IT Sector to Get Major Incentives in 2016-17 Budget

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.