IT sector is likely to get major incentives in the upcoming budget for 2016-17, including extension in tax holiday and tax reduction for IT services companies, we have learnt.
Official sources confirmed that government is considering extension in tax holiday on telecom exports for three years.
Tax holiday on IT export is going to get expired by the end of June 2016.
Pakistan Software Export Board was given the task of getting IT industry an extension in tax exemption, which it currently enjoys on IT exports. The proposed incentives will motivate IT companies to remit more of their earnings to Pakistan instead of relocating to another country and keeping their earnings abroad.
Furthermore, the federal government and finance team is considering a reduction in the tax on revenue from 8 percent to 2 percent in the budget for financial year 2016-17.
FBR had proposed this tax cut after a notable number of IT companies reportedly moved abroad after a minimum tax of 8% was imposed on services companies during 2015-16.
Estimates suggest that around 40 percent IT companies relocated to better taxed markets like UAE. Such IT companies shifted their billings to UAE while retaining back-offices in Pakistan and hence hurting government’s efforts in achieving its tax collection targets.
Punjab provincial government has also reportedly decided to continue with its policy of zero tax on IT.
Punjab government has regressed the 19.5 percent Broadband tax in the province to support IT & IT enabled services (ITES) as well as promote the use of internet.
That 2% minimum tax is more of a joke than a relief. Ever wondered 2% of what from 8% of what? Government issued a similar “relief” in October 2015 too whereby for service sector, tax was based on 2% of revenue from goods, exports, turnkey contracts and services. 8% tax on services was a smaller figure for most of the companies than the 2% from all sources. There are other technical issues as well but believe me that wasn’t any relief and the same is expected so hold your horses!
What about giving relief from Sales Tax (The Financial and Time Bug), its 15% cost load for companies that sale their software in local market, monthly returns need to be file to all provinces with minimum 1 time complete audit by each province a year :) its big joke with local companies whom are striving to increase use of IT in local business