The Federal Board of Revenue (FBR) has clarified the tax treatment applicable to non-resident individuals holding Roshan Digital Accounts (RDAs), stating that such account holders are not required to file an income tax return for investments made through their RDA and are not subject to non-filer tax rates. The clarification addresses questions surrounding the taxation of non-resident RDA holders, particularly those using funds from their accounts to invest in the Pakistan Stock Exchange (PSX) and subsequently repatriating investment proceeds and profits abroad.
According to the clarification issued by FBR, non-residents holding an RDA do not have to file an income tax return in relation to their RDA investments. The tax authority explained that income in the form of profit on debt earned through the RDA is exempt, meaning the account holder does not incur a return-filing requirement on the basis of that exempt income. This provides specific treatment for non-resident RDA holders and distinguishes their position from taxpayers who may be subject to ordinary return-filing requirements and non-filer rates.
The FBR clarification also covers investments made in the Pakistan Stock Exchange using funds generated through an RDA. Where an RDA holder invests in PSX from profit received through the account, gains and dividends arising from those investments will be subject to tax at filer rates. This means that the relevant tax treatment for PSX gains and dividend income is based on the applicable filer rates rather than the higher rates associated with non-filer status.
The tax authority further clarified the treatment of funds transferred back overseas through an RDA. According to FBR, moving funds abroad through the RDA is not subject to tax. This applies to the repatriation of funds held in the account and provides clarity for non-resident account holders who wish to transfer their money and investment proceeds outside Pakistan. The clarification is particularly relevant for overseas Pakistanis and other non-residents using RDAs as a channel for investment in Pakistan.
Questions had emerged regarding the tax implications of investing in PSX through RDA and the subsequent repatriation of profits. The latest clarification addresses these issues by separating the tax treatment of RDA income from the taxation applicable to income generated through investments made using those funds. While profit on debt from the RDA is exempt and does not create an income tax return filing requirement for non-residents, gains and dividends from PSX investments are subject to tax at filer rates where the investment is made from profit received through the RDA.
The clarification provides a more specific understanding of how the tax framework applies to different stages of an RDA holder’s investment activity. Non-resident account holders can maintain an RDA without being required to file an income tax return on account of exempt RDA profit, while investments in the local equity market remain subject to the relevant tax treatment. At the same time, the transfer of funds back abroad through the RDA is not taxed, according to FBR.
The clarification comes as RDA remains an important channel for non-residents seeking to participate in Pakistan’s financial and investment markets. By setting out the treatment of return filing, PSX gains, dividends and repatriation, FBR has addressed key questions raised by RDA users regarding their tax obligations. The guidance also distinguishes between exempt RDA income and taxable returns generated through investments, giving non-resident investors a clearer understanding of the applicable rules.
Follow the PakBanker Whatsapp Channel for updates across Pakistan’s banking ecosystem.