Significant progress has been made on the issue of sending tax notices to IT companies in Pakistan.
Negotiations between the Ministry of IT and Telecom (MoIT&T) and the Federal Board of Revenue (FBR) regarding taxation of IT companies have been successful.
The federal government has decided to give relief to IT companies registered with the Pakistan Software Export Board (PSEB).
Caretaker Federal Minister IT Dr Umar Saif has said that FBR will not issue tax notices to IT companies registered with the Pakistan Software Export Board. According to the Caretaker Federal Minister, FBR has made changes in the system of tax notices. Tax notices will no longer be issued to IT companies registered with the Pakistan Software Export Board.
The facility of issuing tax notices to IT companies has been withdrawn from the individuals within the FBR responsible for issuing such notices. This step has been taken to prevent potential blackmail of IT companies.
According to Dr. Umar Saif, if this does not resolve the issue, then the IT sector can be declared non-taxable. This means that 0.25 percent will be deducted from IT companies but it will be counted in cess revenue or levy revenue. He stated that the FBR acknowledges the sensitivity of the matter, which is why it has agreed to provide this relief.
According to the caretaker federal minister, the IT industry has very little 0.25 % of the tax regime which was earlier zero percent. Tax documentation of the IT sector has become necessary due to FATF conditions.
But ever since this tax was introduced and IT companies came under the tax jurisdiction, the FBR began sending notices to them. This has led to a sense of disillusionment within the IT industry, prompting it to keep its funds outside the country.
What is the guarantee that this scheme will not be misused?. Several companies can create fake IT companies as front companies and can funnel their investment via this route. How government will safeguard against this loophole?.
Legit IT companies source remitter can easily be verified by the banks or govt even if they use the proxy remitter by creating the fake companies. The issue is why pseb want to interfere when they done nothing practically except calculating the IT services export and taking credit for doing nothing. Second they opened they way for fbr to easily pin point the innocent freelancers to easily bribe them. The income should never be treated in different section other then foreign income and should be tax free. Will FBR give freelancers option to adjust the tax they paid for servers rent, can they do that? There was a promise of pseb to register and there will not be any tax but they broke their promise and now relying on FATF excuse which is totally baseless.