Tax Benefits for IT Export Services in Pakistan 2023
Tax Benefits for IT Export Services in Pakistan 2023. Let us discuss the tax benefits available to IT export service providers in Pakistan. Moreover such tax on freelancers is a big relief. Moreover reduced rate of tax is applicable to IT exporters.
The Growing IT Export Services Sector in Pakistan
Pakistan’s IT export services sector experienced a great growth in recent years. Moreover Pakistan is a big market for a highly skilled workforce, competitive rates, and a favorable business environment. It is the reason that country has become a great place for IT outsourcing.
However one of the important key factor that played important role in the success of the IT export services industry in Pakistan is the taxpayer friendly tax regime. The government provided many tax incentives to encourage the growth of IT sector.
Tax Rate on IT Export Services
The tax rate on IT export services in Pakistan is very attractive for entrepreneurs providing services in this field. Under section 154A of the Income Tax Ordinance 2001, IT export services are subject to a reduced tax rate of just .25% of export proceeds for tax years 2024 to TY 2026 (if taxpayer is registered with Pakistan Software Export Board) and in any other case 1% of their export receipts.
Further this low tax rate allows IT exporters to reinvest their revenue for growth of their business. It increases their competition in the global market.
Section 154A: The Key to Unlocking Tax Benefits
Section 154A of the Income Tax Ordinance 2001 is an important tax provision for IT export services in Pakistan. It explains requirements for availing the reduced tax rate for IT exports.
Moreover according to this tax provision, an IT company must register with the Pakistan Software Export Board (PSEB) and fulfill certain conditions to qualify for the tax benefits.
Moreover the tax deductible under this section 154A shall be a final tax on the income arising from the IT Export Services. Such conditions include:
- Income tax return filed
- Moreover withholding tax statements for the relevant tax year filed if required under the Ordinance
- no credit allowed for foreign taxes paid
Moreover, the above conditions shall not apply to a person who does not fulfill the specified conditions or who opts not to be subject to final taxation
Further if you fulfill the requirements of Section 154A, IT companies can get the substantial tax benefits and enjoy the advantages of operating in Pakistan’s growing IT export services sector.
Moreover the rate of tax to be deducted under section 154A shall be:
| S.NO | Types of Receipts | Rate of Tax |
| 1 | Export proceeds of Computer software or IT services or IT Enabled services by persons registered with Pakistan Software Export Board | 0.25% of proceeds (for tax years 2024 up to tax year 2026) |
| 2 | Any other case | 1% of proceeds |
Conclusion
The reduced tax rate of just .25% and 1% on export services, provides an advantage to IT companies operating in the country.
However as the IT export services industry continues to grow, businesses can take complete benefit of these tax reliefs to initiate growth as leaders in the global market.
