Public Company and Private Company

Establish the following as either public or private company.

(i) PPL is a company incorporated under the Companies Act, 2017 and is not listed on any stock
exchange in Pakistan. 59 per cent of the shares in PPL are held by BBC Ltd, a company
incorporated in United Kingdom. BBC Ltd. is owned by United Kingdom.
(ii) XYZ Limited is a public company incorporated under the Companies Act, 2017 whose shares
were traded on Pakistan Stock Exchange from 01 August 2023 until 29 June 2024 on which
date the company was delisted on the exchange.
(iii) The Provincial Government of KPK holds 50% of the shares in ABC Ltd, a public company
under the Companies Act, 2017. ABC Ltd is not listed on any stock exchange in Pakistan.
(iv) BRR is a public company under the Companies Act, 2017. 41% of the shares are held by the
Federal Government, 50% by the Government of Saudi Arabia and 9% by the individuals
and group companies. BRR is not listed on any stock exchange in Pakistan.
 Public Company and Private Company - Solution
(i) A public company for Pakistan tax purposes, inter alia includes a company in which not less
than 50% of the shares are held by a foreign government or a foreign company owned by a
foreign government. 59% of the shares in PPL are owned by BBC Ltd, which is a foreign
company and BBC Ltd is owned by the United Kingdom (foreign government).
Therefore, PPL is a public company for Pakistan tax purpose.
(ii) A company whose shares are traded on a registered stock exchange in Pakistan at any time in
the tax year and which remained listed on that exchange at the end of that year is a public
company for tax purpose.
Although the shares of XYZ Limited were traded on the Pakistan stock exchange during the
tax year 2024, XYZ Ltd did not meet the test of being a public company for tax purpose
since its shares were not listed on the Pakistan stock exchange on 30 June 2024. XYZ Ltd is
therefore not a public company for tax purpose.
(iii) A company in which not less than 50% of the shares are held by the Federal Government or
Provincial Government is a public company for tax purpose. Since the Provincial Government
of KPK holds 50% of the shares in ABC Ltd, ABC Ltd is a public company for tax purpose.
(iv) A public company for Pakistan tax purposes, inter alia means a company in which not less
than 50% of the shares are held by a foreign government, therefore, BRR is a public
company as 50% of the shares are held by Government of Saudi Arabia.
 Question No. 4(c) of Spring 2022
Following information pertains to three unlisted companies:

Paid up Total Annual

Company Capital Reserves Turnover Shareholders
------------ Rs. in million ------------
60% shares are held by a foreign
A Limited 30 80 150
company
40% shares are held by the
B Limited 80 (35) 220
Provincial and Federal Governments
100% shares are held by a local
C Limited 40 5 500
group

Required: Under the provisions of the Income Tax Ordinance, 2001 briefly discuss whether each of
the above companies can be classified as small, public or private. Also state the additional
information, if any, which may be required for determining the classification of these companies.
 Question No. 4(c) of Spring 2022 - Solution
Company Status of Company
 Not a small company because its paid up capital plus undistributed reserves
exceeds Rs. 50 million.
A Limited  It can be a public company if foreign company is owned by a foreign
government.
 Otherwise, A Ltd. will be a private company.

 If remaining 60% holding is with foreign government or foreign company

owned by foreign government then public company.
 Otherwise, small company being its paid-up capital plus undistributed reserves
are below 50 million and annual turnover is below Rs. 250 million if:
 employee not exceeding 250 at any time during the year.
B Limited
 is not formed by splitting up or the reconciliation of a company already
in existence (1 July 2005).
 is not a small and medium enterprise.
 If any of the above condition shall not be met then it shall be classified as
private company.

 Not a small company because its annual turnover exceeded Rs. 250 million.
C Limited  Not a public company because 100% shareholding is with local group.
 Therefore, it shall be classified as private company.
 Question No. 4(a) of Autumn 2011
Briefly discuss the residential status of the following persons for the tax year 2011 under the
Income Tax Ordinance, 2001.
(i) Mr. Shah has been working as an Information Analyst in the Ministry of Foreign Affairs. On 1
November 2010, he was posted to Pakistan Embassy in Canada for three years.
(ii) Asif Learning Center is a partnership concern, providing IT training to professionals in
Pakistan, UAE and Saudi Arabia. Up to 31 July 2010, the management and control of its affairs
was situated partly in Pakistan. However, with effect from 1 August 2010, the entire
management and control of the affairs of the partnership was shifted to Dubai.
(iii) Mr. Liaquat was sent to Pakistan on a special assignment by his UK-based company on 1
March 2011. He left Pakistan on 9 September 2011.
(iv) Farooq Trading LLC was incorporated as a limited liability company in UAE. The management
and control of its affairs are situated wholly in Pakistan.
 Question No. 4(a) of Autumn 2011 - Solution
(i) Being an employee of Federal Government Mr. Shah would be treated as a resident
irrespective of number of days he stays in Pakistan.
(ii) Asif Learning Centre (ALC), being a partnership firm, is an AOP.
According to the ITO-2001, an association of persons shall be a resident association of
persons for a tax year if the control and management of affairs of the association is situated
wholly or partly in Pakistan at any time in the year.
Since ALC’s management and control of affairs were present in Pakistan during the tax year
2011, it shall be considered as resident association of person.
(iii) The stay of Mr. Liaquat for the purpose of tax year 2011 is 122 days (31+30+31+30).
Since his stay in Pakistan is less than 183 days in tax year 2011, he is a non resident for tax
purposes.
(iv) Since the management and control of affairs of Farooq Trading LLC was wholly situated in
Pakistan during the tax year 2011, it is a resident company irrespective of the fact that it was
incorporated in UAE.
 Question No. 4(b) of Autumn 2013
In view of the provisions of Income Tax Ordinance, 2001 and Rules made thereunder, determine
the residential status of the following persons for the tax year 2013:
(i) Ramiz proceeded to Saudi Arabia on 24 December 2012 to assume responsibilities on his new
job. He visited Karachi from 20 June 2013 to 24 June 2013 for presenting a paper in a
seminar but due to unavoidable circumstances, the seminar was cancelled.
(ii) Khalil, an officer working at Ministry of Foreign Affairs, since last three years, was posted to
the Pakistan’s mission in Geneva from 1 August 2012 to 30 June 2013.
(iii) Ali Associates is a partnership firm and provides consultancy services in Pakistan as well as
United Kingdom (UK). The management and control of its affairs is situated partly in UK and
partly in Pakistan.
(iv) Smith, a Nigerian football coach, came to Pakistan on 28 February 2013. He left he country
on 31 August 2013.
 Question No. 4(b) of Autumn 2013 - Solution
(i) The number of days Mr. Ramiz spent in Pakistan for the tax year 2013 is as follows:

Month Days
July 2012 31
August 2012 31
September 2012 30
October 2012 31
November 2012 30
December 2012 24
June 2013 5
Total 182

Mr. Ramiz is a non- resident person as his total stay in tax year 2013 is less than 183 days.
However, Mr. Ramiz (if citizen of Pakistan) can still be treated as resident if he is not present in any other
country for more than 182 days during the tax year or he is not a resident taxpayer of any other country.
(ii) A Federal Government Employee posted abroad is considered as a resident person irrespective of his
physical presence in Pakistan. Therefore Khalil is a resident individual for tax year 2013.
(iii) Ali Associates being a partnership firm, is an AOP, and even if the management and control of its affairs is
partly situated in Pakistan during the year it would be treated as a resident.
 Question No. 4(b) of Autumn 2013 - Solution
(iv) Total number of days Smith spent in Pakistan during the tax year 2013 are as follows:

Month Days
February 2013 1
March 2013 31
April 2013 30
May 2013 31
June 2013 30
Total 123

The number of days he spent in Pakistan beyond 30 June 2013 would fall under next tax year. Therefore,
Mr. Smith is a non- resident person as his total stay in tax year 2013 is less than 183 days.
 Question No. 2(a) of Autumn 2017
Discuss the residential status for tax year 2017 in each of the following situations:
(i) On 21 September 2016 Asif proceeded to Dubai to join his new job. Due to certain
professional issues with his employer in Dubai, he resigned on 1 May 2017 and came back to
Pakistan. On 16 May 2017 he got a new job in Pakistan which he continued till 30 June 2017.
(ii) Sami Associates is an association of persons and provides accounting services in Dubai. On 2
January 2017, the entire management and control of its affairs was shifted from Karachi to
Dubai.
 Question No. 2(a) of Autumn 2017 - Solution
(i) The number of days Asif spent in Pakistan during tax year 2017 is 144 as shown below:

Month Days
July 2016 31
August 2016 31
September 2016 21
May 2017 31
June 2017 30
Total 144

Asif is a non- resident person as his total stay in tax year 2017 is less than 183 days.
However, Mr. Asif (if citizen of Pakistan) can still be treated as resident if he is not present in
any other country for more than 182 days during the tax year or he is not a resident
taxpayer of any other country.
(ii) An AOP is treated as a resident if the management and control of its affairs is situated in
Pakistan at any time during the year. Hence Sami Associates would be considered a resident
irrespective of the fact that its entire management and control of affairs was subsequently
shifted from Karachi to Dubai.
 Question No. 3(c) of Spring 2018
On 1 December 2016 Bruce Lee was appointed by a Chinese company as a Technical Director for
Pakistan. He has provided you the following details:
 Arrival in Pakistan 15 December 2016
 Joined office in Pakistan 20 December 2016
 Visit to Dubai on an official trip 21-30 March 2017
 Visit to South Korea for vacations 12-21 April 2017
 Visit to northern areas of Pakistan for personal trip 4-9 June 2017
In view of the provisions of the Income tax Ordinance, 2001 and related Rules thereunder,
comment on the residential status of Bruce Lee for the tax year 2017.
 Question No. 3(c) of Spring 2018 - Solution
Mr. Bruce Lee is not a resident for the tax year 2017 as he was present for less than 183 days in
Pakistan i-e 182 days as follows:

Month Days
December 2016 17
January 2017 31
February 2017 28
March 2017 (21 + 1 + 1) 23
April 2017 (12 + 10) 22
May 2017 31
June 2017 30
Total 182
 Question No. 3(a) of Autumn 2019
Respond to the following independent scenarios, under the provisions of the Income Tax
Ordinance, 2001:
(a) Jean Francois, a French designer, often visits to Pakistan for promotion of his products. During
his last visit he stayed in Pakistan from 10 July 20X8 to 25 February 20X9. Determine the
residential status of Jean Francois for tax year 20X9, assuming that the Commissioner has
granted him permission to use calendar year as special tax year.

Solution:
In view of the permission granted by Commissioner-IR to Jean Francois to use special tax year, the
number of days he spent in Pakistan beyond 31 December 20X8 would fall under tax year 20Y0.
As a result, John is a non-resident person because his total stay in tax year 20X9 is 175 days (i.e.
from 10 July 20X8 to 31 December 20X8) which is less than 183 days.
 Question No. 5 of Winter 2010
In view of the provisions of Income Tax Ordinance, 2001 and the stated rules, determine the
residential status of the following persons for the tax year 20X8 under the given circumstances.
(i) Mr. Mubeen came to Pakistan for the first time on a special assignment from his company on
April 01, 20X8 and left the country on September 30, 20X8.
(ii) Mr. Rana, who had never travelled abroad in his life, got a job in Canada. He went to
Canada on December 29, 20X7 to assume his responsibilities as a CFO. In June, 20X8 his
company sent him to India on a training workshop. On June 30, 20X8 on his way back to
Canada he had to stay in Karachi for a whole day in transit.
(iii) Mr. Baber, a Federal Government employee was posted to the Pakistan mission in Geneva
from July 01, 20X7 to June 30, 20X8.
(iv) Mr. Francis, a sugar dealer in Brazil, came to Pakistan on July 31, 20X7. During his visit he
stayed at Lahore for 60 days and spent the rest of the days in Karachi. He left the country on
January 31, 20X8. Assume that the Commissioner has granted him permission to use calendar
year as a special tax year.
 Question No. 5 of Winter 2010 - Solution
(i) For the tax year ended June 30, 20X8, the relevant period is July 01, 20X7 to June 30, 20X8.
Therefore, the stay of Mr. Mubeen for the purpose of tax year 20X8 is:

Month Days
April 20X8 30
May 20X8 31
June 20X8 30
Total 91

Since his stay in Pakistan is less than 183 days in tax year 20X8, he is a non-resident for tax
year 20X8.
However, Mr. Mubeen (if citizen of Pakistan) can still be treated as resident if he is not
present in any other country for more than 182 days during the tax year or he is not a
resident taxpayer of any other country.
 Question No. 5 of Winter 2010 - Solution
(ii) Since Mr. Rana never travelled abroad in his life before proceeding to Canada for assuming his
job responsibilities, the number of days he spent in Pakistan for the tax year 20X8 is:

Month Days
July 20X7 31
August 20X7 31
September 20X7 30
October 20X7 31
November 20X7 30
December 20X7 29
Total 182

The day he spent in Pakistan on June 30, 20X8, while in transit, would not be counted as
day of his presence in Pakistan. Since his stay in Pakistan is less than 183 days in tax year
20X8, he is a non-resident for tax year 20X8.
However, Mr. Rana (being citizen of Pakistan) can still be treated as resident if he is not
present in any other country for more than 182 days during the tax year or he is not a
resident taxpayer of any other country.
 Question No. 5 of Winter 2010 - Solution
(iii) A Federal Government Employee posted abroad in terms of his employment is considered as
a resident person irrespective of his physical presence in Pakistan. Therefore Mr. Baber is a
resident individual for tax year 20X8.
(iv) In case of Mr. Francis, it is immaterial where he stayed in Pakistan. The calculation will be
made from the day of his arrival in Pakistan to the day of his departure from Pakistan.
Therefore, the total number of days he spent in Pakistan during the calendar year 20X7 i.e.
the year starting from January 01, 20X7 to December 31, 20X7 (Special tax year 20X8) is:

Month Days
July 20X7 1
August 20X7 31
September 20X7 30
October 20X7 31
November 20X7 30
December 20X7 31
Total 154
In view of the permission granted by Commissioner Income Tax to Mr. Francis to use special
tax year, the number of days he spent in Pakistan beyond December 31, 20X7 would fall
under tax year 20X9. Therefore, 31 days which he spent in January 20X8 would not be
included in tax year 20X8. As a result, Mr. Francis is a non-resident person as his total stay in
tax year 20X8 is less than 183 days.
 Residential Status
Determine the residential status in view of the provisions of Income Tax Ordinance, 2001 and the stated rules, of
the following persons for the tax year 20X8 under the given circumstances.
(i) On 01 February 20X8, Mr. Sameel was sent to Pakistan by his UK based company to work on a special
project. He left Pakistan on 23 August 20X8.
(ii) Mr. Salman a property dealer in USA came to Pakistan on 01 February 20X7. During his stay up to 03
August 20X7 in Pakistan, he remained in Peshawar up to 30 June 20X7 and thereafter till his departure
from Pakistan, in Quetta. Assume that Commissioner has granted him permission to use calendar year as
special tax year.
(iii) A company, having its registered office in America, is partly controlled and managed from its branch
established in Pakistan.
(iv) Anderson LLC was incorporated as limited liability company in UK. The control and management of its
affairs was situated wholly in Pakistan. However, with effect from 01 November 20X7, the entire
management and control was shifted to UK.
(v) BBL is a non-listed public company incorporated under the Companies Act, 2017. All the shareholders of
the company are individuals. The control and management of affairs of the company during the year was
outside Pakistan.
(vi) In a partnership firm consisting of 3 partner i.e. A, B and C. A and B reside in Pakistan while C resides in
China. The firm is fully controlled by C. During the tax year 20X8, C stayed in Pakistan for 7 months.
(vii) ABC (Single Member Company) Ltd. is incorporated under Companies Act, 2017. Its sole owner and
director Mr. Lee belongs to China. The company is fully controlled by Mr. Lee. During the tax year 20X8,
Mr. Lee did not even for a single day in Pakistan.
 Residential Status - Solution
(i) The stay of Mr. Sameel for the purpose of tax year 20X8 is 150 days (28+31+30+31+30). Since his stay in
Pakistan is less than 183 days in tax year 20X8, he is non-resident for tax purposes.
(ii) It is immaterial where he stayed in Pakistan. Number of days shall be counted from the day of his arrival in
Pakistan to the day of his departure in the following manner:
Accounting period 01 January 20X7 to 31 December 20X7 (Special tax year 20X8)

Month Days
February 20X7 28
March 20X7 31
April 20X7 30
May 20X7 31
June 20X7 30
July 20X7 31
August 20X7 3
Total 184

Since he was present in Pakistan for 184 days, therefore, he is resident individual. Mr. Salman would not be
resident individual, had the tax year been a normal financial year ending on 30 June 20X8.
 Residential Status - Solution
(iii) A company shall be resident if control and management of the affairs of the company is situated wholly in
Pakistan at any time in the year. Therefore, company is not resident because the control and management
of the affairs of the company is not situated in Pakistan.
(iv) A company shall be resident if control and management of the affairs of the company is situated wholly in
Pakistan at any time in the year. Therefore, company is resident irrespective of the fact that it was
incorporated in UK.
(v) If a company is incorporated or formed by or under any law in force in Pakistan, it is treated as a resident
company. Such company cannot be treated as non-resident merely on the basis that the control and
management of the affairs of the company were situated abroad. Therefore, BBL is a resident company.
(vi) An AOP shall be a resident AOP for a tax year if the control and management of the affairs of the
association is situated wholly or partly in Pakistan at any time in the year. The partnership firm is the
resident AOP as it controlling partner (i.e. Mr. C) was partly (i.e. 7 months) in Pakistan.
(vii) If a company is incorporated or formed by or under any law in force in Pakistan, it is treated as a resident
company. Such company cannot be treated as non-resident merely on the basis that the control and
management of the affairs of the company were situated abroad. Therefore, ABC (SMC) Ltd. is a resident
company.