Export of goods to attract 1.25% withholding tax, while PSEB-registered IT exporters continue to enjoy a concessional 0.25% rate.

ISLAMABAD: The Federal Board of Revenue (FBR) has notified the income tax rates applicable to the export of goods and services for Tax Year 2027, which commenced on July 1, 2026, following amendments introduced through the Finance Act, 2026.

The revised rates have been incorporated into the updated Income Tax Ordinance, 2001, amended up to June 30, 2026, providing clarity on the withholding tax regime applicable to exporters during the current tax year.

1.25% tax on export of goods

According to the updated law, the rate of tax to be deducted under Section 154 of the Income Tax Ordinance, 2001, has been prescribed at 1.25% of the export proceeds for Tax Year 2027.

The 1.25% withholding tax applies to deductions made under sub-sections (1), (3), (3A), (3B) and (3C) of Section 154.

In addition, the FBR has notified that the rate of tax deductible under Section 153(2) has also been fixed at 1.25%.

The tax will continue to be deducted at source from export proceeds in accordance with the provisions of the Income Tax Ordinance.

Concessional rate retained for IT exports

The FBR has also notified the withholding tax rates applicable to the export of services under Section 154A of the Income Tax Ordinance.

Type of Export Receipts	Withholding Tax Rate
Export proceeds of computer software, IT services and IT-enabled services by persons registered with the Pakistan Software Export Board (PSEB)	0.25%
Export proceeds from all other services	1%

The concessional 0.25% withholding tax rate will continue to apply to exporters of computer software, IT services and IT-enabled services registered with the Pakistan Software Export Board (PSEB).

The reduced rate will remain available from Tax Year 2024 through Tax Year 2029, in line with the government’s policy of encouraging information technology exports and supporting the growth of Pakistan’s digital economy.

Other service exporters to pay 1%

Exporters of services other than computer software, IT services and IT-enabled services will continue to be subject to a 1% withholding tax on export proceeds under Section 154A of the Income Tax Ordinance.

The FBR said the notified rates are effective for Tax Year 2027, which began on July 1, 2026, and reflect the tax measures introduced through the Finance Act, 2026.

The latest notification provides certainty to exporters regarding the applicable withholding tax rates and facilitates the implementation of the revised tax framework for goods and services exports during the current tax year.