I work remotely from abroad for a Pakistani company. Is my salary Pakistan-source income?

What does the law say?

Section 101(1) of the Income Tax Ordinance, 2001 is the source rule for salary. Salary is Pakistan-source income to the extent it:

• (a) is “received from any employment exercised in Pakistan, wherever paid”; or
• (b) is paid by or on behalf of the Federal Government, a Provincial Government or a Local Government in Pakistan, wherever the employment is exercised.

Section 101(16) makes everything else foreign-source. The rule does not mention the employer’s nationality, where the contract was signed, or which bank account receives the salary. For a private employer, the only test is where the employment is exercised.

Section 11(6) then says a non-resident’s income is computed using only Pakistan-source amounts. So if you are non-resident under section 82 and your employment is exercised abroad, your salary from a Pakistani company falls outside your Pakistani taxable income. If you are resident, section 11(5) brings foreign-source income in as well, and the source question matters less.

Where is remote employment “exercised”?

The Ordinance does not define “employment exercised in Pakistan”, and it has no provision on remote or online work. Read plainly, employment is exercised where the employee does the work, which for someone sitting in Toronto points to Canada. The text does not say how to treat factors such as a Pakistani office being the employee’s formal place of posting, the work serving Pakistani clients, or time spent working during visits to Pakistan. This page does not resolve those points.

Days you work while visiting Pakistan are a clearer case: during those days the employment is being exercised in Pakistan, so section 101(1)(a) makes the salary for that work Pakistan-source “to the extent” it relates to them. The Ordinance does not set a method for splitting a monthly salary between days worked here and abroad.

How does withholding work?

Section 149(1) requires every person responsible for paying salary to an employee to deduct tax at the time of payment at the employee’s average rate, computed on “the estimated income of the employee chargeable under the head “Salary””. The section does not carve out non-resident employees. Its calculation is built on salary income that is chargeable, but it does not say how the employer is to establish that a remote employee’s salary is foreign-source.

Section 152(2) is the general withholding rule for payments to non-residents. Section 152(3)(a) says it does not apply to amounts subject to deduction under section 149, and section 152(3)(d) excludes amounts on which the non-resident “is not chargeable to tax”. Salary to an employee is therefore handled under section 149, not section 152.

Where tax has been deducted on salary that turns out not to be chargeable, section 170 allows a refund application to the Commissioner, within three years of the later of the assessment order or the date the tax was paid.

Worked example (illustrative figures)

Rabia works for a software house in Lahore. On 1 July 2026 she moves to Melbourne and continues the same job remotely, on Rs. 400,000 a month. In tax year 2027 she visits Lahore for 20 days in December and works from the Lahore office on 10 of them.

1. Residence. 20 days in Pakistan is below 183, so section 82(a) does not apply. She spends more than 182 days in Australia and, for this illustration, is an Australian resident taxpayer, so section 82(d) does not catch her. She is non-resident.
2. Source of the salary for work in Australia. The employment is exercised in Australia on the plain reading of section 101(1)(a), so that part is foreign-source and outside her Pakistani income under section 11(6).
3. The 10 working days in Lahore. That work is exercised in Pakistan, so the salary for it is Pakistan-source. At an illustrative split of 10 working days out of 22 in December, that would be Rs. 400,000 x 10 / 22 = about Rs. 181,818. The Ordinance does not prescribe this method.
4. Withholding. If her employer continues deducting under section 149 on her full salary, the deducted amount beyond what her Pakistan-source salary justifies is the kind of excess section 170 addresses.

Common mistakes

• Treating a Pakistani payslip as proof of Pakistan-source income. Section 101(1)(a) applies “wherever paid”.
• Applying section 152 non-resident rates to salary. Section 152(3)(a) excludes amounts subject to section 149.
• Ignoring working visits. Days worked in Pakistan make that part of the salary Pakistan-source.
• Assuming government salary follows the same rule. Section 101(1)(b) makes it Pakistan-source wherever the work is done.

What to check in the official text

Read section 101(1) and (16), section 149(1), section 152(2) and (3), section 11(5) and (6), section 82 and section 170. Any tax treaty between Pakistan and the country you work in, and the other country’s own tax on your salary, are outside this corpus.