07-14-2011, 05:50 PM
<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by Star</i>
<br />In that foreign country, rated of income tax at source on profit on debt is 10% while if i receive profit on debt without deducting income tax at source in foreign country, the whole profit on debt will be added in my personal income due to which applicable slab on my personal income will be higher than 10% say 15% resulting into saving of 5% tax in the instant case.
Thus it makes a difference and provides me benefit.
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<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
Probably you have ignored the following part of my answer,
"I am also not clear on calculation of tax payable in Pakistan. Normally, if one has paid tax on foreign income, he will add foreign income to local income, work out the tax rate, apply that tax rate on foreign income to check the tax payable on that income in Pakistan. thereafter he will claim credit lesser of tax payable in Pakistan or paid in foreign country.
But a complex question is that suppose on dividend income tax deducted by foreign company is 10%.
Should we take this income as separate block of income and 10% deduction as final tax or should we add dividend income to local income and work out the rate of tax for that year, then to claim tax credit equivalent to actually paid or equivalent toour rate of tax on dividend income, whichever is less. Apparently, s.103 supports the latter. However, further opinion is invited in this regard."
S.103(2) and 103(8) clearly provides how to work out tax payable in Pakistan. According to s.103, I think deduction of tax by foreign country will not help you. In both the cases you have to work out your tax rate by adding foreign income to local income.
<br />In that foreign country, rated of income tax at source on profit on debt is 10% while if i receive profit on debt without deducting income tax at source in foreign country, the whole profit on debt will be added in my personal income due to which applicable slab on my personal income will be higher than 10% say 15% resulting into saving of 5% tax in the instant case.
Thus it makes a difference and provides me benefit.
*
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
Probably you have ignored the following part of my answer,
"I am also not clear on calculation of tax payable in Pakistan. Normally, if one has paid tax on foreign income, he will add foreign income to local income, work out the tax rate, apply that tax rate on foreign income to check the tax payable on that income in Pakistan. thereafter he will claim credit lesser of tax payable in Pakistan or paid in foreign country.
But a complex question is that suppose on dividend income tax deducted by foreign company is 10%.
Should we take this income as separate block of income and 10% deduction as final tax or should we add dividend income to local income and work out the rate of tax for that year, then to claim tax credit equivalent to actually paid or equivalent toour rate of tax on dividend income, whichever is less. Apparently, s.103 supports the latter. However, further opinion is invited in this regard."
S.103(2) and 103(8) clearly provides how to work out tax payable in Pakistan. According to s.103, I think deduction of tax by foreign country will not help you. In both the cases you have to work out your tax rate by adding foreign income to local income.
