Karachi, August 27, 2025 – The Federal Board of Revenue (FBR) has issued updated withholding tax rates for the export of services for the fiscal year 2025-26.
These rates have been notified under Section 154A of the Income Tax Ordinance, 2001, following amendments introduced through the Finance Act, 2025.
Key Tax Rates for Export of Services
According to the FBR’s Withholding Tax Card 2025:
• For computer software, IT services, or IT-enabled services provided by exporters registered with the Pakistan Software Export Board (PSEB):
o 0.25% tax rate applies to taxpayers on the Active Taxpayers List (ATL).
o 0.5% tax rate applies to those not on the ATL.
• For all other categories of export of services:
o 1% tax rate for ATL persons.
o 2% tax rate for non-ATL persons.
What Qualifies as Export of Services?
Under Section 154A, the export of services includes:
1. IT and Software Services – Computer software, IT services, or IT-enabled services registered with PSEB.
2. Technical Services Rendered Abroad – Any professional or technical services performed for foreign clients.
3. Royalty, Commission, and Fees – Payments earned from foreign enterprises for the use of intellectual property, industrial designs, or specialized expertise.
4. Construction Contracts – Projects executed outside Pakistan.
5. Other Services – Additional categories notified by the FBR.
Compliance Conditions
To benefit from these rates, exporters must:
• File annual income tax returns on time.
• Submit withholding tax statements for the relevant year, if required.
• File sales tax returns where applicable.
Failure to comply may result in standard taxation instead of final tax treatment.
Purpose of the Policy
The FBR aims to encourage the export of services by keeping tax rates low for compliant taxpayers, particularly in IT and digital sectors, which are driving Pakistan’s foreign exchange earnings.
Disclaimer:
This article is intended for informational purposes only and should not be considered legal, financial, or tax advice. Tax rates, rules, and conditions for the export of services may change through official notifications or amendments to the law. Readers are advised to consult the Federal Board of Revenue (FBR) or a qualified tax professional for guidance specific to their business or service category.