Income Tax Ordinance, 2001 — Section 43: Foreign government officials

43. Foreign government officials.— Any salary received by an employee of a foreign government as remuneration for services rendered to such government shall be exempt from tax under this Ordinance provided

(a)the employee is a citizen of the foreign country and not a citizen of Pakistan;

(b)the services performed by the employee are of a character similar to those performed by employees of the Federal Government in foreign countries; 1[and]

(c)the foreign government grants a similar exemption to employees of the Federal Government performing similar services in such foreign country2[.] Chapter III – Tax on Taxable Income

(a)the individual is either 1[not a resident] individual or a resident individual solely by reason of the performance of services under the Aid Agreement;

(b)if the Aid Agreement is with a foreign country, the individual is a citizen of that country; and

(c)the salary is paid by the foreign government or public international organisation out of funds or grants released as aid to Pakistan in pursuance of such Agreement.

(3)Any income received by 2[any person] engaged as a contractor, consultant, or expert on a project in Pakistan shall be exempt from tax under this Ordinance to the extent provided for in a bilateral or multilateral 3[ ] agreement between the Federal Government and a foreign government or public international organisation, where

(a)the project is financed out of grant funds in accordance with the agreement;

(b)the person is either a non-resident person or a resident person solely by reason of the performance of services under the agreement; and

(c)the income is paid out of the funds of the grant in pursuance of the agreement. 4[(4) Federal Government may, in respect of an official development assistance financed loans and grants-in-aid, subject to such conditions and limitations as it may specify, exempt income of any person on a case to case basis through a notification in the official Gazette.] 5[44A. Exemption under Foreign Investment (Promotion and Protection) Act, 2022 (XXXV of 2022). – (1) Taxes on income (including capital gains), advance tax, withholding taxes, minimum and final taxes under this Ordinance shall, for the period and to the extent provided in the Second and Third Schedules to the Foreign Investment (Promotion and Protection) Act, 2022 (XXXV of 2022) in respect of qualified investment as specified at Sr. No.1 of the First Schedule to the said Act 1 The words “a non-resident” substituted by the Finance Act, 2003. 2 The expression “a person (not being a citizen of Pakistan)” substituted by the Finance Act, 2022. 3 The expression “technical assistance” omitted by the Finance Act, 2022. 4 Sub-section (4) inserted by the Finance Act, 2022. 5 Section 44A inserted by the Finance Act, 2023. 101 Chapter III – Tax on Taxable Income or investors, be exempt or subject to tax at the rate and in the manner specified under the said Act.

(2)All investors and shareholders of the qualified investment, their associates and companies specified in the Second and Third Schedules to the said Act including third party lenders on account of any loan shall also be exempt from taxes and other provisions of this Ordinance or subject to tax at the rate and in the manner specified under the said Act for the period and to the extent provided in the Second and Third Schedules to the said Act.

(3)Provisions of this Ordinance relating to Anti-Avoidance, for the period and to the extent specified in the said Act including sections 106, 106A, 108, 109 and 109A, shall not apply to the persons and amounts mentioned in sub-sections

(1)and (2).

(4)Rates of depreciation, initial allowance and pre-commencement expenditure under sections 22, 23 and 25 as on the 20th day of March, 2022 shall continue to be applicable for thirty years as provided in the Third Schedule to the said Act in respect of persons mentioned in sub-sections (1) and (2).

(5)For the purpose of this section, the terms defined under the Second and Third Schedules to the said Act shall apply mutatis mutandis to this Ordinance.]