Export proceeds will face a 1.25% withholding tax, while PSEB-registered IT exporters will benefit from a lower 0.25% rate.

ISLAMABAD: The Federal Board of Revenue (FBR) has issued the withholding tax card for exports for Tax Year (TY) 2027, prescribing tax deduction rates under Sections 154 and 154A of the Income Tax Ordinance, 2001.

Under Section 154, the withholding tax rate on export proceeds has been set at 1.25%. The same rate applies to transactions covered under sub-sections (3), (3A), (3B) and (3C).

The rates have been specified under Division-IV of Part-III of the First Schedule, read with Rule 10(c) of the Tenth Schedule of the Income Tax Ordinance, 2001.

FBR sets rates for export of services

The FBR has also prescribed withholding tax rates under Section 154A for the export of services.

For tax years 2024 through 2029, export proceeds earned from computer software, IT services and IT-enabled services by persons registered with the Pakistan Software Export Board (PSEB) will attract withholding tax at 0.25%.

For exports of services falling under any other category, the applicable withholding tax rate has been set at 1%.

These rates fall under Division-IVA of Part-III of the First Schedule, read with Rule 10(ca) of the Tenth Schedule.

TY2027 export withholding tax rates

The updated withholding tax card sets out separate rates for exports of goods and services under the Income Tax Ordinance.

• Exports under Section 154(1): 1.25%

• Exports under Sections 154(3), 154(3A), 154(3B) and 154(3C): 1.25%

• Computer software, IT and IT-enabled services by PSEB-registered persons: 0.25%

• Other exports of services: 1%

The updated tax card provides exporters and withholding agents with the applicable withholding tax rates for TY2027, while maintaining separate treatment for export proceeds from goods and services.

The lower rate for PSEB-registered IT and IT-enabled service exporters provides a preferential tax treatment for a key segment of Pakistan’s services exports, while the standard rates continue to apply to other export transactions.