How to Show Your Upwork/Fiverr Earnings to the Federal Board of Revenue (FBR) in Pakistan
To show your Upwork earnings to the Federal Board of Revenue (FBR) in Pakistan, you need to follow a structured process to ensure compliance with tax regulations. Here are the steps you should take:
Steps to Show Upwork/Fiverr Earnings in Pakistan
1. Register with FBR
- Obtain a National Tax Number (NTN): Your NTN is essentially your Computerized National Identity Card (CNIC) number. Register online through the FBR’s IRIS portal or visit a Regional Tax Office (RTO).
- Complete Form 181: This form is for voluntary income tax registration.
2. Gather Required Documentation
- CNIC
- Bank account statements: Ensure you have statements for the relevant tax year (July 1 – June 30).
- Record of income and expenses: Maintain detailed records of all transactions, especially those from Upwork.
- Proof of Remittances: Obtain Proceeds Realization Certificates (PRCs) for all remittances received through proper banking channels.
3. Calculate Your Taxable Income
- Track Your Income: Include all earnings from Upwork and other freelancing platforms.
- Deduct Eligible Expenses: Business-related expenses such as office rent, equipment purchases, utility bills, and employee salaries can be deducted.
4. File Your Tax Return
- Use the E-Filing System: Register for e-filing on the FBR’s portal by creating an account with your CNIC details, mobile number, and email address.
- File a Declaration: Choose the appropriate tax year, declare your total income, and deduct eligible business expenses to determine your taxable income.
- Wealth Statement: Provide details of personal expenses and assets acquired during the tax year and reconcile these with the income declared.
5. Submit and Pay Taxes
- Submit Your Return: Ensure all details are accurate and submit your tax return through the FBR e-portal. The deadline for submission is typically September 30 each year.
- Make Payment: Use approved banks or online payment methods to pay any taxes due.
Special Considerations for Freelancers
Tax Exemption for IT Services
- IT Services Exemption: Under clause 133 of Part-I of the Second Schedule to the Income Tax Ordinance, 2001, income from exports of computer software, IT services, or IT-enabled services is exempt from tax until June 30, 2025, provided 80% of the export earnings are remitted to Pakistan through normal banking channels.
- PSEB Registration: While not mandatory, registering with the Pakistan Software Export Board (PSEB) can simplify the process. However, individual freelancers cannot register directly with PSEB; they must form a sole proprietorship or company to do so.
Using Payment Services
- Payoneer and Jazz Cash: These services can be used to receive payments from Upwork. Ensure that you receive PRCs for all remittances to benefit from tax exemptions.
Record Keeping
Maintain all records of your income, expenses, and tax returns for at least six years, as they may be subject to audit by the FBR.
Conclusion
Filing taxes as a freelancer in Pakistan involves several steps, but by following this guide and keeping meticulous records, you can ensure compliance and avoid legal complications. Consider consulting a tax advisor for personalized guidance and to stay updated on any changes in tax regulations.
By adhering to these steps, you can effectively show your Upwork earnings to the FBR and ensure that you are in compliance with Pakistani tax laws.