P@SHA Proposes Taxation Reforms for Exporters of IT Services

Pakistan Software Houses Association (P@SHA) Chairman Muhammad Zohaib Khan Tuesday said that unanimous and representative budgetary proposals regarding the IT industry from the platform of P@SHA have been submitted to the concerned ministries and important institutions.

In a statement, Khan expressed his apprehensions on the applicable tax applied on IT professionals’ salaries employed in Pakistan in comparison with remotely working individuals, and proposed that the rate of payroll tax for persons employed by PSEB & P@SHA-registered companies shall not exceed 5 percenr of their salaries. A provisio may be added after the table in First Schedule (Section 149) of the Income Tax Ordinance (ITO) 2001 as follows:

“Provided that maximum rate of tax applicable on salary of an individual shall not exceed 5 percent if such individual is receiving salary from a person registered with PSEB and P@SHA,” he said.

Khan also proposed a demand for exemption from income tax for IT exporters. Nonetheless, in principle, this exemption may only be made available to such exporters who are registered with Pakistan Software Export Board (PSEB) and P@SHA.

He added that no exemption certificate from FBR shall be required for such exemptions. He further proposed that the following clause may be inserted in Part I Second Schedule as clause 133 of the Income Tax Ordinance (ITO) 2001: “The income from export of Information Technology (IT) and IT-enabled services as defined shall be exempt from tax subject to the condition that the person is registered with PSEB and P@SHA.”

P@SHA Chief proposed that a clarification shall be added in section 4C to identify that super tax is not applicable on exporters of IT & IT-enabled services for tax year 2022 as they were eligible for 100 percent tax credit under section 65F.

However, currently tax officers are sending unjustified notices to the companies, the clarification will help in resolving the issue. Although a decision has been issued by Tribunal in favor of an IT company; but, in order to avoid further litigation an explanation may be inserted.

In light of the industry statistics, P@SHA Chairman said that the IT industry in Pakistan – which has the largest share in services exports – has achieved remarkable milestones: crossing $2.6 billion in exports in 2023; it holds the unique distinction of being Pakistan’s only export industry with a 77 percent trade surplus; supports the livelihoods of 800,000 professionals, freelancers and their families as well as over 10,000 companies and the IT industry has proven to be the fastest-growing sector in Pakistan as well. It has demonstrated the potential to address the current account deficit and shape the economic future of Pakistan, he added.

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  • With all the mess P@SHA creates, it never owns up to freelancers. Not even a single guide is published to help freelancers learn how to properly file taxes and to clarify how payments received through various payment processors should be declared.

    • This step however if taken, can help small to medium companies to pay better salaries and have better competition in the market overall.
      Let’s hope that this gets approved by all the old idiots sitting in parliament and FBR.

  • FBR officials just ask for bribe for nothing from IT freelancers. When we don’t put flesh bones in to their mouths, they prepare fake cases against the IT freelancers to keep them busy full time in legal fights. Which prevents freelancers from focusing on their IT work. How miserable condition is this that this looters mafia is drowning our economy. A big question is; what is the benefit of PSEB membership, if PSEB cannot help their members from getting prey of this corrupt mafia.

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