A big portion of the IT industry, responsible for IT exports in Pakistan, do not report their income.
Keeping this observation in mind, the Pakistan Software Export Board (PSEB) plans on conducting interactive sessions and seminars, in collaboration with the FBR to educate IT companies, call centres and individuals on tax-related matters.
PSEB, being an apex government body, works to promote Pakistan’s IT industry locally and internationally. It regularly launches projects and programs which improve the local industry’s outlooks by developing infrastructure, human capital, company capabilities, marketing, strategy, research and promotion of new technologies.
This time, however, PSEB is looking to resolve a taxation matter while working with the FBR to curb tax evasion and ensure proper recording of incomes, whether they are taxable or exempted.
Based on PSEB’s interaction with industry executives on a daily basis, PSEB estimates that only one-fifth of IT companies and call centres are reporting their export remittances against the proper income tax codes assigned for IT and ITeS sectors by the State Bank of Pakistan (SBP).
Both federal and provincial, tax authorities have been very active recently. It is very difficult for companies to prove that the income they are generating, through IT exports, is exempted from income tax if they do not report their incoming remittances, against codes assigned for the IT sector, to their respective banks.
This has to be done using PRC or Form-R. Additionally, companies need to get registered with the SBP as IT exporters in order to support their claims for tax exemption under the new policy.
It is important to mention here that government has extended IT exports income tax exemption from June 2016 to June 2019. However, it is conditional on the term that companies bring back 80% of their revenues through foreign exchange remittances via normal banking channels and into PKR accounts.
This means that only 20% of the money made from IT exports can be retrained abroad or foreign currency accounts if a company wants to be exempted from income taxes.
PSEB will soon hold seminars in major cities across Pakistan to educate IT companies and call centres on how to file their income taxes properly. These companies will also be informed on how they can make the most of the tax exemption to boost their exports. The government is contacting these companies as dates and venues are finalized.