Govt to Form an STZ Authority and Offer Massive Tax Exemptions for IT Companies

P@SHA is pleased to inform that the federal government is going to form a Special Technology Zone Authority (STZA) under the cabinet division through an ordinance. The STZ will be similar to the concept of Special Economic Zone (SEZ), however, its specifications are designed to facilitate the modern dynamics of the technology sector.

Pakistan Software Houses Association for IT & ITES (P@SHA) has been continuously working on the Special Technology Zones (STZs) proposal over the past two years. Thankfully, the proposal was then approved and promulgated by the PM’s IT Task Force and the Federal Minister for IT and Telecom, Syed Amin ul Haque. Once presented to the honorable Prime Minister, Imran Khan, at the Prime Minister’s Office (PMO), he has personally taken the lead on this initiative to pass the ordinance while directing that the STZA will be established under the cabinet division. P@SHA, on behalf of the entire IT industry is sincerely thankful to the honorable Prime Minister, Imran Khan for this.

The objective of this proposal is to establish a cluster-based ecosystem for the technology sector with the allocation of certain areas called Special Technology Zones (STZs) in different cities where technology companies can have the modern and cutting-edge infrastructure while being internationally competitive. This will boost the growth of technology exports and jobs in the country. In each cluster, apart from the tech companies for the sake of academia-industry linkages, centers of excellence for technology research, banks, hotels, community centers as well as some residential areas can be built to cater to all the needs of the industry players. The development of this ecosystem will attract foreign direct investments, and will also encourage the local investors to invest in the Special Technology Zones (STZs) on the basis of offered incentives. Each of these clusters will be governed by the Special Technology Zone Authority (STZA).

Some of the incentives of the Special Technology Zones will be:

1. Exemption from all income taxes (withholding tax, presumptive tax) for a period of ten years from the date of issuance of a license by the STZ Authority.
2. Exemptions from all customs duties and taxes on capital goods including but not limited to materials, plant, machinery, hardware, equipment, and software imported into Pakistan.
3. Exemption from property tax for ten years from the date of issuance of a license by the STZ Authority.
4. Exemption from general sales tax (G.S.T) on goods and services on import of plant, machinery, equipment, and raw materials for the consumption of these items within zones by the Authority as well as zone enterprises.
5. Tax exemption on dividend income and long-term capital gains from investments in a venture capital (VC) undertaking for a period of ten years from the date of issuance of the license by the Authority.
6. Supply of uninterrupted power and other resources.
7. Guaranteed high-speed internet for the companies as well as the data centers which will be established inside the STZs.

Apart from these few incentives, many more will be offered to investors, real estate developers, tech companies and industry players, and foreign technology companies to open up their offices in Pakistan.

P@SHA will continue to work with the PMO, Federal government, IT Task Force, and other relevant stakeholders to establish the STZs in different cities of the country. P@SHA believes that this will be a game-changer for the country’s economy with a massive increase in IT exports and job creation. This will not only improve the technology-related investment in the country but it will also brand Pakistan as the IT hub and outsourcing destination.

P@SHA would like to thank former Chairman P@SHA Syed Ahmad, who is also the Chair of the PM’s IT Task Force for leading this proposal throughout on behalf of P@SHA and the entire IT industry. This proposal has been one of the key demands of P@SHA for the last four years and we believe that this will solve the infrastructure and regulatory issues for the tech industry and bring massive investment into the tech sector.