KARACHI:
The Pakistan Software Houses Association (P@SHA) has urged the government to restore a 10-year tax exemption under the Final Tax Regime (FTR) for IT and IT-enabled services (ITeS) exports from 2025 to 2035 to ensure predictability, continuity, and investor confidence. The IT industry is currently attracting major investments, experiencing operational expansions, and achieving regional diversification in export markets.
The FTR allows for a reduced withholding tax rate of 0.25% on export proceeds for entities registered with the Pakistan Software Export Board (PSEB) until the specified date. Therefore, the continuation of the FTR is imperative for sustaining export growth and investment momentum in the IT industry. The FTR for IT and ITeS is set to expire on June 30, 2026.
A 10-year tax exemption will accelerate digital transformation, boost investor confidence, and position Pakistan as a leading IT hubaligning with the objectives of the Special Investment Facilitation Council (SIFC) and the prime minister’s vision for exponential IT export growth.
The continuation of the FTR will simplify tax structures for IT firms and encourage reinvestment by allowing exporters to retain more revenue for business expansion and technological innovation. Additionally, providing tax incentives and ensuring policy-level consistency is essential for creating a favourable business environment for the IT/ITeS industry.
P@SHA Chairman Sajjad Mustafa Syed explained that reinstating the FTR for IT and ITeS exports would align Pakistan with regional competitors offering long-term tax incentives to attract foreign direct investment (FDI). The IT sector requires stability and consistency to maintain global competitiveness, increase exports, and create employment opportunities.
He maintained that disparities in taxation between salaried employeeswho pay between 5% and 35% in income taxand remote workerswho pay only 0.25% to 1%lead to talent migration, brain drain, and difficulties for local companies in retaining skilled IT and tech professionals. To unlock the industry’s full potential, he said, the government must significantly reduce income tax rates for salaried individuals in IT companies.
One of P@SHA’s key recommendations is to encourage and enable foreign exchange repatriation. Under the current Income Tax Ordinance (ITO), 2001, payments made to non-residents for services rendered in Pakistan are subject to an unfair withholding tax (WHT).
Withholding tax rates vary depending on the nature of the payment and the existence of Double Taxation Agreements (DTAs) between Pakistan and the recipient’s country. For instance, royalties and fees for technical services paid to non-residents without a permanent establishment in Pakistan are subject to a 15% withholding tax. Saad Shah, an IT exporter and CEO of Hexalyze, urged the government to allocate a budget to support IT-exporting companies exploring emerging and high-potential markets, including Saudi Arabia, the UAE, Qatar, and Singapore.
He explained that these markets are investing billions of dollars in various IT sectors, including AI, robotics, cybersecurity, and fintech, offering significant revenue opportunities for service providers.
Pakistani exporters have showcased their products and services in recent months and received an encouraging response, he said. The government should also continue enhancing trade relations at the state level through the Ministry of Information Technology and Telecommunication (MoITT), the Pakistan Software Export Board, economic attachés, and diplomatic missions to promote IT business, boosting exports and investment opportunities.
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