB sucks more than any other bank and unfortunately, I don't have any other bank experience to rate it against.

As far as openning a business bank account is concerned. UBL was much better than SCB. I provided most of my documenattion to SCB e.g. clients name, expected remiittances amount each month etc. UBL didn't ask for it, but UBL sent a person to have a look at my home where I work. Luckily I have a separate room that I converted into my work area. UBL account was opened without any kind of follow up but SCB account needed some phone calls. SCB also required Rs500,000 to be deposited in account as initail payment and also bank guy asked me to keep the same amount for first few months atleast. (I don't know the exact reason but probably had to do with account looks good in books)

Remmittance process in SCB is smooth for me.I think probably it has to do with few clients and direct remiittance from clients to my bank account. Also I haven't tested UBL for payments, for the reason that for my particular clients, there is no other banks inolved in crediting the payments. Its direct payment and hence PRC also shows it.

I can understand the frustration you must be going through, I hope you find the solution soon.

hussain114 · ‎09-22-2020

Yes, agreed. Most of the banks are just annoying in our country on different levels. I'm pushing HBL complaint center to get this sorted soon. Branch manager called me today, feeling a little ashamed, apolgized for not picking up my phone calls & said they're working to get this sorted. (Seriously, why would you apoligize when you don't really mean it & you're only calling me bcoz you got a 3rd reminder from the head office to get this all sorted soon.)
Anyways, let's see how long it takes further.

BTW in my opinion it makes no sense for a bank to visit the workplace of a freelancer, I mean really freelancing is all about, work in your PJs from anywhere you want, even from your bed or from a beach. In freelancing, your work goes with you wherever you go, yet the mentality of our nation is just so backward.

8cc9fa9a · ‎09-22-2020

I agree but I think when we tell them we are the sole bussiness.. then they assume a office like environment.

rizi20002000 · ‎09-21-2020

My suggestion is for everyone related to facing problem getting PRCs from banks.

Once you have your bank account (salaried or business) and you are receiving remittances smoothly, you are good to go to ask bank for PRCs.

There are two ways to bring money in your bank accounts and both comes in local currency:
1. Wire Transfer
When you initiate wire transfer. It comes directly to your account without involving any intermediary bank. Bank officials won't ask you any receipt or proof to generate PRCs when you request them. Wire transfer takes minimum 3 to 4 working days to reflect funds in your account and there are around $30 fee if your payment is more than $999.

2. Direct to bank transfer
This is the process most people use to get money quickly. And when your funds received in bank account, it reflects in your statement as IBFT (inter bank fund transfer) means funds are locally transfered. This process involves intermediary bank. For this type of payment's PRCs, your bank have to communicate with intermediary bank to make sure your money is a foreign remittance. And this is where your bank officials always hesitate and in fact most of them never bother to communicate with intermediary bank.

This is what my case is.

I struggled to get PRCs for the year of 2018-19 and received when I presented payment proofs from upwork.

This year I again got stuck with bank officials for PRCs. For last six months i was providing them remittance information but they never worked on it. Finally I sent and email to bank manager with all history of communications with bank official and threatened them that I'll submit complaint at "Banking Mohtasib". And very next day I got call that my PRCs are ready.

The reason I threatened them because I had all communication history with bank and all proofs that my money is foreign remittance.

So never go face to face everytime. Get bank official's email address and communicate with them. If you are using IBFT process, its recommended you send email to bank when you receive the payment because they request it to inform bank if you need PRC for an IBFT payment.

If they don't work on your requests, get bank manager email address and inform everything and don't forget to mention "Banking Mohtasib" complaint. It worked for me!

hussain114 · ‎09-22-2020

Yes, getting PRCs is a painful process and it mainly depends on the bank staff. Probably also good to discuss this with the branch manager directly before opening a bank account, this is what I did & branch manager assured me they'll provide it for sure. (Still waiting for mine, but let's see)

BTW wire transfer sometimes does include some other intermediary banks, ideally it shouldn't work like this, but unfortunately it's a reality. I think some of the smaller banks rely on bigger banks for wire transfers. Long time ago once my wire got stuck for over a month bcoz it landed in an intermediary bank and the destination bank was so lazy to track it. It is always recommend to first send a smaller amount for testing purposes before you send a bigger one.

aliasif35202 · ‎04-16-2020

Hi Arslan

It's up to your choice, you can go every time to the bank for PRC once you get your funds.

But I would suggest that you should do one transaction per month, it's better to have one PRC instead of four. It will easy to manage your personal account by having 12 transactions per year which will reflect in 12 PRC. This is what I do.

rizi20002000 · ‎08-30-2020

Hello Ali,

Do you use "Direct bank transfer" or "wire transfer"? Because when we use "Direct bank transfer" option, it reflects in our statement as IBFT (inter bank fund transfer) and bank always hesitate to provide PRCs for IBFT transaction.

If you use "Direct bank transfer" option, how you manage to grt PRCs from your bank?

Thanks

aliasif35202 · ‎08-31-2020

Hi Rizwan

Both work the same:

If you select Direct Bank Transfer for your payments it will come through the banking channel. Any other bank* can receive your remittance which they will transfer to your bank account by IBFT. Yes, you can get PRC for this transaction. Go to your bank ask them this amount I received as remittance & it came through the bank (your statement will show bank name) your bank will request other bank* on your behalf for PRC. In 5 working days, you'll get it. If you request PRC for a transaction older than the 1-year bank will charge you up to 1000/- Rs. (year starts from 1st July)

*other bank: other banks are payment partner for managing remittances.

Banks usually provide details on request but it is the staff who hesitate it they hesitate to assist you. You should not hesitate to ring customer service. Always remember your PRC should have any of these purpose codes from 9181 to 9186. Otherwise, you will not enjoy the tax-free perk of IT Export.

Regards

Ali Asif

rizi20002000 · ‎08-31-2020

Thank you for your reply. "Hesitate" is the case with me. Many times I have
asked my bank to communicate with intermediary bank but the are just
passing time and doing nothing.

Thanks anyway.

Regards
Rizwan

Question Tax Exemption for Pakistani Freelancers