Transfer money to Norway after selling property in Pakistan?

READOUR ADVICE ON SELLING PROPERTY IN PAKISTAN

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In our experience, many Norwegian-Pakistanis own property in Pakistan that has not been reported to the Norwegian tax authorities because they are afraid of being taxed. However, there is no reason to be afraid of reporting your property in Pakistan to the tax authorities. It is a myth that you will be heavily taxed for assets abroad. Nor is there an automatic tax liability for property you own in Pakistan.

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This article provides information and specific advice on how to proceed if you want to transfer money from Pakistan to Norway after selling a property.

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Should property I own in Pakistan be reported to Norwegian tax authorities?

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Yes, absolutely all property you own in Pakistan must be reported to the tax authorities. The reporting is done through your tax return. The reporting obligation applies to those who are considered resident in Norway for tax purposes. The fact that you report your property in Pakistan to the tax authorities does not necessarily mean that you are liable to pay tax.

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I have received the property in connection with an inheritance settlement. Am I still obliged to report the property?

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You are obliged to report on the property, regardless of whether you have purchased, inherited or otherwise become the owner of the property. Whether you should pay tax on the property in Norway must be assessed on a case-by-case basis. If you have inherited the property, the date of inheritance is used as the basis for when you became the owner. If there is an ongoing inheritance dispute, your assets will only be equal to your share of the estate until the inheritance settlement is final.

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What value for the property should be determined in the tax return?

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For properties that have not previously had an asset value determined according to Norwegian rules, the asset value is set at a maximum of 30 percent of the market value abroad. Ask a real estate agent in the area to provide you with a valuation of the property, to the extent possible. Insa advokater can put you in touch with the right people in Pakistan if you wish.

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What do I have to pay if I report to the Norwegian tax authorities?

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In 1986, Norway and Pakistan entered into a tax treaty that aims to avoid double taxation. This means that if, for example, you have paid tax on the rental of the property in Pakistan, you will not pay tax on it in Norway. The same applies if you have paid tax on gains from the sale of the property in Pakistan. However, the value of the property will be included in the calculation of your wealth in Norway. You must pay wealth tax on this if your wealth is large enough.

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What happens if the property is reported in Norway?

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If it turns out that you should have paid wealth tax in Norway or paid more wealth tax than you already do, you can request a voluntary correction (so-called tax amnesty). In 2023, spouses with assets of less than NOK 20 million will only pay 1% wealth tax on net assets above NOK 3.4 million. Single people with assets of less than NOK 20 million will pay 1% on net assets above NOK 1.7 million. 1.7 million.  

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Whether your property in Pakistan results in increased wealth tax must be assessed on a case-by-case basis. If you apply for voluntary correction, you risk paying late payment interest and wealth tax for the period you should have paid tax.

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What documents and information do I need if the property is to be reported in Norway?

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Conditions that are important to clarify: How long have you owned the property? Is the property rented out? Is tax paid on any rental income? What is the value of the property?

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Is there tax on the sale of property in Pakistan?

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According to the tax treaty between Norway and Pakistan, if you have paid tax on the gain from the sale of property in Pakistan, you will not pay tax on it in Norway. If you have sold your holiday home in Pakistan and the sale has triggered capital gains tax in Pakistan, you will not pay tax on the property in Norway.

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If no tax has been paid on the gain of a holiday home abroad, the sale is tax-free in Norway if you have:

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• owned the property for at least five years, and
• you have used the property as your own holiday home for at least five of the last eight years prior to the sale.

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I want to transfer the money to Norway. Can I do that?

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Yes, it is completely unproblematic to transfer money from Pakistan to Norway. Make sure that your tax situation in Norway is in order before you transfer the money here.

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Read more about Norwegian-Pakistanis' obligation to report their assets in Norway here.