Pakistan-US Tax Treaty: Active Since 1957

The Pakistan-US tax treaty was signed in 1957. It is one of the oldest US treaties still operating. Modified periodically but never replaced. Pakistani founders running Wyoming LLCs benefit from it, though banking remains the bigger challenge given Pakistan's tightened-review country profile at US banks.

Answer

Pakistan-US tax treaty is in force since 1957 with modifications. US-source dividends drop from 30% default to 15% (most modern interpretations). Royalties drop to 0% in many cases. Article 7 protects operating business profits from US tax unless you have a US permanent establishment. Pakistani founders running Wyoming LLCs typically pay zero US federal income tax on operating revenue, despite the older treaty. Banking remains the harder challenge.

By Zawwad, Founder & CEO, WyomingLLC by Topslice LLC.

Last updated May 20, 2026

How the 1957 treaty still applies

The original 1957 treaty was supplemented by a 1996 Protocol and various subsequent agreements. It remains in force as the bilateral income tax treaty between the two countries. Modern interpretations of the dividend and royalty rates align with current US treaty practice, even though the original text was written 70 years ago.

Treaty rates

Dividends: 15% under modern interpretation (treaty text says 15-30%; the lower rate applies in practice)
Royalties: 0% for most types (very generous under the modernized interpretation)
Interest: 0% for most types
Business profits: Article 7 protected (zero US tax without US PE)

How to claim treaty rates

File Form W-8BEN-E with each US payer (Stripe, Amazon, AdSense, brand sponsors). Cite Pakistan-US treaty in Part III. The treaty rate then applies to subsequent payments. Forms expire after 3 years; renew before expiration.

The banking challenge for Pakistani founders

The treaty solves the tax side. Banking is where Pakistani founders face friction. Mercury approves Pakistani profiles at ~60% with extended KYC. Wise Business at 95% serves as the practical primary banking option for most Pakistani founders we serve.

Pakistani-side tax on LLC income

FBR (Federal Board of Revenue) generally treats US LLCs as transparent for Pakistani tax. Pass-through income flows to your Pakistani income tax return at applicable rates. Consult a Pakistani tax advisor for specific treatment. State Bank of Pakistan rules govern USD inflows from LLC operations.

Frequently asked questions

Is the 1957 treaty actually current?

Yes. It is in force with modifications. Modern interpretations apply. The IRS treats it as an active treaty for W-8BEN-E purposes.

Will Pakistan and US sign a new treaty?

No announced timeline. The 1957 framework continues to function.

Do Pakistani founders pay US tax on LLC operating revenue?

Generally no. Article 7 protects business profits. Most Pakistani founders running SaaS, agency, e-commerce LLCs pay zero US federal income tax on operations.

Banking is the bigger issue?

Yes. Pakistan country profile is tightened-review tier at most US chartered banks. Wise Business at 95% acceptance is the practical primary banking solution.