Plan contractor hiring in Pakistan

Engage the Pakistan-resident supplier under a written services agreement that defines the result, acceptance test, delivery date, fee, invoice currency, payment date, and governing law. Where Pakistan law governs, the Contract Act requires both parties to perform their promises. If the promisor must perform without application by the promisee and the agreement omits timing, the Act applies a fact-specific reasonable time. The resident contractor remains responsible for Pakistan income tax because resident income includes Pakistan-source and foreign-source amounts, and business income is Pakistan-source to the extent the business is carried on in Pakistan. Before signing, record the contractor's work location because sales tax on services is administered separately in the provinces and Islamabad Capital Territory.

Sources: Pakistan Code, Contract Act 1872, Federal Board of Revenue, Income Tax Ordinance, 2001 Amended upto 30.06.2026

If the line is crossed

If the relationship is employment and the work is exercised in Pakistan, treat the payment as Pakistan-source salary and apply section 149's salary-withholding checkpoint rather than documenting it as a section 153 independent-service fee. Section 149 requires every person responsible for paying salary to deduct at payment using the employee's estimated average rate for the tax year. The cited sections do not establish a complete registration, deposit, CPR, statement, SWAPS, or certificate-delivery procedure for a foreign payer with no Pakistan entity or permanent establishment. Obtain a Pakistan-specific determination of those mechanics before the next payment.

Sources: Federal Board of Revenue, Income Tax Ordinance, 2001 Amended upto 30.06.2026

National Tax Number

The National Tax Number is the contractor's federal income-tax identifier. For an individual, FBR uses the 13-digit CNIC as the NTN or registration number after Iris enrollment. Request the Iris registration record and match the legal name and number to the contract and invoice. A company uses its own registration identity. The NTN is useful for payee records and any withholding analysis, but it does not prove that the contractor is registered for sales tax on services in Sindh, Khyber Pakhtunkhwa, another province, or Islamabad Capital Territory.

Issued by: Federal Board of Revenue to the registered taxpayer

Timing: After income-tax enrollment through Iris

Sources: Federal Board of Revenue, Register for Income Tax

Section 164 withholding certificate and payment receipt

The section 164 certificate documents tax actually deducted from the contractor's fee. A person deducting tax must give the payee a copy of the computerized payment receipt or equivalent evidence together with a certificate stating the deducted amount and required particulars. Build this handoff into settlement when Pakistan advice concludes that section 153 reaches the foreign buyer and the payment exceeds the applicable floor. The certificate is conditional on a real deduction; it should never be created merely to make an invoice appear compliant.

Issued by: The person that deducts tax, to the resident payee

Timing: At the time tax is deducted

Sources: Federal Board of Revenue, Income Tax Ordinance, 2001 Amended upto 30.06.2026

Electronic Proceeds Realisation Certificate

The electronic Proceeds Realisation Certificate is the contractor's bank-issued evidence that funds received from abroad were realized. State Bank permits authorized dealers to issue it after realization and requires them to provide a digital access method. Ask the contractor to retain the certificate with the contract, invoice, and receipt record when it is needed for tax or export evidence. The foreign customer does not issue this certificate and should not present it as its own filing. Its practical role is to keep the commercial invoice and Pakistan-side receipt record traceable to the same service.

Issued by: The contractor's authorized dealer after funds from abroad are realized

Timing: After realization of the inward export receipt

Sources: State Bank of Pakistan, FE Circular No. 05 of 2022

Invoice tax treatment starts with the contractor's Pakistan location and exact service classification. Sindh's current section 3 reaches a taxable service provided by a person from an office or place of business in Sindh, including service to a nonresident recipient. In Khyber Pakhtunkhwa, a service originating in the province and terminating outside Pakistan remains taxable unless the Government specifies otherwise. Islamabad Capital Territory expressly charges exports of services at zero percent. These rules belong to separate territorial systems, so a foreign billing address does not produce one Pakistan-wide export result. Confirm current Punjab or Balochistan law directly when the contractor works there, and verify any service-specific schedule, exemption, rate, notification, registration, and return rule before approving the tax line.

Sources: Sindh Revenue Board, The Sindh Sales Tax on Services Act, 2011 (Amended upto 1st July, 2026) [E&OE], Khyber Pakhtunkhwa Revenue Authority, Sales Tax on Services Act 2022 updated through the Finance Act 2026, Pakistan Code, Islamabad Capital Territory Tax on Services Ordinance 2001

What an invoice has to show

• Sindh provider and recipient identities, SNTN, CPC Code, values, rate, and tax

  A Sindh tax invoice identifies the provider by name, address, and SNTN and the recipient by name, address, and NTN, SNTN, or CNIC. It also carries a serial number and date, a service description and CPC Code with other required details, value excluding tax, tax rate and amount, and total value including tax. Rule 29 states no foreign-recipient identifier exception. If the foreign customer lacks every listed identifier, the Sindh-registered provider should obtain current SRB confirmation before issuing the tax invoice. Do not import Khyber Pakhtunkhwa's separate if-any qualifier into this Sindh requirement.

  Sources: Sindh Revenue Board, The Sindh Sales Tax on Services Rules, 2011 (Amended upto 1st July, 2026) [E&OE]

• Khyber Pakhtunkhwa registration details, service description, values, rate, and tax

  A Khyber Pakhtunkhwa tax invoice shows the provider's name, address, and registration number and the recipient's name, address, and registration number if any. It then describes the service and states the value excluding tax, tax rate, tax amount, and total including tax. The words if any matter for a foreign customer that has no Pakistan registration number. Do not replace the provider's KPRA number with an NTN or a number from another province. Apply this face-of-invoice list only after the contractor's Khyber Pakhtunkhwa status and tax treatment are established.

  Sources: Khyber Pakhtunkhwa Revenue Authority, Sales Tax on Services Act 2022 updated through the Finance Act 2026

Pakistan contractors should bill against contract milestones or accepted deliverables, with payment due on the date the agreement states. Set the billing milestone, acceptance evidence, invoice currency, bank-charge allocation, tax-deduction process, and governing law in the services agreement. Where Pakistan law governs, the Contract Act requires the parties to perform their promises. If the promisor must perform without application by the promisee and the agreement omits a deadline, section 46 leaves timing to a reasonable-time question of fact. Require a clear invoice reference and an objective review period, and state when silence counts as acceptance, if at all.

Sources: Pakistan Code, Contract Act 1872

When invoices are settled

Use the payment day or objective deadline written in the contract. Where Pakistan law governs and the promisor undertakes performance without application by the promisee, section 47 addresses a fixed day and section 46 leaves an omitted time to a reasonable period determined on the facts. The Contract Act does not supply a universal 30-day or 45-day term for this foreign-business and resident-contractor scenario. A practical clause should start the clock from a defined event, such as delivery plus acceptance, state the number of calendar or working days, and address a disputed portion without delaying an undisputed amount.

Sources: Pakistan Code, Contract Act 1872

Local currency rules

The special purpose-code, one-working-day, and no-Form-R procedure applies only if the contractor is an IT company or a Pakistan-resident individual providing online services to international clients as a defined freelancer. In that branch, the exporter gives the service declaration and the authorized dealer handles purpose coding, receipt processing, and reporting. The processing time begins after receipt and does not set the invoice due date. Other service exporters should confirm their applicable procedure without importing these special rules. Separately, an authorized dealer may issue an electronic Proceeds Realisation Certificate after funds received from abroad are realized; the foreign buyer does not issue it.

Sources: State Bank of Pakistan, EPD Circular Letter No. 06 of 2026, State Bank of Pakistan, revised export rules for IT companies and freelancers, State Bank of Pakistan, FE Circular No. 05 of 2022

Applying one territory's services-tax rule throughout Pakistan

A foreign customer address does not produce a uniform Pakistan export result. Sindh's current section 3 reaches a taxable service provided by a person from an office or place of business in Sindh, including service to a nonresident recipient; Khyber Pakhtunkhwa keeps an outbound service taxable unless the Government specifies otherwise; and Islamabad Capital Territory charges exports of services at zero percent. Ask for the contractor's actual work and business location, identify the service classification, and review that territory's current schedules and notifications. Never use a Sindh registration, rate, invoice field list, or filing assumption as proof of treatment in another province.

Sources: Sindh Revenue Board, The Sindh Sales Tax on Services Act, 2011 (Amended upto 1st July, 2026) [E&OE], Khyber Pakhtunkhwa Revenue Authority, Sales Tax on Services Act 2022 updated through the Finance Act 2026, Pakistan Code, Islamabad Capital Territory Tax on Services Ordinance 2001

Treating no permanent establishment as a withholding exemption

The buyer's lack of a Pakistan entity or permanent establishment does not appear as an automatic section 153 exception. The Income Tax Ordinance includes a body incorporated under foreign company law in its company definition, and companies are prescribed persons for the service-payment rule. Before the first payment, obtain Pakistan advice on the buyer's entity type, territorial administration, registration, deduction, remittance, reporting, and any treaty position. If withholding applies, give the contractor the section 164 certificate and payment evidence instead of reducing the invoice without a documented basis.

Sources: Federal Board of Revenue, Income Tax Ordinance, 2001 Amended upto 30.06.2026

Applying the special IT exporter procedure to every service

Purpose coding, one-working-day processing, and no-Form-R treatment under revised paragraph 12 apply only to an IT company or a Pakistan-resident freelancer providing online services to international clients. In that procedure, the resident exporter gives the service declaration and the authorized dealer handles purpose coding, processing, and reporting. Do not extend those rules to a generic service exporter. A separate rule permits the authorized dealer to issue an electronic Proceeds Realisation Certificate after funds received from abroad are realized, so the foreign buyer cannot issue that certificate.

Sources: State Bank of Pakistan, revised export rules for IT companies and freelancers, State Bank of Pakistan, FE Circular No. 05 of 2022