P@SHA Backs Budget Relief But Goes After Remote Workers Again

The Pakistan Software Houses Association (P@SHA) has released a position paper on the Federal Budget 2026–27, welcoming several incentives for the IT sector while warning that key structural issues remain unresolved.

P@SHA said the government has extended the 0.25 percent concessional tax rate on IT exports until Tax Year 2029, providing medium-term policy stability.

It also noted a reduction in advance tax on foreign card transactions from 5 percent to 0.5 percent, which it said will support freelancers and IT exporters engaged in international payments.

The association highlighted additional measures, including withholding tax exemptions for startups, tax relief for salaried IT professionals, and a reduction in the Super Tax burden. It said increasing the Super Tax exemption threshold from Rs. 150 million to Rs. 500 million effectively removes most IT companies from that bracket. It also noted over Rs. 10 billion in allocations for digital skills programs, including the Prime Minister’s Youth Skills Development Program and AI Seekho 2026.

Despite these measures, P@SHA said major structural constraints persist. It cited the absence of a legal definition for freelancers and remote workers serving foreign clients as a barrier to talent retention. It also pointed to the lack of a structured legal and financial framework for venture capital and private equity, which it said is limiting investment inflows. The association further flagged the continuation of the Rs. 100 million turnover threshold under Clause 43F as a concern for industry players.

The budget also introduces new compliance requirements, including a 5 percent withholding tax on social media income, mandatory digital financial statements, stricter penalties for e-invoicing violations, and higher fines for late tax filings.

P@SHA urged the government to provide a permanent legal framework for the 0.25 percent IT export tax rate, formally define freelancers and remote workers, and develop a comprehensive venture capital regime.

It estimated IT exports could grow from $3.2 billion in FY2024 to $4.5 billion by FY2026, but said reaching the $15 billion target by 2030 will require addressing these structural gaps.