--- title: "US tax for Americans in Pakistan | Expat Tax Abroad" url: https://expattaxabroad.com/insights/us-tax-americans-in-pakistan/ description: "The US–Pakistan treaty dates from 1957 and is thin by modern standards — and with no totalization agreement in place, self-employment tax still applies in full." lang: en --- Skip to content IRS Enrolled Agent · One preparer, every return 48 country guides 48 guides (https://expattaxabroad.com/countries/) Verify at IRS.gov: https://irs.treasury.gov/rpo/rpo.jsf Facebook: https://www.facebook.com/people/Jorge-I-Rivas-ExpatTax/61572578032002/ Instagram: https://www.instagram.com/jrivas0013/ LinkedIn: https://www.linkedin.com/in/jorgeirivas1186sm X: https://x.com/jrivas0013 Filing rules · 22 September 2026 # US tax for Americans in Pakistan There is a US–Pakistan income tax treaty and no totalization agreement. The treaty is from 1957 — one of the oldest still operating — so it relieves double income tax without carrying the provisions a modern treaty would. Pakistani rates reach 35%, which usually puts the credit ahead of the exclusion on employment income. Image: A treaty ticked with its 1957 date noted, a totalization agreement struck through, and 15.3% self-employment tax marked as surviving. (https://expattaxabroad.com/features/art-pakistan-1600.webp) Image: Jorge I. Rivas, EA (https://expattaxabroad.com/_astro/jorge-rivas-avatar.BkTc9hQv_ZqNxAY.webp) Jorge I. Rivas, EA Enrolled Agent · 6 minutes to read ## A 1957 treaty is not a modern one The treaty in force dates from 1957. It has no comprehensive limitation-on-benefits article, and its provisions on pensions and independent personal services are thin by current standards. Positions that work comfortably under a 1990s treaty may simply have no equivalent here. What it does do is relieve double income tax, which is the part most people need. Pakistani income tax is creditable on Form 1116 in the ordinary way. ## No totalization agreement means SECA stands There is no agreement covering social security, so a self-employed American in Pakistan pays 15.3% self-employment tax on net earnings whatever the treaty does to the income tax side. An employee on a Pakistani payroll does not carry that exposure. ## At 35%, the credit usually wins Pakistani rates reach 35%, which is above the point where the credit generally beats the exclusion on employment income. That is a comparison worth running properly rather than defaulting to Form 2555 because it is familiar — and the answer can differ in a part-year arrival. ## Where the work was performed drives the return Where income is remitted rather than earned locally, the source question decides almost everything: which country may tax it, what credit is available, and whether the exclusion reaches it at all. Establish where the work was physically performed before choosing an election. ## Property, inheritance and family arrangements Dual nationals with property or inherited assets in Pakistan should expect Form 8938 questions, and Form 3520 where an inheritance or a family arrangement is involved. These are reporting obligations rather than tax charges, but the penalties attached to them are not small. ## A worked example, tax year 2025 A single American employed in Karachi on $90,000, with Pakistani income tax of $25,000 for the year. Pakistani figures are illustrative; the US figures are computed. | Salary | $90,000 | | --- | --- | | Pakistani income tax paid | $25,000 | | US taxable income after the standard deduction | $74,250 | | US income tax before the credit | $11,249 | | US income tax after the credit | $0 | | Excess credit carried forward | $13,751 | | Self-employment tax if the same work were contracted | 15.3%, no relief | Pakistani tax of $25,000 is more than double the US tax on the same income, so the credit clears the liability and the excess carries forward. Had the same work been invoiced rather than employed, 15.3% self-employment tax would apply on top, because no totalization agreement exists to relieve it. Sources: IRC §901, §904, §1401 and §1402; IRS Form 1116 instructions. Scroll the table sideways | Fact | Position | | --- | --- | | US income tax treaty | Yes — the 1957 treaty | | Totalization agreement | No | | Local income tax | Progressive, to 35% | | Self-employment tax (SECA) | 15.3%, no relief | | FBAR threshold | $10,000 aggregate, any point in the year | Sources IRC §901, §904, §911, §1401 and §1402; the 1957 US–Pakistan income tax treaty; Social Security Administration totalization agreement list; IRS Publication 54; IRS Publication 514; IRS Form 8938 and Form 3520 instructions; Rev. Proc. 2025-32; 31 CFR 1010.350. US figures are tax year 2025. Checked 22 September 2026. Change log 22 September 2026 First published Pakistan — full country guide →: https://expattaxabroad.com/countries/pakistan/ Expat tax returns →: https://expattaxabroad.com/services/expat-tax-returns/ FBAR / FATCA compliance →: https://expattaxabroad.com/services/fbar-fatca-compliance/ Treaty & totalization matrix →: https://expattaxabroad.com/tools/treaty-totalization-matrix/ Streamlined catch-up filing →: https://expattaxabroad.com/services/streamlined-catch-up-filing/ Home →: https://expattaxabroad.com/ All insights →: https://expattaxabroad.com/insights/ ## Questions Americans in Pakistan ask ### Is the US–Pakistan treaty still in force? Yes, and it dates from 1957 — one of the oldest still operating. It relieves double income tax, but it lacks the limitation-on-benefits and pension machinery a modern treaty carries, so positions from newer treaties may have no equivalent. ### Do I owe US self-employment tax in Pakistan? If the work is self-employment for US purposes, yes, in full. There is no totalization agreement, so 15.3% SECA applies to net earnings whatever the treaty does to the income tax. ### Which election is better at Pakistani rates? Usually the credit, because rates reach 35% and generally exceed US tax on the same income. It is still worth computing, particularly in a part-year arrival where Pakistani tax is light. ### I inherited property in Pakistan. What does the US want to know? Potentially Form 3520 for the inheritance itself and Form 8938 for the asset, depending on values and structure. These are reporting obligations rather than taxes, but the penalties are substantial and they are much cheaper to handle early. ### I have not filed for several years while in Pakistan. What now? If the failure was non-willful — which describes most people in this position — the Streamlined Foreign Offshore Procedures waive the failure-to-file, failure-to-pay and FBAR penalties: three years of returns, six years of FBARs, and Form 14653. ## Filing from Pakistan? Fifteen minutes settles the source question, the election, and what your property or inheritance needs reported. Book a 15-minute call: https://expattaxabroad.com/book/ Complete return $599 Prepared and signed by an Enrolled Agent Book a call (https://expattaxabroad.com/book/) ## Structured data ```json { "@context": "https://schema.org", "@graph": [ { "@type": "Person", "@id": "https://expattaxabroad.com/#jorge", "name": "Jorge I. Rivas", "honorificSuffix": "EA", "jobTitle": "Enrolled Agent", "description": "IRS Enrolled Agent specialising exclusively in US tax for Americans living abroad. 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